Accomplishing big money goals requires a lot of willpower. But willpower is a finite resource. And if you use up all of your willpower reaching for stretch money goals, you’re more likely to burnout, quit, or “cheat” and sabotage your efforts.
Focusing instead on your money management systems can help you make easy, sustainable changes that get you closer to your goals. By working on your systems for money management, you build the day-to-day habits necessary for achieving big money goals.
Here’s how to manage your money using systems that optimize healthy financial habits, minimize poor choices, and do more with your cash each day.
Money goals vs. money management systems
The idea of working on systems instead of goals was one I came across recently while reading “How to Fail at Almost Everything and Still Win Big: Kind of the Story of My Life” by Scott Adams.
It spoke to me in a big way. Here’s what he says:
“A goal is a specific objective that you either achieve or don’t sometime in the future. A system is something you do on a regular basis that increases your odds of happiness in the long run. If you do something every day, it’s a system.”
On his blog, Adams give some examples of systems centered on losing weight for readers to take note of.
“Compare the goal of exercising 3-4 times a week with a system of being active every day at a level that feels good, while continuously learning about the best methods of exercise,” he writes.
“Before long your body will be trained, like Pavlov’s dogs, to crave the psychological lift you get from being active every day,” he adds. “It will soon become easier to exercise than to skip it — no willpower required.”
The same principle can be applied to help improve your finances. Setting long-term money goals that require painful sacrifices to achieve can feel like setting yourself up for failure.
“With many financial goals, we fail to achieve them because humans are wired to think short term and we have to set up systems to actively get around that,” says Ryan Frailich, a financial coach and founder of Deliberate Finances.
How to improve your money management system
At the end of the day, focusing on your money management systems can help you make small improvements that feel easy but have big payoffs.
Here are four ways to change your money systems so that financial achievement is easy, simple and painless.
1. Focus on daily money habits
“For people who do want to achieve their goals, they need to make the process of working towards those goals into a habit,” says Alex Genadinik, a entrepreneur coach and founder of Problemio.
“There is only so much of ‘forcing ourselves’ that we can do in a day,” Genadinik adds. “So if something isn’t a natural behavior as a habit is, people naturally stop doing it.”
To start a healthy money habit, set up a system that is easy, simple, and can be achieved daily. A habit to help curb missed payments or off-budget spending could be checking your account balances each day.
Or, if you’re trying to save money, you might look for one small opportunity to spend a little less — like getting a $2 coffee instead of a $4 latte.
These small, noticeable results will start reinforcing positive money behaviors. They will strengthen the mental pathways that make money management feel easy and natural. A slow build with small changes will give you chances to build a lasting money habit.
2. Improve your financial knowledge
An important money management tip is improving your financial literacy. As Adams puts it, “gradually replace willpower with knowledge.”
Many money mistakes simply come down to not knowing how to do better or ignorance of better options. Get more informed about personal finance, and you’ll be able to steer clear of money mistakes and risks. And you’ll more easily recognize smarter money choices and financial opportunities.
Learning about money and how personal finance concepts work naturally makes beneficial changes easier. Or as the saying goes, when you know better, you do better.
So pick up a book on personal finance, listen to a money-related podcast episode, or bookmark a blog like Student Loan Hero to learn more.
3. Automate your money management
Automating any financial tasks that you can is another effective strategy for creating a smart money management system.
“This way you’re only deciding once to make that difficult choice, rather than having to do so every pay period or every month,” Frailich points out.
Automating your finances removes the cost of mental effort and willpower it would take to manually take those actions.
Say “you have a goal of building a $1,000 emergency fund by the end of 2017,” Frailich says. “You’re far more likely to achieve it if you automate $42 per paycheck to go straight to that fund than if you have a strategy of ‘I’ll move what’s left at the end of the month to the emergency fund.’”
Automate debt payments or savings transfers with schedule, online payments. Even better, make sure your money never even hits your checking account by splitting your paychecks into separate accounts earmarked for different funds. You can also automate retirement savings through paycheck contributions.
4. Create a feedback loop that rewards positive behaviors
Instead of feeling like your money maintenance is a boring hassle or painful sacrifice, you can set it up to be rewarding. You can create a feedback loop that makes the positive effects of your efforts more visible. And that will, in turn, reinforce your healthy money habits.
