The habits of a financial champion
“Winning is not a sometime thing; it’s an all time thing. You don’t win once in a while, you don’t do things right once in a while, you do them right all the time. Winning is a habit. Unfortunately, so is losing.”
— Vince Lombardi
A recent study published by the University of Scranton Journal of Clinical Psychology on New Year’s resolutions found that 45 percent of Americans usually make a New Year’s resolution followed by 17 percent who infrequently make New Year’s resolutions. Of those, only 8 percent are successful in achieving their stated resolution.
Of the stated Top 10 resolutions, coming in at number three, 34 percent are money related, including the primary goals to spend less and save more.
This highlights the reality that most of us are more inclined to buy a $5 cup of coffee than we are to tuck it away for a greater purpose. It is no surprise that the number of successful resolutions trail off quickly as time passes with only 71 percent still on track after only two weeks and less than 50 percent after six months.
Here is something to consider for those still on the wagon or ready to try New Year’s Resolution — Take 2.
It is well documented that most successful people operate under a set of successful habits. We all have habits. Some of them improve our lives or the lives of others and others create chaos and in many cases destruction in our lives. The most powerful of both are habits that have become automatic. The power of an automatic habit is that our emotions get removed from the process of taking action. Marketing gurus leverage this reality constantly in our lives by allowing us the ease to automate the transfer of money with the implied promise that our lives will be easier because of it. While technology can certainly be used as a tool to make our lives simpler, we should seriously consider the power of automatic money habits.
It is becoming very rare for most of us to walk around with more than $20 in our pockets. We have become a culture of spending through rewards cards, credit cards and now simply from our mobile phones. Convenient?… yes, but have we made it convenient to nurture our healthy habits or our destructive habits? While an all-cash habit is the right choice for some, here are some thoughts on using automation for the rest of us.
• DO automate the payments of your credit cards and debt. Many credit cards allow the automatic payment of either the monthly payment or payment in full each month. Automatically pay in full each month. Most mortgage and auto loan lenders will also lower the interest rate for borrowers who sign up for auto-pay.
• DO automate a savings plan. This is the hardest part for many, but is absolutely necessary for financial success. Think about it, most Americans only save what is automatically deducted from a paycheck before it hits the bank account. Even if it is a small amount, create an automated savings plan today.
• DO NOT automate lifestyle spending transactions. Turn off the auto-reload on your coffee rewards card and break the automated spending links to your bank, credit and PayPal accounts. While Bill-Pay is fine for utility bills, it is healthy to feel the money leave the pocket when it comes to feel-good purchases.
I recommend reading The Automatic Millionaire by David Bach for more insight into this “Pay Yourself First” mindset. Don’t be an automatic loser — take these concepts and begin the winning habits of a financial champion.
RC Arseneau is a Certified Financial Planner and lives with his family in Delaware. Please submit any questions or topic requests to AskRc@mail.com.
The information and opinions in this column are provided only for educational and entertainment purposes. Any reference to a financial product or strategy is not to be considered an endorsement or recommendation. The information is of a general nature only and does not take into account your individual objectives, financial situation or needs. It should not be used, relied upon, or treated as a substitute for specific professional financial, legal or tax advice. Investment Performance may vary due to timing and expenses. Rc recommends that you obtain your own independent professional advice before making any decision in relation to your particular requirements or circumstances.