#6 - Goals vs Systems

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[00:00] You are listening to episode six of the Money Owners podcast with me, Morgen Rochard.

[00:16] Money Owners is a podcast for people who want to be mentally and financially crushing it. This podcast does not provide any investment advice and nothing in this podcast should be misconstrued to be investment advice. If you'd like more information on Money Owners coaching, the podcast, the homework and everything else I have to offer, visit www.moneyowners.com. What's happening Money Owners? I think one of these days I'll actually come out with an intro that I like, but for now we shortened the beginning and you know, maybe I'll come up with something as cool as Adam Carolla's get it on. I don't know. Anyways, today's episode is goals versus systems. I'm super excited to talk to you guys about this because I think it's one of these things where some people say, oh, you should set goals and how other people are like, no, you need habits and systems and you know what? I think you need both. One is not more important than the other, and we will talk a lot today about why that is. So let's just break down what a goal is and what a system is. That way you can understand what I'm talking about and you know, this is a review for some of you either get a good review of goals versus systems or I don't know, fast forward to what you want. So a goal gives you something to strive for, right? And a goal is something that, right, we decide what it is that we want to attain in the future and then we strive for it. That's a goal. So an example of a goal is I want to save $100,000. Whereas the system is what helps you achieve that goal. The system has everything that we put in place to actually, you know, get that $100,000 that I just said we wanted to have.

[01:50] The thing that's really cool about when you set goals is that you also get this positive emotion just from goal setting. So if you have a goal in mind, all of a sudden you think happy thoughts, you're thinking about what it would be like to actually attain that goal. So when I think about having 100 extra thousand dollars in the bank, I think, wow, wouldn't that be great? And then all of a sudden I have all this nice positive emotion flowing through me. Whereas a system not as much, right? A system is actually like the workhorse that gets the job done. So sometimes actually when you, when you're going through systems, you might feel a lot of negative emotion because you have to work hard to do it and working hard is well, it's hard. So goal setting means you have to set something up that's so much more valuable to you that you're actually able to make sacrifices to achieve it because otherwise if we just set a goal but we don't think it's that valuable, we don't actually do anything to achieve that goal and therefore we wouldn't put any systems in place that would actually help us achieve it.

[02:46] And if we don't put any systems in place, then we're not actually making the sacrifices that we need to attain that goal. The experience in and of itself as we move closer to the goal, creates positive emotion, which is really nice. So even if the path itself is hard, right? Even if the systems and things that we have to put in place are in themselves hard, when we, when we get closer to that goal as we are achieving it, we experienced positive emotion and that's why it's really good to set up things like mini goals or goals within goals so that as you achieve goals over time, you feel good about them. So here's an example of you have a main goal and then you have a bunch of mini goals and then you'd have some systems in place to actually achieve those things. So I need, let's say my goal is I want to start a business and to make my example really easy, since I already owned my own business, I'm just going to use that as an example.

[03:40] So let's say let's back up four and a half years ago. And let's say I wanted to start a business back then and I took out a pen and paper and I jotted down that goal. I want to start a registered investment advisor, what do I need to do to do that? So the first thing I'd probably do is I would look at my expenses, right? That we talked about a couple of episodes ago. I'd look at my expenses and I would decide, okay, how much runway do I need? And I probably want to have two whole years worth of expenses to really get myself through the first two hard years. And let's say in my example that I needed $50,000 per year to cover my expenses. So I would need to save $100,000 to start my business. So that will be a mini goal within my goal.

[04:20] And I know that doesn't sound mini. I just said I need to save $100,000. But it's many for the purposes of this example. So the main goal is I want to start the business. The next mini goal is I need to save 100k to start that business, a second mini goal within that. So I don't know if any of you know, but starting a registered investment advisor means that you also have to register with the state that you're going to be located in. So for me that was New York, so a second goal was to get registered within the state of New York to open my registered investment advisor and then a third goal, mini goal, is I need to create a way to create clients and I don't want to go too much into that as a mini goal, but I don't like the word like attract clients.

[04:59] I think it sounds kind of, I don't know, something about it, but creating clients sounds like something I'm excited about and something I really want to do. So my third goal within my business was to create clients. So within that one big goal of starting a business, I just listed three mini goals and obviously when you actually start a business, you should probably have more than three mini goals to start that business. But this is just an example, you can see how it works. So in this example, right, if I had actually put some systems in place to save the hundred thousand dollars for my business, I'd be much better off and I'd probably be able to start my business sooner, you know, considering like how I actually go about saving for that goal. So systems come into play because systems are the actions that you take to achieve these goals and you may need to learn new skills along the way to do it. And these will likely provoke negative emotion in you, like I said before, and you'll want to quit and you'll probably want to escape with things like food or alcohol, maybe binge watching TV or fill in the blank for your favorite de-stressor.