Your social circle can create a feedback system that provides those feelings of reward. For instance, maybe you start sharing your debt payoff progress on social media. Those likes and comments you receive in exchange will give your brain the positive feedback and rewards it craves.
Another way to get this positive feedback is to visibly track your progress. You can get an app that shows your saving balance inching up. Or maybe you can set up an automatic alert for each $50 you knock off of your credit card balance.
Money goals can help you plan and get moving in the right direction. But how to manage money better comes down to your systems and money habits. Start with improving money management better, and you’ll do more than accomplish your money goals — you’ll master them.
Interested in refinancing student loans?Here are the top 6 lenders of 2018!
|Lender||Variable APR||Eligible Degrees|
|Check out the testimonials and our in-depth reviews!
1 Important Disclosures for Earnest.
To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest fixed rate loan rates range from 3.89% APR (with Auto Pay) to 7.89% APR (with Auto Pay). Variable rate loan rates range from 2.47% APR (with Auto Pay) to 6.97% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of Month/Day/Year, and are subject to change based on market conditions and borrower eligibility.
Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 08/21/18. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at firstname.lastname@example.org, or call 888-601-2801 for more information on ourstudent loan refinance product.
© 2018 Earnest LLC. All rights reserved. Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by or agencies of the United States of America.
2 Important Disclosures for Laurel Road.
Laurel Road Disclosures
APR stands for “Annual Percentage Rate.” Rates listed include a 0.25% EFT discount, for automatic payments made from a checking or savings account. Interest rates as of 11/8/2018. Rates subject to change.
Variable rate options consist of a range from 3.27% per year to 6.09% per year for a 5-year term, 4.64% per year to 6.14% per year for a 7-year term, 4.69% per year to 6.19% per year for a 10-year term, 4.94% per year to 6.44% per year for a 15-year term, or 5.19% per year to 6.69% per year for a 20-year term, with no origination fees. APR is subject to increase after consummation. The variable interest rate will change on the first day of every month (“Change Date”) if the Current Index changes. The variable interest rates are based on a Current Index, which is the 1-month London Interbank Offered Rate (LIBOR) (currency in US dollars), as published on The Wall Street Journal’s website. The variable interest rates and Annual Percentage Rate (APR) will increase or decrease when the 1-month LIBOR index changes. The variable interest rates are calculated by adding a margin ranging from 0.98% to 3.80% for the 5-year term loan, 2.35% to 3.85% for the 7-year term loan, 2.40% to 3.90% for the 10-year term loan, 2.65% to 4.15% for the 15-year term loan, and 2.90% to 4.40% for the 20-year term loan, respectively, to the 1-month LIBOR index published on the 25th day of each month immediately preceding each “Change Date,” as defined above, rounded to two decimal places, with no origination fees. If the 25th day of the month is not a business day or is a US federal holiday, the reference date will be the most recent date preceding the 25th day of the month that is a business day. The monthly payment for a sample $10,000 loan at a range of 3.27% per year to 6.09% per year for a 5-year term would be from $180.89 to $193.75. The monthly payment for a sample $10,000 loan at a range of 4.64% per year to 6.14% per year for a 7-year term would be from $139.65 to $146.76. The monthly payment for a sample $10,000 loan at a range of 4.69% per year to 6.19% per year for a 10-year term would be from $104.56 to $111.98. The monthly payment for a sample $10,000 loan at a range of 4.94% per year to 6.44% per year for a 15-year term would be from $78.77 to $86.78. The monthly payment for a sample $10,000 loan at a range of 5.19% per year to 6.69% per year for a 20-year term would be from $67.05 to $75.68.
However, if the borrower chooses to make monthly payments automatically by electronic funds transfer (EFT) from a bank account, the variable rate will decrease by 0.25%, and will increase back up to the regular variable interest rate described in the preceding paragraph if the borrower stops making (or we stop accepting) monthly payments automatically by EFT from the designated borrower’s bank account.
3 Important Disclosures for SoFi.
4 Important Disclosures for LendKey.
Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
5 Important Disclosures for CommonBond.
Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown.
All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 2.28% effective October 10, 2018.
6 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|2.47% – 6.99%3||Undergrad & Graduate|
|2.46% – 6.97%1||Undergrad & Graduate|
|2.57% – 8.09%4||Undergrad & Graduate|
|3.02% – 6.44%2||Undergrad & Graduate|
|2.50% – 7.24%5||Undergrad & Graduate|
|2.79% – 8.39%6||Undergrad & Graduate|