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. Having better money habits can help us achieve our financial goals. This article will help you understand how to have better money habits using discipline and willpower and 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. 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. I would even get part of the way some years 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, and we often go to the library 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, and I found hundreds of dollars in a couple of weeks spent on buying kindle books. It even surprised him, and 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, plans 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 begin through repeated actions that may come with rewards.

According to Johns Hopkins University Professor Susan Courtney, our brains release dopamine, facilitating 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 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 die, 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 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 pay down debt. 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 driven on a familiar road and don’t recall getting there. I don’t mean that you forget you were going, and it is more like you were on automatic pilot.

Keystone Habits

Building a single habit can be modeled into other practices, 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), take 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 then 14-year-old daughter worked that summer, she insisted on going to the bank every time she had a paycheck in hand. She was then excited to pick up other side jobs to bring cash 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, and 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 total, and it provides a very satisfying peace of mind.

Create A Budget And A Net Worth Statement

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 leftover 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.

You also need to create and periodically review your net worth statement, another essential tool to make sure you are on the right road to building wealth. 

Spending less than you earn, paying off debt, and budgeting are intertwined. Make sure you are tracking your spending and reducing purchases you can’t afford. Together, these actions are keystone habits that can improve your 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 a current routine or habit stacking. First, Clear explains how a study of synaptic pruning may build 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 and 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? It 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 current practice (you have). You are using patterns that already exist and adding new behavior. Using this method increases the likelihood of sticking 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 a “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 these actions regularly and as early as possible.

Final Thoughts

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

Thank you for reading this article! Please visit The Cents of Money for more articles of interest.

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.



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