This week, I’m reading Tim Ferriss’ new book – Tools of Titans: The Tactics, Routines, and Habits of Billionaires, Icons, and World-Class Performers. Tim Ferriss basically compiled the best bits from his podcasts and put them in a huge tome. Luckily, you don’t have to read every line of the 660 page book. It’s best to just scan through and find the best nuggets of wisdom that apply to your life. The book is divided into 3 sections – healthy, wealthy, and wise. Unfortunately, the first section on health is a bit too extreme for me so I skipped most of that section. The section on wealth is pretty good, though. One particular chapter really stood out to me – “systems” versus “goals.”
This section is the interview with Scott Adams, the creator of the Dilbert comic strip. Basically, he postulates that setting up “systems” is better than setting goals. Setting up a good system will position you for success even if you don’t have a goal in mind. While a goal is just a short term project, a system can develop many useful skills that let you build on your success over time. Once you accomplish a goal, it’s done, whereas you can branch off from a system. Wow, that’s an interesting way to look at it.
Here is Scott Adams on blogging.
When I first started blogging, my future wife often asked about what my goal was. The blogging seemed to double my workload while promising a 5% higher income that didn’t make any real difference in my life. It seemed a silly use of time. I tried explaining that blogging was a system, not a goal. But I never did a good job of it. I’ll try again here.
Writing is a skill that requires practice. So the first part of my system involves practicing on a regular basis. I didn’t know what I was practicing for, exactly, and that’s what makes it a system and not a goal. I was moving from a place with low odds (being an out-of-practice writer) to a place of good odds (a well-practiced writer with higher visibility).
The second part of my blogging system is a sort of R&D for writing. I write on a variety of topics and see which ones get the best response. I also write in different “voices”. I have my humorously self-deprecating voice, my angry voice, my thoughtful voice, my analytical voice, my half-crazy voice, my offensive voice, and so on. You readers do a good job of telling me what works and what doesn’t.
When the Wall Street Journal took notice of my blog posts, they asked me to write some guest features. Thanks to all of my writing practice here, and my knowledge of which topics got the best response, the guest articles were highly popular. Those articles weren’t big money-makers either, but it all fit within my system of public practice.
My writing for the Wall Street Journal, along with my public practice on this blog, attracted the attention of book publishers, and that attention turned into a book deal. And the book deal generated speaking requests that are embarrassingly lucrative. So the payday for blogging eventually arrived, but I didn’t know in advance what path it would take. My blogging has kicked up dozens of business opportunities over the past years, so it could have taken any direction.
Goals vs. System
This is the best bit, but you can read the whole thing on Scott Adams’ blog post – Goals vs. System. Starting a blog is a lot of work, but it can really expand your horizon. Almost nobody makes much money from their blogs in the first year. You have to write consistently and build some readership first. Even if you don’t make any money, you will improve your writing skill and expand your network. Scott has an advantage because he’s already famous, but a lot of famous bloggers started from scratch. Blogging can create many opportunities and it’s up to you to take advantage of them. Check out my guide on How to Start Blogging if you need some help getting started.
Back to Scott’s system, the main issue I have with this is the “vs.” part. I love setting goals and it has worked extremely well for me. Life has improved dramatically since I started setting goals and accomplishing them. I’m not about to throw out my goals just on a cartoonist’s say so. (I’m just joking, I love Dilbert.) For me, it’s better to set a goal first and then create a system to accomplish that goal. When I started Retire by 40, I did have some goals. I wanted the blog to help me focus on my early retirement journey and also generate a little side income. My initial goal was to make $500/month from blogging, but our blog income has improved quite a bit since 2010.
Anyway, I don’t see why you shouldn’t have goals and systems. For me, it’s just easier to set some goals first. Let’s go through some of my 2017 goals and see what kind systems I am using to accomplish them.
Save $50,000 in our tax-advantaged accounts
We’ve had this goal for many years now and we have been able to accomplish it every year. The system here is pretty easy.
- Mrs. RB40 maxes out her 401k every paycheck. That’s $18,000.
- I contribute $1,500 per month to my individual 401k. That’s another $18,000.
- We contribute $400 per month to RB40Jr’s educational 529 plan. That’s $4,800.
- We contribute to our Roth IRA when we have money. That’s $5,500 times 2 = $11,000.
At the end of the year, we’d saved and invested $51,800. Most of this saving is automated so it’s easy and we never miss the money.
Increase dividend income to $11,500
There is a system for this one, too.
- We buy stocks that have a track record of increasing their dividend payout.
- The dividend is reinvested into our dividend portfolio.
- We add new money occasionally.
Our dividend income is slowly increasing every year and it will help fund our early retirement. When Mrs. RB40 retires, we probably won’t be able to add new money or reinvest as much.
Increase passive income to cover 78% of our living expenses
This one is broader in scope, but it has a system too. Basically, we need to minimize lifestyle inflation and increase our passive income as much as we can.
- Minimizing lifestyle inflation really isn’t that difficult. We already live a pretty comfortable lifestyle and we just need to stay the course. This means no big ramp up in purchases like buying a luxury car or a huge house.
- Increase passive income is tougher because it is so slow. We need to keep saving and investing every year until we meet our goal. It will probably take 3-5 more years to reach 100% FI ratio. (That’s having enough passive income to cover 100% of our living expenses.)
This one actually works well with Scott Adams’ point. We lived modestly and saved as much as we could long before financial independence became our goal. This way of living gave me the opportunity to switch gears and work toward early retirement. If we saved only 10% of our income like the financial advisor suggested, I’d never have been able to retire early. Living modestly is a system that will give you more choices in the future.
My fitness goals for 2017 are to average 7,000 steps per day and do 15 consecutive pull ups. These are tough for me because I’m not very active by nature. I prefer stay home and read than go out in the cold to exercise. The first few weeks of 2017 didn’t go well, but eventually I settled into a routine.
Now, I walk to the gym and exercise after RB40Jr goes to school. This takes care of both the steps and the pull ups. Yes, I can do 15 pull ups now! Accomplishing that goal made me feel great. For the rest of 2017, I just need to work on my form and try to do even more pull ups. I’ve seem to hit a plateau so I’m going to take a week off during spring break next week to rest up.
This fitness system won’t work for everyone, though. It seems a lot of people hate the gym and they just can’t consistently go. In that case, you should try to be more active by doing activities you enjoy like biking and hiking. You have to come up with a system that works for you.
My other 2017 goals are more limited in scope.
- Move RB40Jr’s 529 plan to Vanguard
- Move Mrs. RB40’s traditional IRA to Vanguard
- Start a new site
- Join Toastmasters
- See the 2017 total solar eclipse
These are things that can be accomplished relatively easily, but they tend to get put off until later. Having them on my 2017 goals list really helps because it means I will get them done sometime this year. These goals don’t need a system. I just need to do them.
Goals and system
Setting goals and accomplishing them has worked wonders for me. Personally, I think the journey is more motivating if you have goals to work forward to and have that feeling of accomplishment. It would be much harder for me to put faith in a system without having a goal. They both work well together so why not use both goals and systems?
What do you think? Do you like having systems and/or goals? I guess it is similar to the chicken and egg problem. What comes first, the system or the goal?
Image credit: Zak Suhar
For 2018, Joe plans to diversify his passive income by investing in US heartland real estate through RealtyShares. He has 3 rental units in Portland and he believes the local market is getting overpriced.
Joe highly recommends Personal Capital for DIY investors. He logs on to Personal Capital almost daily to check his cash flow and net worth. They have many useful tools that will help every investor analyze their portfolio and plan for retirement.
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