How Habits can Impact Your Finances

Presented by Lucas Group Financial Advisors |

When people wish to become healthier, they know that they have to change their eating and exercise behaviors. That’s easier said than done, which is why diets and personal trainers are popular. They provide a system for controlling portions, managing nutrition, building exercise routines, and staying accountable. Within a few months, behaviors and habits can transform, leading to a healthier lifestyle.

Our behaviors can produce the results we see in our lives. If you don’t like the results, then change the behaviors. Though this sounds simple, it can be a struggle to practice in everyday life.

The average adult makes thousands of micro-decisions each day – many unconscious and unimportant. But added up along with the bigger decisions you make, they have the ability to shape your life in profound ways. So ask yourself:

What kind of life am I creating with my daily choices? Are they keeping me on track to meet both current and future goals?

When applying this to personal finances, think of your choices as you would interest compounding over time. Each choice builds on the consequences of all previous decisions. It could be upgrading to a luxury car with higher maintenance fees, impulsively buying the latest tech, or choosing to vacation in the Swiss Alps instead of Lake Tahoe. These may seem inconsequential and affordable at the time. However, over several years, these decisions may impact your ability to accumulate wealth, which could affect your retirement goals.

However, future goals such as retirement should also be balanced with meeting current lifestyle targets. If having the latest tech is important to you and enriches your life, or you wish to travel the world while you're young and healthy to enjoy it, perhaps savings can be found in other areas of your finances. Balancing the two - enjoying your income now while still saving enough for a comfortable retirement or other long-term goals - can take careful planning. 

Assess Your Situation

What do you see when you track your daily financial habits? Do you:

  • Spend without a budget?
  • Shop without a list or goal in mind?
  • Rationalize large and impulsive purchases?
  • Struggle to focus on your long-term objectives?
  • Adhere to a defined savings plan?
  • Know how much you need to save for a comfortable retirement?

In life and in finances, the difference between success and failure may lie in the choices you make daily – not one monumentally bad decision. Look at professional athletes: 78% of former NFL players say they’re financially stressed just two years after retiring. Though several factors can contribute to this, the unsustainable lifestyle choices made during their short careers are often a large part of why some players go bankrupt.

Analyze Your Plan

In addition to assessing your current trends, it's also important to examine your short- and long-term goals. Are your habits allowing you to set aside enough each month, or does an analysis show that more savings are needed to reach retirement or other goals? Which areas of current spending are essential, which are maintaining your desired lifestyle, and which are less important and can therefore be adjusted?

Adjust Your Behavior

Once you've recognized your behaviors, you can start to build a plan to improve them. Try keeping score with yourself. For many of us, when we keep score, we focus on improving our score. By incorporating this natural tendency into your planning, you may be more motivated to stick to your goals.

Here are some ideas to help you get started:

  • Establish realistic goals for the results you want to achieve. SMART goals are one way to create achievable goals that are clearly defined.
  • Monitor and track your activities. There are several tracking apps available, but a journal works as well. A journal can be especially helpful at the beginning, because the act of writing down each purchase makes you more aware of each expenditure, and you can consider how it fits into your goals. But either method can be effective as long as you use them consistently.
  • Make sure your plans include room for current enjoyment. If your goals and budget case you to pinch every penny and bypass all non-essential spending, you're unlikely to stick to the program long-term.
  • Reward yourself for reaching milestones and desired results.
  • Consider talking to a financial professional – they can help you create a plan and stay accountable.


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