8 Tips To Control Your Holiday Spending

8 Tips To Control Your Holiday Spending

“Delicious autumn! My very soul is wedded to it, and if I were a bird I would fly about the earth seeking the successive autumns.”

– George Eliot

I love the foliage season and the fall. Halloween is a big holiday for consumers. According to a National Retail Federation’s ( NRF’s) annual 2019 survey, Halloween spending is expected to reach $8.8 billion this year. This is a bit below $9 billion in last year’s rate. Shoppers they will spend an average of $86.27 this Halloween. About 172 million people, or 68% of Americans, plan to celebrate this holiday, slightly down from 175 million last year.

Halloween is not the biggest holiday dollar-wise. Consumer spending is far higher for Valentine’s Day and Mother’s Day. At least this occasion may involve the whole family, including your pets.

Halloween Spending

Among those celebrating, the number one item which  Americans spend their money is on costumes at $3.2 billion, decorations at $2.7 billion, closely followed by candy purchases at $2.6 billion. Actually, one quarter of all candy sold annually in the US is purchased for Halloween and only $390 million for greeting cards. I don’t recall the last time I sent or received a greeting card.

A startling 37% of Amercians planned to start Halloween shopping before October. My guess is that you wanted to settle on your costume or that of your children early on. I recall running relatively late (mid-October and I thought I was early!) to get my kids’ choices. All the great ones (such as Dora the Explorer) were gone. I enlisted a cousin at one of best distributors of costumes. He saved my a** with the perfect princess and super hero costumes. This year, 3.1 million children (7.9%)  plan to wear their favorite princess while 2.4 million children (6.6%) go as their favorite superhero.

Do You Dress Your Pets?

Halloween is rarely scary for the average person. However, for our pets it is a scary time but I am not referring to scary humans but the fact that owners like to dress up our pets for this holiday.There are 29 million people who plan to dress their pets in costumes. For the record, I have never costumed either of my dogs…the leash is challenge enough.

PetPlan, a pet health insurance company, found the week around Halloween to be among the most dangerous times of the year for our favored members of the household. Petplans reimbursement for chocolate toxicity treatment during that same week averaged $627. Chocolate, especially darker chocolate, can be toxic for dogs giving them gastrointestinal upset and elevated heart rate. The costumes are alright, unless frilled or with feathers which are potentially difficult to injest. Of course, their self-esteem could take a hit.

How We Spend For Winter Holidays

Consumer spending for the Halloween celebration is comparatively tame dollar-wise. The upcoming winter holidays, which runs from Thanksgiving to Christmas, and includes Black Friday and CyberMonday, dwarfs all the rest. Consumers plan to spend $1,047.83, up 4% from last year’s plan. Shoppers between ages 35-44 years will spend $1,158.63 this year, according to NRF. These dollar amounts do not include New Year’s Eve or winter vacations.

Given the approaching festivities, it is time for a sound financial plan to spend wisely, make end of year investing decisions and have fun.

8 Tips To Control Holiday Spending And End of Year Planning


1. Use A Shopping List to Plan In Advance

Pull out your list from last year to update for the typical three categories. Those are:

  • gifts for families, friends, co-workers and neighbors;
  • non-gift holiday items, notably candy, food, decorations, greeting cards and flowers. If you can reuse decorations, go for it; and,
  • other non-gift purchases that we make when we take advantage of deals and promotions during the season. 10-15% of our planned spending is for these items. These expenditures are probably discretionary.


2. Keep Track Of Your Spending

Make sure you use a realistic budget and track your spending. If you have a spending plan that is impossible to keep to, you’ll just go off script. Refer to your budget for items that recur every year whether for gifts or holiday dinners. Search online and put items in your cart to prompt follow up discounts from the retailer.

The point of tracking spending is to be more conscious about your purchases so that you can be guilt free and can enjoy the holidays.

3. Avoid Procrastination, Shop Early

Start shopping early so you aren’t forced to buy in a hurry.  Procrastination is costly, especially during holiday shopping. I have often waited too long and found preferred merchandise for loved ones sold out, and ended up spending more than I intended for sometimes inappropriate things. I don’t enjoy shopping in crowds but I don’t like paying more than I should be spending.

