It’s officially July and we’re halfway through the year. Like many people, you probably set new years resolutions back in January. And like many people, you may realize now that you’re not on track to accomplish those resolutions (doesn’t it feel like this happens every year?).
You had good intentions, but somewhere along the way, you got off course.
That’s okay. You don’t have to be ashamed. Don’t tell yourself you’ll try again next year. Today is the day to hit that reset button and begin again.
About 15 years ago (before I hit the reset button on my own personal finances), I struggled to make ends meet. I had $36k in student loans, I didn’t realize how much I was overspending, and I even misused my credit cards.
Fast forward to today, and my good financial behaviors are habits. I don’t think about them anymore – they just happen. They’re on autopilot. But, I’ve been working at this professionally for over 20 years (notice it too me a few years to apply it personally).
Here are 6 anchor behaviors you can use to get back on the right financial track. These are 6 behaviors that helped me (and many of my clients) develop good financial habits, and I know they’ll help you too.
1. Recognize (And Celebrate) The Good Habits You Have
Think about some of the “wins” you’ve had this year. Maybe you invested in resources that helped you develop a new skill. Maybe you got a promotion at work. Or perhaps you even increased your income or reduced your expenses.
Even if you haven’t made any positive financial changes, maybe you started exercising regularly or eating more fruits and vegetables. Maybe you have been successful in the quest for a good night’s rest. Maybe you started meditating every day and focusing on your mindset.
All these wins are worthy of being celebrated.
So, take a moment and reflect on this year. You’ve made some good choices, and you’ve made strides in the right direction. This isn’t about beating yourself up when you fail. It’s about recognizing your successes and realizing you’re a work in progress.
Your story has many chapters to be written. You aren’t finished yet.
2. Save A Little (Or If You’re Already Saving… Save A Little More)
If you have a 401k and aren’t using it, start contributing 2% of your income. Two-percent isn’t much (relative to your total income), so this will ease you into the savings process.
If you don’t have a 401k, don’t fret. Many states are setting up state-sponsored tax-advantaged savings programs (look into that in your state). For now, set up an automatic monthly contribution to a savings account directly out of your paycheck. The goal is to save 2% of whatever you make. So, if you make $5000 per month, save $100 (2%) per month.
If you’re already saving a little (say 5%), then push it to 7%. I always recommend saving a percentage (rather than a fixed dollar amount) because it makes it easier to increase your savings as your income grows.
The ultimate goal is to push your savings to 15% of your income. Why 15%? Well, I look at 10% as the minimum if you start saving early (say, in your 20s). But, if you’re 40 and haven’t saved anything, then you need to save more to catch up.
If you take small steps, then you won’t feel a major change in your life as you increase your savings. But, if you’re a rip-the-Band-Aid-off sort of person, then #3 might be for you.
3. Go All In — Set Up Your 401k & Save 15% Today
If you go the slow and steady route, increasing your savings rate won’t make a huge difference in your lifestyle. If you go all in and start saving 15% today, you’ll certainly need to adjust your lifestyle (i.e. reduce your expenses) to compensate.
Whatever you do, be sure you aren’t relying on debt to fund your lifestyle just so you can save more. If debt is increasing while you’re saving… you simply aren’t doing it right.
4. Whether You Go With #2 Or #3 Above, Believe You’re Capable Of Forming Good Financial Habits
I came from a household where we NEVER had money. Both my parents owned small businesses, and neither of their businesses made much money. So, there were many side hustles in our household.
My brother and I were often labor for my parent’s side hustles, and coupon clipping was a weekend activity (long before coupon clipping was cool). Not a complaint, I learned incredible lessons and developed a stellar work ethic in the process.
Everyone has a different history with money. We were all taught different money lessons as children. It doesn’t matter what those lessons were. If they were good, implement them. If they were horrible, overcome them, learn new ones, and implement those.
There are lots of studies that talk about building better habits, and they all come down to two very simple things.
- You’ve gotta try. If you fail, try again.
- If you succeed, keep going – don’t stop.
New habits are hard. Be patient with yourself.
5. Automate, Automate, Automate
The beauty of today’s financial technology is that it allows you to make a one-time decision and then move onto other things.
For example, you may decide “I am going to save 10% of my income in my 401k” or “I am going to pay extra on this card.” Once you’ve made the decision, automate it. It’s a great way to take the pressure off of having to make those decisions every month.
6. Imagine Yourself With Successful Financial Habits
Paint yourself a vivid picture of what it would be like to:
- Have a personalized roadmap to financial success
- Have an actionable savings plan
- Know exactly how much you spend every month
- Be debt-free
- Have a fully-funded emergency fund
- Live the life you want
- Retire with an income you can’t outlive
Know this… you’ll have all these things at some point in the future. You will get there if you start by hitting the reset button today. If you drift off course, remember this vivid picture, forgive yourself, and start again.
As time passes, these good financial behaviors will turn into habits. You won’t have to think about them anymore. They’ll be on autopilot for you just as they are for me.
You can do this.
Want to read more blog posts on developing good financial habits? Check out: