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Post by: Dann Albright | Make Use Of | Published on: 10/05/2016


In their 1996 book The Millionaire Next Door, Thomas Stanley and William Danko outline seven characteristics of truly wealthy people. Surprisingly, those characteristics aren’t things like “inherited wealth,” “have a seven-figure salary,” or “are great investors.” Instead, many of them simply focus on developing better money habits that contribute to a financially sound lifestyle.

But good habits are hard to stick with — it takes a great deal of discipline, motivation, and self-control to develop and follow through with them. We’ve talked a bit about good money habits in the past, but now we’ll focus on how you can develop those habits. These principles will prove useful in your quest to build wealth, no matter which financial habits you’re trying to adopt.

1. Set Specific Financial Goals

Goals are certainly motivating, but not all goals are created equal: a 1981 meta-analysis found that “specific and challenging goals led to higher performance than easy goals, ‘do your best’ goals, or no goals.”

So if you want to give yourself a good reason to improve your financial habits, you will need specific, actionable goals. If you haven’t read it yet, check out our guide to 5 mistakes to avoid when setting goals, and keep them in mind when you’re working on your money habits.

Here are a few specific, measurable goals to give you some inspiration:

  • Only eat out once a week.
  • Update a budget spreadsheet or app every day.
  • Save $5,000 by the end of the year.
  • Double last year’s 401(k) contributions.
  • Save 20% of every paycheck.

2. Remove Barriers to Financial Success

Now that you have a goal, what’s stopping you from getting there? Maybe it’s your friends on social media encouraging you to spend more. Or your reticence to look for a new job even though you’re underpaid. It could be your coffee addiction that keeps you spending $5 every day on a fancy coffee. No matter the barriers between you and good financial habits, the first step is to identify them. Be honest with yourself.

Once you’ve identified those barriers, come up with a plan for taking them down. Maybe you can adjust your social media settings so you see more positive influences. Or use a gamification app to make job-hunting more fun. Or invest in some nice coffee-brewing equipment of your own that will pay off down the road. Attacking those barriers can be tough, but getting rid of them will reduce the amount of mental energy you need to solidify your habits eventually.

3. Start With Small Changes

We’ve talked previously about the power of micro habits, which are great ways to kick off new routines that might otherwise be difficult. Want to start spending less? Make a habit of quickly checking your bank balance on your phone before you make an unplanned purchase. It only takes a couple seconds, and it’ll help you make a more informed decision.

When you decide on a financial habit you want to start using — let’s say cooking dinner at home more often — think about a small step toward it that you can take. In this example, your small step could be spending an hour every weekend planning your meals. It won’t stop you from eating out, but it’ll help give you a reason to save your money. These small changes can make a big difference.

4. Build in Flexibility

People often neglect flexibility when analyzing their finances; you set up categories for all of your regular spending, figure out how much you should be saving, get it all set up in your preferred budget app, and plan for every last cent. But that’s setting yourself up for failure, because there will always be unexpected expenses.

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