4. Have A Plan For Reducing Debt

The holiday times are often stressful. Often that tension is caused by the realization that you will be spending a lot during this time of year. You are not alone. The average credit card debt per borrower is $5,554 in the first quarter 2019 according to TransUnion statistics.The share of  credit card balances transitioning to 90+ day delinquency rates have hit a 7 year high in 2Q19, rising to 5.2% from 5.0% in 1Q19.

Many borrowers are struggling with credit card debt and are not able to even make the minimum payments. The truth about credit cards are that even if you are paying the minimum amounts, the high cost of interest rates on most credit cards are compounding what you owe.

Start a plan during the holiday season that you can commit to even if it means after the holidays. Pay more than the minimum amount owed and work your way toward paying your balances in full every month.Use a budget to keep your spending from going out of control.

5. Be A Savvy Shopper

Holiday season is especially tricky time to shop. Typically, you are not buying things for yourself. Gift shopping is more of a necessity because we are getting something for family and friends. We feel some guilt looking for bargains for others. Merchants are taking advantage of us during this time. The store is brightly lit and holiday music is being piped in.There is a psychology at work here as most of us feel nostalgia for the holidays which elevates our positive moods.  

Feeling good while shopping makes it hard to resist impulsive purchases. So need to work harder to avoid that feeling. Recognize that not all sales are true bargains and that it is just a sign with the word “sale” on it. Doing your research online or sticking to your shopping list helps.

6. Use More Cash

If you know you will overspend if you use your credit cards, try using cash. It is a good way to keep track of your money for smaller purchases. You will feel pain more immediately and often are more judicious about your purchases.

7. Year-End Tax Strategies For Your Portfolio

While your mind may be on the upcoming holiday season, this time of year is a good time to consider how to efficiently structure your capital gains and losses in your portfolio.

By timing your stock sales correctly, you can lessen your tax burden. If you have some stocks with long term losses, it is a good idea to match the capital losses against your capital gains. The federal capital gain rate is 15% on the stocks you have held for a year and a day. Importantly, if you sell your long term stocks that have losses along with gains you can minimize your tax bill.

If you have an financial adviser, it is a good idea to speak to him or her about selling some stocks. Accumulating capital losses for future stock gains is called tax loss harvesting.

You are not the only one selling stocks with losses at the end of year. Fund managers often “window dressing” that is selling stocks with large losses while picking up high flying stocks at the end of the quarter so their portfolio looks smarter.

8. Charitable Giving

Charity is something you might do all year whether it is giving of your time by volunteering or donating to charities. This time of time, there are a lot of toy, food, and clothing drives collected by your neighborhood centers or churches or other places of worship.

Final Words

The upcoming months are fun and enjoyable times spending with family and friends. Have a plan in place to spend wisely, use a budget and a shopping list during these expensive months. Shop smartly and use debt sparingly. Managing money is sometimes tough during the winter holidays but some things in advance where possible.

Have you started planning out your winter holidays? What works for you when you are shopping for a lot of different things? We would love to hear from you!






13 Money Lessons From Warren Buffett Through Shareholder Letters

13 Money Lessons From Warren Buffett Through Shareholder Letters

“Whether talking about socks or stocks, I like buying quality merchandise when it is marked down.”

Warren Buffett


As a college professor, I assign reading and a paper on the legendary Berkshire Hathaway’s  CEO and Chairman Warren Buffett’s latest Letter to Shareholders to my finance students. They are always enthusiastic to discuss the letter and watch videos of the “Oracle of Omaha.”

Buffett writes his own shareholder letters. I have read the letters annually for years and find them fun, enlightening and educational. The letters contain his gems on the economy, financial markets, money management, investing, running businesses and his unwavering optimism for America.

Buffet’s “aw shucks” attitude is refreshing from the Wall Street I spent most of my career in. When I visited a CEO in Omaha from one of the emerging telecom companies, we “ran” into Buffett in the building’s lower level cafeteria where he was carrying Coke and chips. It instantly made me feel like I was in the best restaurant on the planet, rather than a mere cafeteria where I was holding my own tray. If Warren could eat here, so could I.

