How Habits Can Impact Your Finances

When people choose to eat healthier or lose weight, they know that they have to change their behaviors. That’s easier said than done, which is why weight loss programs and restrictive diets are popular. They provide a system for controlling portions, managing nutrition, and staying accountable. Within a few months, eating behaviors and habits can transform, leading to a healthier lifestyle.

Our behaviors can produce the results we see in our lives. If you don’t like the results, then change the behaviors. Though this sounds simple, it can be a struggle to practice in everyday life.

The average adult makes thousands of micro-decisions each day – many unconscious and unimportant. But added up along with the bigger decisions you make, they have the ability to shape your life in profound ways. So ask yourself:

What kind of life am I creating with my daily choices? If I don’t like what I see, how can I change my results?

When applying this to personal finances, think of your choices as you would interest compounding over time. Each choice builds on the consequences of all previous decisions. It could be upgrading to a luxury car with higher maintenance fees, impulsively buying the latest tech, or choosing to vacation in the Swiss Alps instead of Lake Tahoe. These may seem inconsequential and affordable at the time. However, over several years, these decisions may impact your ability to accumulate wealth, which could affect your retirement goals.

By reconsidering some of your daily choices, you could have a positive impact on your retirement accounts.

Assess Your Situation

What do you see when you track your daily financial habits? Do you:

• Spend without a budget?
• Shop without a list or goal in mind?
• Rationalize large and impulsive purchases?
• Struggle to focus on your long-term objectives?
• Adhere to a defined savings plan?

In life and in finances, the difference between success and failure may lie in the choices you make daily – not one monumentally bad decision. Look at professional athletes: 78% of former NFL players say they’re financially stressed just two years after retiring. Though several factors can contribute to this, the unsustainable lifestyle choices made during their short careers are often a large part of why some players go bankrupt.

Change Your Behavior

Once you've recognized your behaviors, you can start to build a plan to improve them. Try keeping score with yourself. For many of us, when we keep score, we focus on improving our score. By incorporating this natural tendency into your planning, you may be more motivated to stick to your goals.

Here are some ideas to help you get started:

• Establish realistic goals for the results you want to achieve. SMART goals are one way to create achievable goals that are clearly defined.
• Monitor and track your activities. There are several tracking apps available, but a journal works as well. Both methods can be effective as long as you use them consistently.
• Reward yourself for reaching milestones and desired results.
• Consider talking to a financial professional – they can help you create a plan and stay accountable.

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