The best time to plant a tree was 30 years ago. The next best time is today.
That’s also true for personal finance. Our money goals are a lot easier to achieve when we have a lot of time, and harder with less time.
You and I both want better financial futures for ourselves and our loved ones. It’s my desire to help you identify and break bad habits, and to replace them with new and better money habits.
For quite some time, we as Americans have struggled with money. Far too many of us live paycheck-to-paycheck, we’re not saving enough money, we’re stuck in credit card debt, and we’re taking on too much risk with the money we do have invested.
I’ve spent over 20 years helping people to get better at money so they can live how they want. Here are some strategies you can use to get on your path to financial success.
Here’s what we’ll cover:
- What are the best habits
- How to break an old habit
- How to create a new habit
- How to make them stick
Let’s get started.
What are the best habits
I like to talk about the top three financial habits in terms of Olympic medals. Here are the Gold, Silver and Bronze financial habits.
Pay yourself first. If you’re living paycheck-to-paycheck, you’ve no doubt experienced the phenomenon of having more month than money. I know I have. When we pay everyone else first, then wait till the end of the month to pay ourselves, we discover there’s no money left over for us. We break that habit and start a better one by paying ourselves first.
We can start paying ourselves first in many ways:
- Enroll in your company’s 401(k) plan
- Open an IRA and set up automatic contributions
- Set up automatic transfers from your every day checking account to a savings account
- Set up automatic transfers to a taxable brokerage account
The contribution or transfer should take place at the beginning of the month, before you pay anyone else.
Get and stay out of debt. Credit card debt is crushing far to many of us. I speak from experience on this as well, as I lived in credit card debt off and on through my 20s. Being stuck in the cycle of credit card debt can lead to stress and anxiety. Getting out from under it should be a top priority.
In service of helping, you can access our Get Out of Debt course at no cost. It will help you put together and execute your plan for becoming debt-free. Once you successfully do it, make sure you don’t fall back into it.
Diversify. It’s really important to take a diversified approach to investing. While the rise of online brokerage platforms like Robinhood have raised interest in investing, the vast majority of people who invested there have lost money. And that’s because they took on too much risk.
Taking a diversified approach to investing means not taking too concentrated a position in any one thing like a stock or cryptocurrency. We can effectively diversify our investing by using vehicles like mutual funds and ETFs. There are a lot of low-cost and high-quality options.
How to break an old habit
We’ve all heard the expression, “Old habits die hard” and I know it to be true. We all have patterns and habits we follow. Some serve us, while others don’t.
It’s hard to break habits because our brains have things called neural pathways. We introduce a stimulus and get a reaction. When there’s a clear pathway between those two things, our bodies crave more of it. For example, when we smoke a cigarette, the nicotine makes us feel good, even though we know we’re doing something bad to our bodies.
The first step in breaking a negative habit is to get clear on the life you truly want. Quitting smoking for the sake of quitting isn’t a strong enough motivator. A stronger motivator could be wanting to live a long and healthy life so you can be around and active to play with grandkids.
To help you get clear on what you truly want, you can access our Goals course at no cost. It will help you get clarity on the things which are most important to you and develop a plan for making them happen.
Also, give yourself grace as you’re breaking your bad habits. Change is hard and it will take time, but you can do it.
How to create a new habit
There has been a ton of great research and thinking done on this topic. This article from the New York Times helps by laying out the steps.
The first idea is to stack your habits. If you’re trying to create a new one, add it to something you’re already doing. For example, if you take your dog for a walk every day, consider jogging for a portion of the walk.
The next idea is to start small. If you decide to incorporate running into your dog walking routine, don’t try to run the entire time right away. Instead, start small and work up to longer distances.
Next, do it every day and make it easy. Since you’re already walking your dog every day, start running every day as well. Get everything ready to go the night before so you don’t need to spend a lot of extra time getting ready. Easy equals success.
How to make them stick
I like to talk about diet and exercise because they’re as important and challenging as personal finance is. Creating positive and sustainable habits in these areas sets us up for long-term success in life. To help you develop sustainable habits, here’s a learning framework for making them happen.
We need a learning framework because, unless you already know how to do these things, you’ll need some help. You can apply this to anything you’re trying to get better at.
The internet puts everything at our fingertips and makes learning anything possible. You can find most anything you need on YouTube or through a Google search. This may take you longer, but it’s free.
If you want to speed up the learning curve, you can invest some money in a course. When you do this, you’re benefiting from the expertise from the teacher. Viewing the cost of the course as an investment in your future is a wise approach.
Finally, if you want to not only benefit from someone else’s expertise and wisdom, and also want help with the implementation, partnering with a personal trainer or financial professional could be what you’re looking for. While this is the most expensive path, it can be the most effective.
Bonus habit and resources mentioned
I want to leave you with a bonus habit. It seems obvious once you’ve heard it, so I want you to hear it.
Become the CEO of your financial life
There’s never going to be anyone who’s more interested in your financial future than you are.
You do it by accepting ownership and personal responsibility for where you are and where you’re going with your money.
You put the habit to work by paying attention to your money. Start monitoring your cash flow every month. Put together and maintain a household budget and review it every month. Log in to all your financial accounts at least once a month.
Connect with one of our Certified Partners to get any question answered.
If you’re ready to take control of your financial life, check out our DIY Financial Plan course.
If you’d like to partner with someone to help you create better financial habits, check out our Academy Coaching Program.
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You’re someone who’s capable of being financially successful!
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