Buffett has been a great inspiration for my students who often come from modest means. His letters are great money lessons easy to learn. His iconic quotes as well as that of Charlie Munger’s (his Vice Chairman) often come from these letters.

13 Money Lessons From Buffett’s  Annual Letters:


 1. Berkshire’s Long Term Performance Exceeds S&P 500

Billionaire Warren Buffett is considered to be one of the best investors of all time. Buying Berkshire Hathaway shares is the best way to own a piece of his success. Consider the shares’ long term performance against the S&P 500, a market proxy.

Berkshire Hathaway shares realized strong compound annual growth for 1965-2018. They grew 20.5% (shares do not pay dividends) compared to 9.5% for  S&P 500, including dividends. That reflects outperformance of 36 years. If Warren Buffett was a baseball player, his outstanding .679 batting average would let him own Baseball’s Hall of Fame!

The shares outperformed the market in 2018, a tough year, rising 2.8%  versus a 4.4% loss in the S& P 500. However, 2019 performance has not been a good year for Berkshire Hathaway shares thus far. The stock has only risen 2.2% compared to the market’s stellar performance of 20.6%.

As a result, some large shareholders, like David Rolfe, the chief investment officer at Wedgewood Partners, have sold their holdings. Rolfe himself is not having such a good year and so Rolfe may have needed to explain his own performance. Likely unperturbed, CEO Warren Buffett and his Vice Chairman Charlie Munger at ages 89 and 95 years, respectively, continue to look to long term solid  performance.

Berkshire Hathaway itself has less than 50 employees at the corporate level, including Warren Buffett and his partner, Charlie Munger who can equally match his wit and wisdom.


2. Use Discipline When Spending

“If Wall Street analysts or board members urge that brand of CEO to consider possible acquisitions, it’s a bit like telling your ripening teenager to be sure to have a normal sex life.”

Buffett was referring to the purchasing frenzy in 2017. That fueled a lot of higher priced acquisitions in the market, resulting in Berkshire Hathaway buying fewer stand-alone businesses. He and Munger stick to their discipline and value strategy. This requires “a sensible purchase price” along with key quality criteria. Those are: durable competitive strengths, able and high-grade management, good returns on the net tangible assets required to operate the business and opportunities for internal growth at attractive returns.

Poking fun at Wall Street has long been a Buffett trademark. He has pointed comments directly at analysts (I take no offense despite being one for over 15 years and I agree with him on principle) and investment bankers, who receive huge fees, often pushing acquisitions at CEOs who want to do some kind of a deal.

On bankers pushing prospective acquisitions at CEOs, Buffett has said in previous letters, “Don’t ask the barber whether you need a haircut.”  This means that an acquisition can always be justified on cost synergies by those recommending the deal but the not always good value.


3. Exercise Patience

Buffett has always exercised patience and will pass on a proposed acquisition if it doesn’t make sense for the company. They don’t believe in overpaying for acquisitions. If they don’t find a bargain relative to value they will pass up a possible company. This is as true for those who impulse shop, overpay or overspend for what is not needed as for a CEO who buys too many companies to satisfy their impatient shareholders.

“The less the prudence with which others conduct their affairs, the greater the prudence with which we must conduct our own.”

There was one valuable acquisition made by Berkshire in 2017. The company bought an initial 38.6% partnership interest in Pilot Flying J in 2017, considered to be a leading travel center operator. Berkshire used cash from its hoard for this relatively small acquisition, adding a growth business to his non-insurance holdings.

4. Buy-Hold Stocks As A Sound Investment Strategy 

“Stock investments are not just ticker symbols.”

Berkshire Hathaway has a significant collection of equity holdings. This portfolio is separate from the companies that Berkshire controls. Ownership stakes range from 5%-10% of sizable companies (their interest in American Express is above 10%) which deliver dividends and stock appreciation.

Buffett and Munger view these stakes as interests in diversified businesses. They bought fifteen positions for Berkshire Hathaway’s portfolio which they intend to hold long term.

I have always extolled on the virtues of buying stocks with a long term horizon for individual investors rather than trading positions.

