How To Adopt Financial Habits That Stick

March 16, 2018

If your goal is to become a better steward of your hard-earned money, what does it take to improve your odds of succeeding once you decide to make some positive financial changes? It helps to make your goals as specific as possible.

Since the acronym SMART was introduced in a Management Review article in 1981, many of us have become familiar with the notion of making our goals:


For example, common personal financial goals might include contributing a set percentage of pay to your retirement plan at work, paying off all credit card debt within 24 months, and building emergency savings equal to three months of take-home pay within 5 years.

Behavioral change is tricky business

Although SMART is a handy and easily remembered acronym for developing and articulating goals, it doesn’t do much to actually keep us motivated to achieve them. Changing the way we think about and spend money means finding ways to change our behaviors, and humans are largely creatures of habit. Accordingly, becoming a better money manager means modifying those habits and establishing some key financial priorities.

Translating intentions into action

For example, becoming better prepared for retirement could mean committing to regularly saving a specific percentage, say 10% or more, of every paycheck to your employer’s retirement savings plan and simultaneously learning to live on less than we earn. Becoming a better saver means committing to regular transfers from a checking account to an emergency fund savings account every payday. Getting out of credit card debt means committing to a cash-only lifestyle while also paying off the highest interest rate cards first.

Deciding what we need to do and being very specific about it is relatively easy. It is the commitment part that presents most of us with an ongoing and often difficult challenge.

Getting from tricky to sticky

Creating meaningful and lasting behavior changes is no small task, nor is the process for doing so consistently and successfully fully understood, even by experts. University of Pennsylvania research professors Angela Duckworth and Katherine Milkman, both PhDs with considerable achievements under their respective belts, recently launched an impressive and appropriately named project called “Making Behavior Change Stick.”

The goal of the project is to better understand the various nudges and incentives that help people consistently make better decisions with respect to health, education, and personal finance by utilizing a research team comprised of large corporate sponsors and professionals from the fields of psychology, economics, medicine, computer science, marketing, and sociology.  This particular research project is relatively new, ambitious, and ongoing. It will be interesting to follow the various insights that it uncovers over time.

What we’ve learned at Financial Finesse

In the meantime, my colleagues and I have a considerable amount of experience with facilitating behavioral change within the realm of personal finance via financial education and individual financial coaching tied to workplace financial wellness programs. Data from our 2016 Year in Review research summary shows that improving behavior is the key to improving employee financial wellness among a sizable cross-section of large employers with active financial wellness programs in place for their employees.

Gradually adopting positive financial behaviors leads to improved cash management, less debt, and better preparedness for retirement, particularly among repeat users of financial education and coaching resources. The availability of individualized financial coaching appears to be particularly helpful in facilitating sticky financial behavior changes that are both effective and enduring. Whether you participate in a formal financial wellness program or not, some of the best practices that can make your financial behavioral changes more sticky and less tricky include:

Automate. Put as many decisions on autopilot as possible. Using your bank’s electronic bill pay feature to schedule regular monthly credit card payments so they are always made on time is one example. Another is setting up automatic transfers every payday from your checking account to a savings account in order to build up an emergency fund.

You are probably already saving for retirement with automatic payroll deductions to your 401(k), 403(b) or similar employer retirement plan. Use similar techniques to automatically save for other goals or to help get out of debt faster. Instead of having to make many great decisions every month, make a few great decisions now that automatically repeat themselves every month from now on.

Be mindful. Practice mindfulness and recognize that many of our decisions are driven as much or more by our emotions as they are by logic. We are only human, and emotional biases are going to creep into our thoughts and decision making abilities.

Rather than trying to bottle up or ignore our emotional and often illogical sides, we can choose instead to acknowledge and explore them. The next time we fall short of a financial goal or slide back into bad spending habits, we can use those opportunities to carefully examine both why we made those choices and what we were feeling at the time, along with considering what we could do differently next time. Celebrate the small wins along the way. These are what add up over time to become much bigger improvements.

Find a money coach. Have you ever stopped to consider how many superstar level athletes, people who in every sense of the word are quite literally at the top of their game, continue to work with personal coaches and trainers? Although a coach can certainly help us learn new skills and techniques that make us better, their real and lasting value comes from helping us stay better at those important skills and techniques.

Financial coaches are available through a variety of channels. Check your financial wellness benefit or you may already work with a financial advisor or planner who can provide you with financial coaching from time to time. If not, the Certified Financial Planner Board of Standards, Inc has a free planner search tool on their website,

These are just some of the techniques that we’ve found helpful in creating behavioral change that can produce results. The key is to find what works best for you. Which ones will you adopt to finally tackle those financial goals?


This post was originally published on Forbes.