January is the season for resolutions. But did you know that about 80% of new year’s resolutions fail by February 1? This year, don’t set arbitrary goals that you can’t keep, focus on the motivation and behavior behind the change you want to make. For example, instead of making a goal that you want to save $5,000 by next month, look at your spending and saving habits in greater detail. By focusing on the behavior associated with the habit, you will be better able to reach your goals. There are many factors that can stand in the way of you reaching your financial goals. I want to address a common one that many people don’t think about: behavior. I’d like to show you that by having a deeper understanding of your behavior and habits toward your finances, you will be better able to make the changes you need that will stick.
Assess your ‘why’
Why? That is the most important question to ask yourself when thinking about your financial tendencies. It is the indicator of many negative financial behaviors and the habits that accompany them. After figuring out why you make certain choices you will have a better understanding of the process as a whole. Think through some of your why questions.
- Why do I spend/overspend money?
- Why do I struggle to pay down debt?
- Why do I struggle to save more?
The reason that answering the ‘why’ question is so important is because it assesses your intention. Financial intention is one of the most important tools you have at your disposal. When you are actively aware of why you spend, why you save, and why you set specific goals you will have a better incentive for reaching and surpassing those goals. Once you understand your intentions, it then becomes time to assess how you can implement or change day-to-day habits that will lead you to reach those goals. The key here is unmasking the root behind your negative financial habits. Let’s say for example, overspending. Perhaps you overspend because you are unhappy and purchasing new things temporarily makes you feel good.
- The first thing to do is recognize where you are spending your money.
- In this case, a department store
- Next, look at the frequency at which you spend
- 3-5 times per week
- You will then look at the amount of money you spend
- In this case let’s say $50 per week
- Now is time to think about why you spend
- To fill a void.
This last point gets at the root of the overspending in this case. Figure out what your why is and then take actionable steps to stop that habit. What happens if you identify the why but you can’t stop with the behavior? It is time to dig a bit deeper now to think about what is standing in your way.
Understanding and eliminating roadblocks
We all experience this: we know something is wrong yet we do it anyway. But why is this such a common practice? The simple answer is that there are roadblocks standing in the way of success. The goal here is to identify the roadblocks and figure out how to eliminate them in order for you to accomplish your goals.
What is stopping you from achieving your goals?
Is it a roadblock that can be removed – like overspending in a category that doesn’t give you purpose or leave you fulfilled? Or is it something bigger that you’re not accounting for – like having to care for an aging parent? If the former is true, then the best way to eliminate the roadblock is to focus your spending on things that provide you with purpose and fulfillment. If the latter, it is time to factor in your larger spending to your budget. Compromises will have to be made in order to accommodate this financial need and making that change is a great step.
Up, up, and away!
Now that you understand your why and are in the process of dismantling the roadblocks that stand in your way, it is time to make a budget that matches your new financial habits. Budgets are not always simple, to make or to stick to, but if you create your budget with an intention and goal in mind, you will make the job much easier.
Make your goal this year be to create a value-based budget. Don’t separate your values and emotions from your money. Often, money is much more emotional than people think and by infusing a budget with your values, you will be on the road to breaking those negative financial habits and making new ones that will be with you for the long haul.