Holding stocks long term are better for these reasons:

  • Your gains are taxed at the lower capital gain rates rather than as ordinary income.
  • It is difficult for experienced investors to time the market. Remain rational rather than emotional during turbulence.
  • Returns compound over time with stocks generating higher returns than most other asset classes.
  • Easier to manage your positions.
  • Less commissions to pay although fees have been coming down and may be eliminated as Charles Schwab has recently announced.
  • Diversify your holdings rather than keep concentrated positions.

To reduce risk in your portfolio, make sure to diversify your holdings.

Related Post on Investing here:

How To Start Investing: A Guide For Beginners

5. Uses Debt Sparingly

“Our aversion to leverage (meaning debt) has dampened our returns over the years. But Charlie and I sleep well. Both of us believe it is insane to risk what you have and need in order to obtain what you don’t need.”

Through the 50+ years of running Berkshire Hathaway, Buffett and Munger have always evaluated acquisitions on all-equity or stock for stock basis. They rarely use debt, even if  interest rates were at lower levels.  There have been exceptions. Buffett did use debt for Clayton Homes, specific to its lending portfolio and to the fixed assets associated with their utilities business.

Just like Buffett’s motto about borrowing for acquisitions, use debt sparingly for your purchases. Pay cash when possible rather than putting on your credit card. Do not just pay your monthly credit card balances on time, pay in full to avoid high interest costs. Reduce spending for items that are not needed if you have to borrow to pay for it. If you have too much debt, make a plan to reduce their levels.

Higher debt levels often come from overspending. Avoid impulse shopping or frivolous spending for items that are not essential. Sure, you can treat yourself but take care to not use your credit cards recklessly.

6. Don’t Buy Shares On Margin

“Even if your borrowings are small and your positions aren’t immediately threatened by the plunging market, your mind may well become rattled by scary headlines and breathless commentary, and an unsettled mind will not make good decisions.”

This quote in last year’s shareholder letter packed a powerful warning to investors who use borrowed money to own stocks.  Buying on margin is a common form of debt to buy stocks. It can be a painful lesson when the brokerage firm “calls” for payment in a declining market.

Buffett pointed to a table that exhibited sharp declines in four time frames:

Time Period                    Percentage Decrease

1973-1975                              -59%

1987                                       -37%

1998-2000                              -49%

2008-2009                              -51%

Buffett offers Kipling’s “If” often for those times when there are major declines in the market, there are opportunities for those who are not laden with debt and hold on to stocks during tumultuous times.

7.  Keep Stocks With A Long Term Horizon And Let Compounding Work Its Magic

“… price randomness in the short term can obscure long term growth in value.”

Buffett pointed to short term swings in the stock market which can hide long term values. For the last 53 years, the company has built value by reinvesting its earnings and letting compound interest work its magic.” Buffett’s long term buy-hold stance is a legendary part of his long term value investing which can ride out short term price randomness.

Buffett’s long term perspective was influenced by his mentor, Ben Graham, considered “father of value investing.” Graham’s maxim stated: “In the short run, the market is a voting machine; in the long run, however, it becomes a weighing machine.”

This means that there may be superficiality in the short-term picking popular versus unpopular companies. Companies really should be judged by their substance, over the long term, having ridden out some of the ups and downs of the market. Compound interest, whether Albert Einstein said it (or not) was the eighth wonder of world. This results from interest on interest, which can result in significant income over the long term.

8. A Bet: Low Cost Index S& P 500 Fund Trounced Hedge Funds

“Performance comes, performance goes. Fees never falter.”

Buffett made a well known bet on December 19, 2007 with  Protege Partners, a fund-of hedge fund firm. He challenged the firm and its selected five investment experts. Believing in his “buy-hold” strategy, Buffett selected a low cost passive S& P 500 index fund and bet that it would outpace the investment returns of Protege Partners’s fund of funds plan over a ten year period.

He wanted to prove that the index fund would deliver better results than that of advisory professionals who typically charge higher fees for asset management. The winner of this bet would be announced ten years later, in December 2017.

The proceeds of the bet were to be given to Girls Inc. of Omaha. Both Protege Partners and Buffett contributed to the ultimate  $1 million prize. The fixed fees that Protege Partners charged for investments in their fund of funds (hedge funds) was a very high 2.5% of assets. The Protege partners were able to use five different fund of funds and rebalance their portfolio as they normally would do for their clients.