[05:58] But this is when you need really good systems. So in order to let's say save $100,000 for my business, maybe I needed to like auto-save outside of a retirement account or maybe I need to like put dates on my calendar if I wasn't getting regular income to make sure that I put aside the amount that I needed to every single month, even if it wasn't just like a level of savings goal or registering with the state. Like I would actually have to fill out the paperwork and do those other things. There's some systems in place that would need to get put in, put in place so that I was compliant and so it was following up because you know, we all know governments how they operate and sometimes they take a little bit longer than expected and you need to have systems to follow up with them or you know, creating clients.

[06:38] Right? So that means I would have to create a whole system around prospecting or how I prospect or maybe an email drip campaign or maybe just modifying how I do sales or modifying my sales process in general. All those things would come into play. And those were all systems that I would need to put in place. There are a number of things that come into play with this that would maybe make me successful or unsuccessful. So there's something called outcome based versus identity based habits, when we put systems into play. And this is really important because one of the reasons why goals get crapped on sometimes by people is because they think that the systems are more important than the actual goal because the system itself is what actually gets you closer to that goal. And that is 100 percent true. And outcome based habits are usually more goals based. Whereas identity based habits are more systems based because they are coming from within. So when you think about outcome based habits, it's something like I want to go to the gym five times a week so that it will be healthy versus identity based would be, I want to be a healthier person. So what are the things that I need to do to get me there? And identity based habits and just identity based things in general are generally much more effective than outcome based and there and, but outcome base doesn't mean that it's necessarily a bad place to start. Right? Sometimes we have to say to ourselves, I want to go to the gym five times to even know that we want to be a healthier person. I know that sounds really silly, but like, you know, sometimes we need to say things like.

[08:11] I mean, I know for me, I wasn't particularly happy with where I was, where I was practicing financial planning and financial advisory, before I started my business. But I liked what I was doing and that was enough for me to say I want it to go to start my business. But I didn't start with the identity of "I want to be a business owner", which is very different than I, you know, I just want to like go start this financial planning thing on the side. So I think though, if I had said I want to be a financial planning business owner, that would have changed my identity and that would have made it very different for me to put this specific systems in place because I would have formed my entire identity around what I was doing and therefore acted upon that. And these are really important when we're talking about financial goals because it's one of those things where sometimes when you look at the people around you, you, you think to yourself, why is it that other people seem to be able to get the things that they want?

[09:06] But I can't get the things that I want? And I don't know. Is it because maybe you're just a little bit outcome based and you're not an identity based. Maybe you don't think of yourself as a person who can save money. Maybe you think, "oh savings a little hard for me, so therefore I can't do it." That in and of itself can become a self fulfilling prophecy. And I know we've talked about this quite a bit in other episodes about how our thoughts cause our feelings and our feelings cause our actions, and therefore our results. So when you think about what your financial future might look like, it'll look a lot like the past, if you don't do anything different to change it. So one of the things about identity based systems is that if you're able to change your identity, if you're able to change the thoughts that you're having in your head around money, then you will be able to change the feelings that you're having and then change the actions and therefore your results.

[09:54] And it's much easier to change your actions when you change the thoughts in your brain. And that's what identity habits are all about. So you need to ask yourself certain questions, which we can put it in a homework for you. I know you all love the homework so much. So I'm going to create one for you. And the first question is, what do you want to stand for? So when you think about your money and you think about what you're doing in your life, you have to think about what do I want to stand for and what do I want that money in my life to represent for me? And that can be a number of things depending on who you are and what you want to do with your money. But one of the things about finances is we can get so wrapped up in our finances in and of itself, but if we don't take a step back, if we don't detach, if we don't think about what it is that we want to use this money for in our life, what do we want to do with this money in our life? How do we want to live our richest life? What do we want to stand for? And we don't think about those things, but it's going to be really hard for us to create identity based habits around those things, which are the systems that will actually help us achieve the goals. Another good question is who do you wish to become with your money? So I know we talked about this quite a bit on this podcast, but it's really important to take a step back and really evaluate who it is that you want to become or who it is that you are now that you really like, so that you can keep doing the things that you're doing and do them intentionally rather than just flying by the seat of your pants and looking back and saying, hey, what have I been doing with my life and my money even though, hey, maybe it's pretty good.

