Build Better Habits to Reach Your 2022 Financial Goals
As the new year approaches, it’s tempting to think about all of the ways you’re going to overhaul your life and make this “your year.” But before you go all out changing every aspect of your life, remember that trying to focus on more than one thing at a time can waste a lot of energy, and before you know it, you’re burnt out and right back where you started.
Instead of setting multiple goals that leave you feeling scattered and frustrated, consider concentrating on building the habits that will become the foundation of your goals.
Listen to this week’s episode of the rich & Regular podcast as we discuss setting financial goals in 2022, and keep reading for ways to build habits that can help you achieve those goals.
Understand what you’re doing and why.
While goal setting can be fun and aspirational, habit building often gets into the nitty-gritty of how your life and brain work. Instead of thinking about what could be, habit forming is the work it takes to get where you want to be. Spend some time thinking about the ways you can improve your life and develop a strategy to help you get there.
Start by identifying the goals you’d like to achieve this year, such as paying off debt or building up your emergency fund, and then consider turning them into actionable habits by using what James Clear, author of Atomic Habits, calls the Three R’s—reminder, routine and reward— which helps you create (or stop) a behavior.
The Three R’s
Reminder: The reminder is the trigger that gets you to start a behavior. Getting out of bed in the morning is often the trigger to brush your teeth every day.
Routine: In this example, brushing your teeth is the routine activity that you do every day, and might be the habit you want to build.
Reward: The reward is the benefit you receive from the routine. For instance, fresh breath, healthy teeth and even societal approval for being well-groomed.
Clear argues that all habits adhere to this three-step system, and identifying the individual components can help you create new patterns or stop bad or unhelpful habits. Take some time to identify the Three R’s of the habit you want to build. For instance, if your goal is to save more this year:
A reminder might be that anytime you get a notification of a deposit, whether that’s your paycheck, refund or gift, you create a routine action of transferring a certain percentage of each deposit into your savings account. Your reward is watching your emergency fund grow and creating the habit of saving so that you don’t even have to think about it; you just take action.
As you build your Three R framework, also consider the following so that you give your habit building the best chance of success.
Don’t ignore your context.
Knowing what will and will not work for your lifestyle is vital for habit creation. What works for your friend or neighbor may not be best for you, and while you may hear that success is just a matter of discipline—and that can be true—it’s important to focus on the habits you are building, and ignore what other people are doing.
For example, if your goal is debt payoff, one person might move as quickly as possible and choose to start a side hustle or work a second or third job for a while, even if it adds extra stress to their lives.
But, for another, that might not be doable for multiple reasons, so they look for more unconventional ways to pay off debt, like potentially refinancing or selling excess items to have more cash flow available.
Habits and goals are not one-size-fits-all, so make sure you consider the context of your life when building your new habits.
Focus on one thing at a time.
When we’re excited about a new year and the possibilities in front of us, it can be tempting to accomplish everything simultaneously. The more you try to accomplish at one time, the more you will have to remember and the more stress you’ll add to your life.
Instead, focus on one habit formation at a time for a set period, possibly a month or a quarter, depending on the habit, which allows you to work smarter and focus all of your energy on one thing. It may feel like you are wasting time or that you could do more, but remind yourself that you are building a habit for the rest of your life—not trying to get to an arbitrary finish line.
Slow and steady.
Doing everything all at once is a recipe for disaster and burnout. Remember that even though you might feel guilt or shame for not accomplishing more or succeeding faster, everyone works at their own pace and you want to create a lifelong habit, not check off an item on your to-do list.
Be sure that you honor the improvements you are working on and the habits you are creating before you get to work on the next leg of your journey. Here’s to a prosperous new year!
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