Guess who won? Buffett’s S& P 500 index fund, and of course, Girls Inc. of Omaha!

9.  An Emergency Fund Needed For Tough Times

“Charlie and I never will operate Berkshire in a manner that depends on the kindness of strangers–or even that of our friends who may be facing liquidity problems of their own.” 

Buffett’s 2009 Annual Letter  highlighted the lack of liquidity that was experienced during the 2007-2009 financial crisis. Berkshire Hathaway was in good financial condition at a dire time for many American companies. Unforeseen risks grew for many financial companies referred to as  “too-big-to fail.”  Several faltered as a result of risky investments. Bear Stearns was acquired by JP Morgan but Lehman Brothers collapsed in September 2008 and others struggled.

In contrast to those companies, Berkshire was in a strong position, able to supply liquidity and capital to our financial system. Their strong position was a result of the positive force of nature of both Buffett and Munger.

During the great recession, Berkshire Hathaway held a significant amount of Treasury bills which are virtually risk-free and very liquid. According to Buffett, this was better than the more risky commercial paper (short term corporate borrowings) or bank lines. Berkshire Hathaway typically holds a minimum of $20 billion in cash.

This allows the company to withstand these types of economic disruption, buy back their shares or to opportunistically make acquisitions. On a smaller scale, households also face uncertainties as they did during the severe recession when unemployment rose to 10.2%.

We all need an emergency fund for unforeseen disasters that may occur. Having liquidity on hand allows you to withstand a job loss, an illness and better manage your household.

10. Big Fan of Share Buybacks Over “Pricey Acquisitions”

Having a lot of cash, Berkshire Hathaway will repurchase its own shares above their book value (cost basis) but below their estimate of intrinsic value. The management of their constituent companies also buy back shares, using retained earnings.  Buffett has considered a massive buyback program of up to $100 billion given “the dearth of investable companies” for Berkshire Hathaway.

However, Buffett and Munger have been heavily criticized for the growing cash hoard–over $120 billion based on the latest financial report–and lack of major acquisitions. Many long time investors feel the company has missed opportunities, especially in the high grow tech sector. Kraft Heinz, one of Berkshire’s bigger holdings, has been a huge disaster.

11. Buffett On Taxes: Different Philosophies Whether For Himself Or The Company

The company’s tax rate benefited from recent tax reform law changes. This brought down its tax rate to 21% from 35%. The lower tax rate also reduced reserve requirement for unrealized gains in equities owned by the company. Berkshire continues to defer tax liabilities which Buffett has said is like a tax-free loan from the government. Paying less in corporate taxes can be justified as a benefit to its shareholders.

On the other hand, Buffett feels differently about his personal tax rate. He has long said that the rich pay too low a tax rate compared to the middle class. Buffett is on the record calling for the wealthy to pay proportionately more in taxes along with giving generously to charitable causes.


12. Among Most Generous Billionaire Philanthropists

Although living frugally himself, Warren Buffett, along with Bill and Melinda Gates, launched The Giving Pledge in 2010 to encourage other wealthy people to follow their lead. More than 200 of the world’s wealthiest people have taken this vow to donate a majority of their wealth to philantropic organizations.

Buffett himself has been donating a portion of his Berkshire shares since 2006 to charities. The value of his gifts totalled $34 billion.

“If you’re in the luckiest one percent of humanity, you owe it to the rest of humanity to think about the other 99 percent.”



13. Have Optimism In Our Economy And Financial Markets

“And-as has been the case since 1776–whatever its problems of the minute, the American economy was going to move forward.” “We always live in an uncertain world. What is certain is that the United States will go forward over time.”

Buffett has always been optimistic about America, no matter the issues the country is grappling with. He feels  our economy always manages to return to growth after recessions which are a normal part of the cycle. Investors should participate in financial markets. He always refers to his five decades of  stock investments as being largely a bet on America he is willing to make.

Final Words

I have long been an unabashed fan of Warren Buffett and Charlie Munger.  They are not only a strong management team but are terrific investors willing to generously share their wisdom. From my days on Wall Street to a college professor I have learned many lessons and have paid it forward to my students and my readers. They don’t have a perfect record and are not flawless. Many brilliant portfolio managers have not easily outperformed the market to the extent Buffett and Munger have.

