If we become what we repeatedly do, poor habits can make us poor while “rich habits” can lead to wealth.
Sarah Berry, The Sydney Morning Herald
At Income Solutions we meet initially with our clients to plan and discuss their financial goals, these documented goals are updated annually and are an important part of securing their stated financial future. However, these goals are just one part of the puzzle, the money habits that we form over years and make decisions and choices about daily are a direct reflection of both our current and future financial situation.
A good place to start when looking a what a good money habits is, is to reflect on some of the money habits employed by financially secure people who:
~ Invest in themselves, they know the value of time and money spent on their education or self-development.
~ Live within their means or even under their means, knowing the freedom of not living from one pay day to the next.
~ Don’t borrow to fund a lifestyle or discretionary purchase.
~ Take calculated risks and opportunities when the evidence stacks up.
~ Start planning early for their retirement.
Starting today you can begin changing financial habits that will directly lead to a change in your current and future finances. James Clear in his New York Times bestselling book ‘Atomic Habits’ explains that small changes in our habits can have a big impact. Some of the strategies for change listed in his book include:
1. Know the difference between being in motion and acting
Motion is all about planning and learning and theorizing. Action is all about deliberate practice to deliver an outcome. It’s all too easy to fall into the trap of being in motion, of fooling yourself into thinking you’re making progress towards something. Remember setting a goal to be a millionaire one day will count for nothing unless you act and form habits and systems to create this outcome.
2. Be aware that we live in a delayed return environment
In modern society, many of the choices you make today will not benefit or impact you immediately, an example of this is the habit of smoking, which will provide immediate gratification, but the health consequences may take years to manifest. When applied to financial habits, while some may spend years not saving or planning for their retirement the impact of this on their daily lives will not be immediately evident until they get closer to retirement and are presented with the impact on limited retirement funds.
“The chains of habit are too light to be felt until they’re too heavy to be broken”
Bertrand Russell
3. Focus on who you want to become and the person you want to be
Make choices and set goals around the person you want to be. James Clear gives another example of this around smoking and when two people are offered a cigarette. One says, “No thanks, I’m trying to quit” while the other says “No thanks, I don’t smoke.” Once again, when applied to our finances do you want to be a person who is financially responsible and in charge of their financial future or the type of person who does not take financial responsibility seriously…. the choice is ours to make!
“Every action you take is a vote for the type of person you wish to become.”
James Clear
4. Habits are the compound interest of self-improvement
The same way that money multiplies through compound interest, the effects of your habits multiply as you repeat them. They seem to make little difference on any given day and yet the impact they deliver over the months and years can be enormous”— James Clear
5. You do not rise to the level of your goals but your habits and choices
Think of this, many people will have a goal to be financially secure by the time they are 40 and perhaps even retired at 50, but only a small percentage will achieve it. People can set out with the same goal, but the goal is never enough because it is the actions, habits, and choices that we make along the way that will reflect whether the goal is achieved or not.
At Income Solutions we will support you in creating systems and money habits that you can implement to propel the outcome of your financial goals.
References:
https://www.investopedia.com/articles/younginvestors/08/generation-y.asp
