Tiny Habits

People do not decide their futures, they decide their habits and their habits decide their futures.

That’s a quote from F.M. Alexander.

Think about how true this is. This goes for almost everything, not just your finances.

That’s what I want to talk about today, how creating good habits can change your financial situation.

But first, let me ask you a question. The question is, how do you as a 401k or 403b participant become a 401k superhero to your future self?

That is the question, and these videos will give you the answers. Hey, I’m Jonathon Schultheiss and welcome to the Becoming a 401k Superhero videos.

BJ Fogg, a Stanford University professor wrote a book called Tiny Habits. The idea behind the book was that making big changes were hard for people to stick with.

His research proved that if instead, you make small changes, people often stick with those small changes longer.

I know when I try to make major changes, it become really hard for me to stick with.

So, if we know that our habits predict our future, and we know we are more likely to stick with tiny habit changes over major changes, how can we apply this to our personal finances?

Here are a couple small habits you can use to change your personal finances.

Habit number 1, Look at your expenses every day.

Here’s the things, you’re just looking at it. You’re not making any changes.

You can use tools like Mint.com that will allow you to aggregate all your credit card spending in one simple place.

Why are you just looking at it?

Because those things that have your attention often get improved.

Most people over spend because they have no idea what they’ve already spent, so they keep spending.

If you look at your spending every day, even if it’s just for 20 seconds, then you know what you’ve spent that month, or that week. Then you will make better decision on future spending.

This is just a simple 20 second small habit.

Habit number 2, Set 1 financial goal.

This goal can be saving for something fun. Maybe it’s a small family vacation, or it’s just an item that you really want.

The purpose of this is to keep you focused on looking at your finances every day.

If you look at your finances every day with your goal in mind, your will start to see ways to cut your spending and using that money to hit your financial goal.

Tip number 3 is to make 1/12 of an extra payment toward your debt.

This tiny habit works great on amortized debt like your home or your car. It doesn’t work so well for credit card debt. That’s a whole different topic.

If you take your monthly payment, divide it by 12, and then add that back to your regular monthly payment, you will make one extra payment a year.

On a 30 year mortgage, making one extra payment, could cut between 8 and 10 years off the life of your mortgage.

On a car payment, it could easily cut one to two years off the life of your loan.

Creating tiny habits that you can keep up with, is a very good way to improve your overall finances.

And when you improve your finances, you are becoming a 401k Superhero to your future self.

If me or my team, can you help with your personal finances, click on the link above and schedule a time to have a conversation with us today.