Reverse Engineer Financial Freedom

With 2016 coming to a close, we’re reflecting back on how we’ve succeeded in accomplishing our financial goals. I’m convinced a large part comes from setting up our goals in the right way. For example, we put our goals out in the public and we’re held accountable from Day 1. The other essential ingredient is we finally figured out the right way to reverse engineer financial freedom.

“The secret of change is to focus all of your energy, not on fighting the old, but on building the new.”

For those who are not goal setters, I hope the above quote from Socrates at least inspires someone to copy the approach recommended below in SOME capacity. It worked for us.

To Reverse Engineer Financial Freedom involves understanding the difference between push goals and pull goals.

What are Push Goals?

Oh man, we’re pros at push goals since we used them exclusively for our 0-20% savings rate era.

Save $50 on the next paycheck.

Invest $1,000 this month.

Cut back on our grocery bill this month by eating less meat.

Eliminate cable to save $100 a month.

Increase our net worth by $10,000 over the year.

We could go on for days!!

Push goals fail because they require mental energy, discipline, and persistence.

Pull goals by contrast are not inherently long term, but they are sourced on our values and beliefs AKA our long term motivations (more on this below).

Feeling the urge to save $5 per meal by cooking doesn’t last forever, especially when you walk by a Burger King on the way home. (This is true, and somehow, I have NOT given into the Whopper temptation!)

What are Examples of Pull Goals?

 

In our case, we started to think about what type of lifestyle we wanted.

So, we included everything.

What type of house we wanted, the food we’d eat, the amount of vacations we’d take each year, etc. Once we came up with the lifestyle, we knew the amount of money it would take.

Needless to say, that money goal is a lot. “A lot” to the tune of two million dollars. But, that money doesn’t just represent a two with six zero’s. It means much more.

It means we can visit friends and family at any time of the year. We can support a loved one in case of an emergency. If our favorite show is in town, we can buy tickets without worrying about our savings (looking at you, Hamilton). We would have peace of mind and not worry about our credit card bills.

That lifestyle is what now pulls us to save today. We’re compelled to hit our goals because it means we’re that much closer to our ideal lifestyle.

Saving $5 by cooking a meal becomes a piece of a bigger puzzle. We start to connect the dots and become all that more excited with each success.

Plus, we figure we’re young and we don’t need excessive luxuries until Mrs. Distilled Dollar picks a Honeymoon location.

Especially since our earning power is only expected to grow as we progress in our lives.

The Secret Power Behind Pull Goals



Is that heading a bit dramatic? I would say, ‘yes’, if it was January, but now that we’ve seen pull goals in action, I’m going with a hard, ‘no’.

The real secret of pull goals is that they force us to reverse engineer our lives.

When we know exactly what we want, it becomes much easier to figure out what it takes to obtain it.

Instead of imagining, “I want to be a millionaire,” it makes much more sense to work backwards from your ideal lifestyle.

In our case we know what our future costs are on a monthly level. From there, we know what our monthly income would need to be to cover those expenses.

We’ve built our way up from the bottom to arrive at our $2,000,000 number.

Once we gain the clarity of what it takes, we become “pulled”, so to speak, into achieving that vision.

Seriously, it works.

Push vs. Pull Goals Summary

Try it out for a few days, or a few weeks, or months. Ideally, incorporate a Pull goal in some major area of your life and see it in action.

You might be surprised by how well Pull goals work!

Have you incorporated Pull goals in the past? What are your experiences in the Push vs. Pull battle?

-Matt

P.S. I’ll be sharing my blogging goals next week along with my Q4 2016 Blog Income report and Q4 2016 Net Worth update.

23 comments… add one
  • Roadrunner Jan 4, 2017, 4:16 am

    This reverse engineering method can work and I’d say it’s a very important exercise to calculate how much you need in order to live your ideal lifestyle.
    At the same time I think you must keep on setting smaller goals to complete in a shorter time and which allow you to get there. Otherwise you might see your ultimate goal too unreachable which might discourage you.

    • Distilled Dollar Jan 4, 2017, 7:34 am

      I agree on setting smaller goals as I don’t see it being mutually exclusive to the reverse engineering approach. I find it much easier to actually accomplish the smaller goals (saving $5 per meal for example with cooking) IF the end point is clear.

      If the end point seems unreachable, then I’d say the best option there is to get hyper specific on the steps along the way. Once you see the path, it becomes much easier.

      • Derek Hopper Jan 8, 2017, 10:14 am

        I agree with both of you. The end point is so important to me though.

        It’s like chopping down a forest. The short term goal would be chopping down ten trees per day.

        The long term goal is taking a moment to fly above the trees in a helicopter. You could see that following your short term goal is leading you to a raging river in a weeks time. By flying above, you have time to change your course.

        I know that’s an exaggeration, but it helps me recognize the importance of looking at everything as a whole.

  • Liz@ChiefMomOfficer Jan 4, 2017, 4:55 am

    Great post – I like to think of this as creating the vision of what you want your future to look like, and making sure all the decisions in your life align with your ultimate goal. Living a life in alignment with where you want your life to go is so important. Every day we’re taking steps either to or from the things we want. “Reverse engineering” helps you to make sure you’re taking steps in the right direction.

    • Jay Jan 4, 2017, 6:17 am

      Really well said Liz. I totally agree with your take on this. Having a big picture vision, with daily to-do’s that back it up, is a great way to keep your progress sustainable and engaging.