They are American treasures and their shareholder letters are refreshingly educational, inspirational and fun to read. We found 15 personal finance lessons in Buffett’s latest letter here. Reading about Buffett’s investing prowess, you may feel interested in learning more about investing. We have some blog posts on how to invest on your own or using a financial advisor. Please visit us.

For our fee Personal Finance eCourse,

Do you have favorite Warren Buffett stories, quotes or comments?  Have you been investing on your own or with a financial advisor? We would love to hear from you!

Reaching Your Goals With Better Money Habits

Reaching Your Goals With Better Money Habits

“Change might not be fast and it isn’t always easy. But with time and effort, almost any habit can be reshaped.”

Charles Duhigg


Simply having goals without good habits is not enough to reach them. Having a desire to lose 20 pounds or saving $10,000 within a year is an empty promise without a plan and good habits. With better money habits, we can achieve our financial goals. This article will help you understand how to have better money habits using discipline and willpower along with hard work, persistence, and perseverance.

Goals Should Be SMART

To better reach our goals, a SMART approach can bridge the gap to better habits. George T Doran first introduced the acronym in Management Review in November 1981. You can adapt this approach to personal finance.

  • Specific
  • Measurable
  • Achievable
  • Realistic (or Relevant, Reasonable)
  • Time


A SMART Example: Saving For An Emergency Fund

You want to establish an emergency fund to cover essential living expenses for unexpected events like a potential job loss. While you haven’t lost your job yet, you haven’t set any money aside. So it is time to open up a high yield savings or money market account. Save by automating weekly transfers of your paycheck here until you get to a six months target. (SPECIFIC)

How long should it take to save for six months of living expenses? It depends on your willingness to save more and spend less to have an ample fund.  (ACHIEVABLE, REASONABLE) Keep in mind that your savings are after-tax income. If you can save 5%, then your spending amounts to 95%. If you can save 20%, there is 80% for spending purposes. (MEASURABLE)

A back-of-the-envelope calculation can help determine how long it will take, courtesy of Dough Roller. To save one month’s needs, divide the percentage of spending by the rate you are saving. If you can only save 5%, you are spending 95%. Divide 95 by 5 and it will take 19 months to save one month for your emergency fund. More aggressive savings of 20% of after-tax income produces a more satisfactory four months timeframe. (TIME)

Setting Goals Are Not An Achievement

I have started with a pledge to lose 20 pounds, eat more healthily and exercise many a year. Some years I would even get part of the way there, but my bad eating habits would kick in. It is then easy to give up than starting from scratch.

Overeating is not very different from overspending. If you want to cut your monthly spending by 10%, you need to modify how you shop. Having a target is hard to accomplish without a behavior change.

Our Targets May Be Unrealistic

After a spate of wasteful buys, my spendthrift husband, Craig, will declare his big purchase days are over. Of course, that is not a sensible goal. He loves to read as I do. We both go to the library often to save money and space. When we recently hired movers, the younger guys couldn’t believe that nearly half of our boxes were for books.

So you can imagine my surprise when going through Craig’s bills. I found hundreds of dollars in a couple of weeks spent on buying kindle books. It even surprised him. He was just seeing them as modest purchases of $1.99 or $2.99 purchases a piece. Maybe Craig didn’t make big purchases, but he overspends on books that he may never read.

The Need For Discipline And Willpower

To carry out your goals, you need to be diligent. Without discipline and the will to succeed, goals are unsustainable.

Charles Duhigg wrote in The Power of Habit:Willpower isn’t just a skill. It’s a muscle, like the muscles in your arms or legs, and it gets tired as it works harder, so there’s less power left over for other things.”

We sometimes lose our will to make changes when life interrupts us to divert attention from our goals. Sometimes a death in the family can cause a major derailment. Discipline and willpower need to be supported by a conscious plan to return when surprise events occur. This way, a  momentary pause doesn’t become a permanent loss of interest.

“The chains of habit are too weak to be felt, until they are too strong to be broken.”  Samuel Johnson

The Benefits of Habits


Habits Allow Us To Be Efficient

Once formed, habits allow us to do things automatically in everyday life. Our practices form through repeated actions that may come with rewards.