[11:23] And then the last one is, what are your values and principles around money? When do you feel like you're using money with integrity? When do you feel like you're not using money with integrity? How do you want to use your money in your life and how do you want your principles and values to be reflected in your finances?

[11:42] So I've been reading this book, Atomic Habits by James Clear and um, I think it like blew up all over the world because it's actually pretty awesome. And I pulled some of the stuff from it and wanted to pull his whole thing about cue, craving, response, and reward. He talks about building systems and I don't think he necessarily made this up, I'm just taking this from his book because that's where I read it. But there's this idea that habits are formed from a cue, then a craving, then a response, and then a reward. Okay? So cue, craving, response, and reward and cues are there. Like they're the first thing that happens, right? It's like something, there was circumstance that's happening in the world or there's something that's happening in your life that kind of cues you up and then a craving forms as a result of that cue. So it's kind of like what we've talked about in the last couple of episodes about how whatever you're making that circumstance mean whatever thought you're having in your head around that circumstance, right? That's what the craving is all about. And the greeting itself is actually a feeling that's caused by that thought. Um, and I know this is kind of getting a little bit deep, but there's the cue, there's a circumstance that happens, then there's a thought that you have about that circumstance that kind of tees you up to have a feeling, a certain feeling and then that feeling leads to the response which are like an action that you take or something that you do to either make the feeling go away or to continue having that feeling.

[13:09] And then lastly is the reward. So the reward is usually another feeling actually that we have as a result of the actions that we take. It's not necessarily just the, you know, the results that we get. So currently we learn from the cues that happen all around us. And we learn by having a thought about it and what we do about it and we learn how to like create feelings based on cues rather than the other way around. So one of the things that I like to talk about quite a bit is like you can actually create all of the feelings that you want to have in your life just by changing your thoughts. But usually we're on autopilot and usually that's not the case, right? Usually we don't feel like, oh, I can just create feelings all the time. No, normally we think something happened to me and now I feel X, Y, Z and it sucks, or it's great, or whatever it is.

[13:55] So we want to get to a place where we're actually able to create those feelings. But for now let's just take it as a, you know, a sign that, hey, this is not what we're doing yet. So cues, they stimulate something within us, right? We, signal like it used to be in the past with the signal, the location of things like food, water or reproduction. Whereas now it's a little bit different in the world that we live in because we spend most of the time learning cues that predict secondary rewards, like money and fame, power and status, praise and approval, love and friendship or sense of personal satisfaction. So we think that we need the cue to do all of these things and we don't actually need the cue and we should probably spend quite a bit of time talking about why it is that we don't need the cue, the let's just take on face value that we need the cue to experience all of those things and then we have a craving as a result of that cue, which is basically like that cue does something in our brain that makes us have a thought and that thought is how we are experiencing the cue and what we're making it mean.

[14:56] And it basically becomes a trigger that means different things to different people. So a good example of this right is like going by a race horse track or something like that. Right? For me it's like, yeah, whatever, like these, you know, poor horses probably. Whereas for somebody else who likes to bet on the track, right, that, that like that cue actually triggers a different kind of reward in their brain and they want to go and interact and gamble. So like the same situation can mean very different things to two different people and then this response that we have is just based on our thoughts and feelings around that cue and craving. Um, and that response also actually has to be something that we can physically do. Right? So like the example that James Clear used in his book is, um, if you weren't able to dunk a basketball because you weren't able to jump that high, that wouldn't actually be a response that you'd be able to have.

[15:45] Whereas like if you were able to do that and that were the, you know, the response that you took as a result of the cue and the craving, you know, you really had a dunk that basketball, then you would actually be able to do that. And then the reward is like, ah, relief from craving good feels good vibes. I'm so content. Okay. So here's some examples that I've come up with or money that maybe you can think about and maybe it would resonate with you and what you're doing in your life. So how about the cue of, you know, stressed at work or. I'm bored at work and the craving is I want to feel less stressed or less bored at work. So my response is something like online shopping, which made me, I know I shouldn't be doing because I've been trying to, you know, be good and be on a budget or anything else that we make that stuff mean in our head.