      • Distilled Dollar Jan 4, 2017, 7:45 am

        Haha wow, together you two summed up the entire post in ~100 words! 🙂

        • FinanceSuperhero Jan 4, 2017, 2:31 pm

          If I may make a humble effort to do so, I think I can sum it up in one sentence: Begin (and continue to act) with the end in mind.
          I wish those were my words, but Stephen Covey beat me to them. 🙂
          This a great concept that everyone ought to embrace and act upon. Nice illustrations of its power, Matt.

          • Distilled Dollar Jan 5, 2017, 11:19 pm

            Winner!

            I need to reread 7 Habits now that you mentioned that line.

    • Distilled Dollar Jan 4, 2017, 7:36 am

      Thanks Liz! You summed it up so well! Living a life in alignment with our values/vision helps us not just financially, but also emotionally, physically, mentally, etc.

  • Matt @ Optimize Your Life Jan 4, 2017, 6:56 am

    Thanks for this, Matt! I don’t think I had really distinguished between these two types of goals before. I recognized the power of having a bigger vision, but I had never really connected it to micro-level goal setting like this. It definitely makes a lot of sense and I will have to incorporate this framework and thought process more often!

    • Distilled Dollar Jan 4, 2017, 7:41 am

      It helped me a lot! Especially on my efforts to stick to developing new habits such as cooking or walking/biking more often.

  • The Green Swan Jan 4, 2017, 7:18 am

    It’s a great idea to envision that future lifestyle, calculate what it would take to live it, and work backwards to how to get there. It can be an eye-opening process. And perhaps it helps you realize you are closer than you thought or what more it will take to achieve it. Very worthwhile process. Great post, Matt!

    • Distilled Dollar Jan 4, 2017, 7:44 am

      I’m glad you mentioned, “what more it will take to achieve,” as I’ve run into that scenario often with this approach. Once the goals are clear, I realize I need to set aside more time or put in more effort to accomplish the given task each week. My early cooking efforts were like this and same with my early efforts to learn how to iron my shirts. Thanks for the comment JW!

  • Penny @ She Picks Up Pennies Jan 4, 2017, 7:55 am

    I’m an awful goal-setter. Well, that’s a lie. I set goals well and all. I just stop paying attention to them. That sounds awful, but I think it’s sort of in line with the idea of a pull goal. I’d much rather carve out routines, habits, and systems to make my day more efficient than to focus on a single goal or a handful of goals. I’m not sure it’s the best plan, but it certainly works pretty well for us.

    • Distilled Dollar Jan 5, 2017, 11:21 pm

      At the end of the day, do what system works for you! I think that’s the ultimate leverage point, our daily habits, since those determine everything else.

  • Financial Shaper Jan 4, 2017, 8:28 am

    We made extremely good experiences with pull goals e.g. when my wife finished our studies ten years ago and visualized how our lifestyle will look like. Interestingly when we made the list for our goals for 2017, we only formulated push goals. My wife and I will have a look at our list again and certainly add some push goals.
    Very interesting and helpful post. Thanks for sharing!
    Cheers

    • Distilled Dollar Jan 5, 2017, 11:24 pm

      Glad you liked it! I’ve noticed some people work easier with push goals, others with pull, so find what works best for you guys. I’m obviously biased to pull goals since it made things a lot easier and much more successful in 2016.

      Best of luck!

  • Mrs. Picky Pincher Jan 4, 2017, 8:38 am

    Hmm, this is a good point. I think too often we’re too strict with ourselves by setting Push goals–and then we’re more likely to feel deprived and say, “Screw it! I’m buying a Cadillac!”

    It’s easier when you remove pressure from yourself and dedicate to living a life you want. I do think Push Goals have a place, especially when you’re trying to form positive money habits, but Pull Goals are better for improving long-term attitudes towards money.

    • Distilled Dollar Jan 5, 2017, 11:26 pm

      Exactly! Once that early wave of motivation fades, we can fall into a negative pattern real quick.

      I find the mix helps, just like we need to find more than one reason to want to achieve something. For us, for example, FI means more than just our personal freedom, but it also means security for our close family members, the ability to contribute to charities, ability to travel, etc.

  • Francesca - From Pennies to Pounds Jan 4, 2017, 4:09 pm

    This is what I have been doing! Thanks for putting it so succinctly 🙂 it’s ALL about mindset. Since I have been making big goals and reverse engineering them, I feel so much confidence that I will be able to achieve them. Good luck with your goals also!

    • Distilled Dollar Jan 5, 2017, 11:27 pm

      Thanks Francesca! It sounds like you won’t need any good luck. I look forward to seeing the great progress on your path! 🙂

  • Colin @ rebelwithaplan Jan 5, 2017, 3:12 am

    This really backs up what’s important: small, daily actions. Look at the big picture vision and figure out the daily actions you need to do to get there. I learned this from the intentional living blog, Break The Twitch. I’ve been doing pull goals without even fully realizing it! haha.

    • Distilled Dollar Jan 5, 2017, 11:29 pm

      Haha, awesome! Daily actions is the ultimate catalyst. Mindsets and attitudes are great. Having a clear vision and big goals is killer. BUT the middle point is that daily decision we make to do something to connect it all together. Often that means the small habits, but over time the habits build on top of each other!

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