According to Johns Hopkins University Professor Susan Courtney, our brains release dopamine, facilitating the building of connections between brain cells.

Courtney says you have to activate a different part of the brain (prefrontal cortex) to override those habitual tendencies to break a bad habit. However, the prefrontal cortex is easily distracted and doesn’t work well when you are tired or stressed. She explains that that part of the brain is vulnerable. When stressed, those habits that are hardwired into the other parts of the brain automatically take over.

Breaking Bad Habits

We can break or curb bad habits by overwriting the old ones in your brain. Set up physical reminders, change patterns you want to break, or even hide things. Putting cookies away in a different place or hiding credit cards may work. Going shopping with only cash will slow unnecessary spending.

Habits May Exceed Your Goal

Goals may limit you, whereas good habits may allow us to go beyond our targets. I am at fault for setting 30 minutes as my time on the treadmill and jumping off. Limiting the time happened because I had to make a call or go to work. However, once I took away the time limit, whether, on the treadmill or outdoors, I found more energy to go further.

Repetitious nature allows us to fulfill our goals more quickly. It may mean going on the treadmill every day at a particular hour, reading at a specific time in the evening, or going shopping without credit cards.

Individual Choices

Many of us borrow too much by putting everything on our credit cards. We are often surprised by how fast our debt balances grow. Saying you will reduce your debt to zero is a great goal but may be difficult and too far away.

You need to have a plan to reduce debt that didn’t build overnight. There are two popular ways to do this. The Snowball method, where you tackle the smallest debt balances first, is often preferable for many. Small wins provide a psychological boost. For others, the alternative often referred to as the Avalanche method is better. There, you are reducing the debt carrying the highest annual percentage rate first.

Either way, reducing debt regularly or paying down your balances to zero are good financial habits to reinforce for those who struggle to pay bills constantly.

Habits For Life

I sometimes envy daily runners plowing on in the heat, snow, rain, and sleet. They have formed healthy fitness habits that will last all their lives.  According to Duhigg’s research, habits control 40 percent of our conscious activities. Taking showers and brushing teeth are activities; we just do it. That’s a good thing. Our lives would be far more chaotic if we couldn’t form habits.

That said, these minuscule actions are ingrained in us. Habits often propel even our driving. Ever drive on a common road and don’t recall getting there. I don’t mean that you forget you were driving. It is more like you were on automatic pilot.

Keystone Habits

Building a single habit can be modeled into other habits, having a compound effect on our lives. Through the years, I have added small activities into my day, usually at the same time. I  grab my book or iPad for daily reading (I read 43 books last year), do the New York Times crossword puzzles (I can’t finish much of Thursday on), daily walks, and review stock positions.

These are connected habits that built on my desire to read, but I wanted to do more. I deliberately use these fun activities to stimulate my brain and defeat my fear of wasting time on the Internet.

Duhigg calls these habits keystone habits.  They are a chain of several related good practices. When my 14-year-old daughter worked this summer, she insisted on going to the bank every time she had a paycheck in hand. She then was excited to pick up other side jobs to bring cash to put into her savings account.

People who exercise daily tend to eat better and drink less alcohol or coffee. Replacing a bad habit with good habits that are linked together may have a powerful chain reaction. For example, it strengthens a person’s conviction to lose more weight after shedding a few pounds.

Creating Better Money Habits


As the new year is fast approaching, use keystone habits to:

  • Support other habits.
  • Provide small steps towards victory in previously tricky areas for you.
  • Give you the confidence and motivation to better manage money.


Spend Less Than You Earn

By spending below your means, you will save and invest more. However, to accomplish this, engage in tracking your spending and expenses regularly. Review your bills online daily. Automate payments for easier ways to pay on time. Look for patterns that may reflect overspending for items you don’t need and possibly more debt than you can handle. 10 Ways To Better Manage Spending

Benjamin Franklin said, “Beware of little expenses. A small leak will sink a great ship.”

Payoff Your Debt

Many people pay only the minimum amount required on their monthly credit card balances. That is simply not enough. It leads to excessive interest levels because of high annual percentage rates on credit cards. As such, total interest costs may exceed the purchased merchandise you are paying over more extended periods than you should.

