Building Habits to Achieve Financial Goals

December 9, 2020
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Last week on the Illumination Wealth Blog, we shared “7 Steps to Setting Better Financial Goals.” However, this is just half of the story. It’s great to set your financial goals year after year and revisit your long-term financial plan, as well. Goals are important, but ultimately it is the plan—and even more important than that, your commitment to the plan—that will allow you to effectively achieve those goals.

Dreaming Big vs. Being Realistic

Many people set very lofty financial goals for the year ahead. It is wonderful to dream big. Unfortunately, goals that are too unattainable may end up being more of a burden than motivation. They require too much of a daunting effort. If you are not fully committed, then you can fall flat. You can end up making much less progress than if you had set more realistic goals.

Finding that sweet spot between attainability and dreaming big isn’t easy, but that’s where you should set your sights when setting your goals (especially when it comes to important financial goals). Don’t aim too low because you might not be motivated by mediocre goals. Don’t aim too high because you might be discouraged when you realize those goals are too far out of reach.

Start Small to Achieve Big

The way to achieve big goals is actually to start small. You have to build better habits. Some psychologists (and financial planners, as well) will call this process setting “micro habits.” Micro habits are smaller components of a larger habit. Over time, as you build your micro habits, you can create bigger, better habits that will allow you to achieve loftier goals.

Think about your average work day. Sometimes, it feels like you have so much on your plate that it’s overwhelming. It’s hard to concentrate on any one task. By the end of the day, you haven’t accomplished much. However, when you break down your tasks and are able to focus on one thing at a time, you often get more done than you thought possible. This same approach can be taken in order to be more successful at goal setting, action plan development and goal achievement.

Building Better Habits Over Time

The idea is to make smaller changes in habits that are easy to work into your normal routine. Over time, they become second nature and then you can introduce more and more micro habits. This is an excellent way to alter your approach and get better at reaching your goals.

If your goal is to run a marathon, you aren’t going to go out the very first day and run 26.2 miles. You would probably fail miserably and then be discouraged to ever try that again. Run a few miles at first. Build up your stamina. Run a few more miles when you are able. Add in other micro habits along the way like stretching, eating right, hydrating, cooling down after a run, etc. This will help you see progress and stay motivated toward your ultimate goal. Eventually, you will work you way up to running a full marathon.

Break your bigger financial goals into smaller goals and tasks. Work on changing your habits one micro habit at a time. Keep building and growing as you get closer to achieving your most substantial goals through smaller accomplishments. This is a tried and true method for personal growth that can apply to just about any goal in life, whether it’s your health, your finances, your family or anything else.

Here is a way to break down this method even further:

1. Think Small

One way to get started is to identify a ridiculously small micro habit. No habit or task is too small. You have to start somewhere!

2. Keep Building

As one micro habit becomes second nature, keep building on it with the next micro habit and so on. This is how you see progress.

3. Track Progress

Speaking of progress, track it and acknowledge it. It’s okay to pat yourself on the back to feel good about your accomplishments (no matter how small). This will help keep you motivated.

4. Be Consistent

The idea of building better habits depends on consistency. To effectively make a habit a permanent one, you have to be persistent and make it part of your daily routine.

5. Stay Accountable

Hold yourself accountable to your habits and your goals. Seek help if you need to. Work with a financial advisor toward your financial goals. Let a friend, colleague or family member know what you are trying to do and ask them to keep you on track. It’s not always easy to keep yourself motivated, so a little outside encouragement always helps.

If you are looking to build a better financial plan and better habits that will make you more successful on the road to financial independence, Illumination Wealth is here to help. Contact us today to start planning your future.