How to Change Your Habits and Own Your Finances This Year
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Tired of missing your money goals for the year? Learn how you can change your habits and own your finances!
Raise your hand if you've ever made a goal and before the week or month was over, you quit.
Yeah, me too.
Why is it despite some of our best intentions we fail at achieving our goals?
Building Wealth with Better Habits
We set ourselves up for failure because we don't address what really needs to be changed.
Most times we don't need more willpower, we need better habits.
In this episode we dig into how you can adjust and create habits that will make saving money and paying down debt easier.
- the difference between changing a habit and create a new one
- how you can use one habit to jumpstart your finances
- resources to keep you on track with your money goals
Hope you enjoy!
Resources to Build Your Habits and Money
If you're ready to create new habits and systems to make your finances easier, here are some key ones to check out.
- The Power of Habit
- Best Budget and Money Apps: Personal Capital, Tiller, Mint
- Automatic Saving:
- Free 401(k) Analysis: blooom
- Jumpstart Your Marriage and Your Money
If you want to chat some more about creating better money habits, questions, or share your own tips please join us over at Thriving Families on Facebook.
How to Change a Habit
We underestimate the power of habits. A big part of it due to how easily and unconsciously we slip into them.
NY Times reporter Charles Duhigg studied the neuroscience and psychological research behind our routines in his book The Power of Habit: Why We Do What We Do in Life and Business.
Duhigg cited a study done at Duke University in his book where researchers found that over 40% of the activities we engage in on a daily basis is a habit.
What Makes a Habit a Habit?
In essence, there are 3 basic components to habits – cues, routines, and rewards.
- Cues – triggers for behavior
- Routine – behavior that you want to change
- Reward – why you're doing this behavior
If you want to change the routine, you have to look at how you can adjust the cue and the reward.
Let's say you want to do a better job with saving for retirement. You want to contribute regularly to your Roth IRA.
What's Your Cue?
Basically, cues fall into a few different categories
- Presence of Certain People
- Preceding Actions
Most of the time, we're not immediately aware of what the cue so when you first try it out you may have to play around to see what your personal cue is.
Indulge in Your Rewards
As much as we like to think we achieve goals based on their value, humans tend to seek out rewards for their behavior or at the very least avoid punishment.
To jump-start the new routine you have to use an extrinsic reward to help you through the transition until the intrinsic reward kicks in.
Think of it as letting yourself have one of your favorite treats after a workout until you start to notice and feel the difference of being in better shape.
To be most effective, choose a reward that you'd really enjoy and take it quickly so you mind associates it with the new routine.
Let's say for every month you reach your IRA contribution goal, you go out that night to one of your favorite restaurants and celebrate with friends.
Carefully pick out the restaurant, which friends to invite, and maybe a theme for the evening. The idea is that your excitement at the chance to celebrate will motivate you to make that contribution. No investment, no night out.
Creating New Routines
So just what behavior can you add or change to get you to contribute to your IRA?
If you're looking to change your behavior, try to make it as easy as possible.
Open an IRA with a company that allows free automatic transfers and that will allocate that money for you.
Set it up so it will be sent to your IRA as soon as your paycheck clears.
In essence, that's it.
Changing a habit means breaking it down and tweaking the cue and the reward so you will stick with it long enough for the new behavior becomes a part of your routine.
Thoughts on Changing and Making Better Habits
What are some of your financial goals for this year? What habits are you looking to change?
This article was originally published in January 2015. It has been updated January 2019.
One thing that works best for me is to set smaller goals rather than one large goal. For example, many people want to lose weight so they’ll say “I want to lose 20 pounds this year.” Eventually this looks overly daunting and even if they lose a few pounds, they’ll give up on the goal after awhile. But, if you set that as a larger goals, but focus on more incremental goals (say 4 pounds at a time), you’ll have the ability to reach milestones faster that can keep one motivated.
Great point – breaking things down can go a long way towards reaching goals!
One of my habits I’m working on changing is less impulse spending on food or eating out. It’s good for finances as well as health. So far, so good…though admittedly it’s only been 6 days so far 🙂