Instead, pay more than the minimum required for a start. Slow your spending and reduce your debt. Use more cash which lets us feel that cost immediately. Ultimately, you should pay your monthly bills in full. It provides a very satisfying peace of mind.

Create A Budget For Better Control Over Spending

Create a budget so you can better track your fixed and variable costs. If costs are too high, make needed changes. Use a financial planner if you don’t think making a formal budget will work for you. Separate your monthly fixed costs, which you must pay separately and first.  Discretionary spending is what you have left over if any. Use budget apps with customizable alerts, help you analyze your spending habits by category and different time perspectives.

Budgeting may help you identify bad habits that are fixable so long as you put in the diligent effort.

Spending less than you earn, paying off debt, and budgeting are intertwined. Together, these actions are keystone habits that can improve chances of working into better habits.

How Long Does It Take To Change A Bad Habit?

I had always heard that it took 21 days to break a bad habit. As a member of Weight Watchers, which is ALL about breaking bad eating habits (and it works for me as I am down 30 pounds and declining!), they always refer to the 21 days. However, I did not know its origin.

The 21-day time frame dates back to nearly 70 years. Dr. Maxwell Maltz, a 1950s plastic surgeon, found that it would take his patients about 21 days to get used to seeing their new face, or post-amputation, they would sense a phantom limb. Dr. Maltz wrote about his adjustment period to changes and new behaviors to form a new habit….” it requires a minimum of about 21 days for an old mental image to dissolve and a new one to jell.”

More research indicates that it takes a longer time to form a new habit than 21 days. A 2009 study published in the European Journal of Social Psychology by Phillipa Lally, a health psychology researcher at University College London, indicated it took 66 days on average (in a range of 18 days to 254 days) to form a new habit.

Whether 21 days or 66 days, it takes significant time, effort, and determination to create a new habit.

How To Build New Habits Through Habit Stacking

James Clear has studied and written extensively on habit stacking, including in his book, Atomic Habits. Clear says the quickest way to build a new habit into your life is to stack it on top of a current habit, or habit stacking. First, Clear explains how a study of synaptic pruning may lead to building new and presumably better habits.

In a 2007 study from Oxford University, researchers compared newborn baby brains with those of adults. They found that the average adult had 41% fewer neurons than the average newborn.

A Surprise Result

This surprising result considers that babies are born with blank slates. They don’t have the strong connections adults have. However, adult brains prune away connections between neurons that don’t get used and build up connections that get used more often. It is a biological change that leads to skill development.

Are you with me? This may mean that synaptic pruning could lead to building new habits.

Habit stacking is related to implementation intention, created by BJ Fogg, it is a pairing a new habit (you desire) with a current habit (you have). You are using habits that already exist and adding new behavior. Using this method increases the likelihood you’ll stick with a habit by stacking new behavior on an existing one.

Habit Stacking: Money Examples

When I want to buy something for $100, I will put it in the online shopping cart and wait 24 hours.  This example encourages delaying impulse shopping which often leads to overspending and borrowing.

After my morning coffee (or dinner), I write my “to do” list. This practice is for those who need to organize the day.

When I complete my “to do” list, I will do my first chore. Procrastinators need an action plan.

Once I finish dinner, I will review my spending tracker review and pay my bills online.

When I review my bills, I will check my subscriptions to services and pare those plans down.

Make new behaviors as routine as possible. Automate your paycheck so that you are putting away money for your emergency fund, a 529 savings plan, or in your retirement accounts. You should do hese are actions regularly and as early as possible.

Final Thoughts

It is easy to make a goal, a target, or a resolution. Carrying out to fulfillment is the hard part. When it comes to money goals, learning to plan out goals with a SMART approach precisely enhances our chances of success. We can reach our goals through better financial habits, whether that means a cut in our spending, less borrowing, or learning how to budget.

Can we adopt better financial habits? Science says we can proceed with discipline, willpower, and effort. Work on keystone habits and habit stacking to expand the likelihood of doing so.

Have you had success modifying a bad habit or building a new one? What worked for you during the transition? We would like to hear from you.