[16:29] But instead we go on Amazon or we go on Nordstrom's or were you going all these places and we spend a bunch of money and with the click of a button while we're supposed to be working and voila! Shows up at our house. So the reward in that moment, right, is that we feel relieved because like that boredom or that stress at work has gone. But now what we've done is we've actually created an association with stress at work and online shopping. And here's another one that actually is like a little less related to work and stress. So you've been, maybe you've been working a lot, but you haven't seen your spouse that much. So the craving is you want to spend time with your spouse, and then maybe your response is something like you book a fancy dinner and you have a night out for an experience with your spouse and you have some wine, but now your reward is that you associate fine dining with spending time with your spouse rather than just spending time with your spouse.

[17:20] So these are all things where we don't really think about it because it's something that we're doing and we're kind of on autopilot and yet like it could actually be disastrous to our budget if we're just, you know, spending money just because we were associating with a certain cue or craving. Here's some examples of some good systems. So you feel a little out of control with your spending. Maybe that's the cue and you want to feel in control which is the craving. So you check your credit card statements as your response and now you start to associate checking credit card statements with feeling more in control. That would be an example of a good system or another one where the cue is saving for any goal and the craving as you want to feel positive about saving for that goal, so maybe auto transfer some money or you scheduled time on your calendar to transfer money like we talked about at one of our other episodes, and then the risk, the reward is: You bask in the glory of your savings! Wouldn't that be beautiful? I think so.

[18:19] So one of the things about creating good habits as you have to make it obvious, you have to make it easy. You have to make it attractive and you have to make it satisfying and if you're able to do all of those things, you'll actually be able to put good systems in place. And it's really important if you have a goal in mind to be able to make it as easy and as attractive and as beautiful as possible to get that goal done. So if you find yourself saying things like, why can't I ever seem to save for my business or save for retirement or save for any goal, or why is it that it can seem to just get off the couch and start that business even though I really want to do it, and the answer is probably because you haven't made it easy enough for yourself to do those things.

[18:59] And I know that we always think in our heads that these things are supposed to be hard and that's why we can't do them, but that's not actually the case. And you go into it thinking that it's going to be hard. I can guarantee you it will be hard because you've already gone in thinking about it being really, really hard. Whereas if you go into it thinking, Hey, maybe I don't know, it'll be easy to start a business. I know that sounds totally insane, but maybe like, I'm ready. I'm determined to start this business. Even though it will be hard. I like hard things. I like a good challenge. Right? In just saying that I already feel a little bit excited and confident and ready to do this thing rather than before when I was saying to myself, oh, it's so hard. I don't want to do this.

[19:42] Right. I can't do this. Everything sucks. It's hard. Um, yeah. I have this defeatist attitude. There's no way I'm going to get it done and this is where it goes back to like goal setting is really kind of important because if we are able to figure out something that we want so badly that we're willing to sacrifice many, many things around us to do it, that's when we're actually able to see the light. We're able to see how we can put systems in place and we are able to set the goals and set mini goals and then set all of the systems in place. And yeah it's not going to be easy because if it were easy, everyone would be doing it, but you can make it simple. You can evaluate what you're doing in your life in regards to your money or in regards to the goals that you want, like that you want to achieve in your life, and you can break them down into mini goals and into even smaller goals until you actually get to a place where it's systems that you need to put in place where it's just an incremental one percent of things that you have to change in your life to actually get these things done.

[20:40] And then you become a person. You have that identity around what you're doing. You become the person that is able to achieve things. You become a person who is confident that can actually go out there and set a goal and get it done. You become a person that maybe they can save some money or start a business or do any of those things that you want to do in your life because you have set the systems in place, based on the goals that you, that you originally outlaid for yourself. So why don't we do any of this at all? Why set goals? Why is set mini goals? Why have systems in place to do all of these things? Because at the end of the day, all we ever really do in our lives or to achieve some sort of positive emotion and goal setting is the number one way to achieve positive emotion because the goal in and of itself just setting it gives you a positive emotion and then achieving little goals along the way give you positive emotion and then achieving the final goal will give you a positive emotion.

[21:41] So it really is. It's not just about achieving the goal, it's all about the journey along the way and yeah, it won't always feel good the entire time, but I guarantee you as you do it and as you progress and as you able to achieve bigger and better things, you will feel more confident and you will be able to do more in your life.

[21:59] So I hope you enjoyed this episode on goals and systems. It's something I'm very passionate about. We'll probably go into it a little bit more deeply on another episode, but for now I hope you liked these nuggets. And I hope it helps you set some goals and set some mini goals and maybe put some systems in place for 2019. If you want to fill out the homework, go to moneyowners.com/podcast/6 and I hope to see you in the new year. Have a good couple of weeks. Happy New Year. Merry Christmas and thanks so much. Bye.

Morgen Rochard