How to stick with it: forming sustainable money habits in 2022
Have you ever made a goal only to find yourself unable to stick to it?
Old habits kick in and you lose the motivation to make that change that you so desperately wanted to make a couple of weeks ago.
The universal joke about people not sticking to their new year’s resolutions exists for a reason, so you’re not alone if you find it challenging to change your long-standing habits.
When it comes to money, it’s often just the same. Sometimes we make ambitious goals and then we feel disheartened when things are moving slower than we hoped for.
Whether you’ve been struggling to meet your saving goals for years or are just about to set money goals for the first time, I’m going to share some tips on making realistic goals and forming the money habits that will help you actually achieve them.
Gain visibility over your money
Step one is to set your money intention. What do you want the end of 2022 to feel like? What would money success look like to you? What would you like to have accomplished? Who can support you to make this happen? Write this down and put it somewhere you can check in on (post it behind the door, on your desktop, on the mirror, or jot it down in a notebook. Whatever works for you to easily check in every now and then and help keep yourself on track and accountable (in a fun, loving way).
Step two is to create a budget! This also is a great way to see if your money intention is achievable or come up with some tangible ways to make it more achievable. Can you live the life you want to live and achieve this? If you don’t have full vision over what money is coming in and what money is going out, then it’s tough to know what is leftover to save or invest. A budget doesn’t need to be complicated; it can be as simple as tracking your income versus all your regular bills and other expenses. You can find plenty of great templates for free online to get you started. I like this one from our friends at She’s on the Money, but look around and see what budgeting style works for you.
Once your budget is sorted, you should have a good idea of how much money you want to save or invest each month. Whether you’re saving more or investing more will depend on your financial goals.
You know how much you have to save or invest… So now what?
Now that you know how much you have leftover, you need to work out what your money goals are.
Are you saving up for a new car or a big holiday? Are you thinking long-term, setting yourself up for the future, and investing for retirement? Consider what your big goals are, and what time period you want to achieve them in. This will help you determine what split is right for you between putting your money in a savings account or investing it. If you want the money for a purpose sooner rather than later - like buying that new car - then you may prefer to put it in a savings account where you can access it more easily. But if you are keen to look at your long-term financial wellbeing, setting aside an amount to invest regularly could be a great way to build up your wealth over time.
When making these goals, it’s important to ask yourself whether you are setting yourself up for success. Based on how much money you have available to save or invest, work out what a realistic timeframe for achieving each goal looks like. For example, if you can only save $500 a month, then saving up a $100,000 house deposit in 12 months is not a realistic goal. It can be useful to break these types of goals down into smaller goals like $5,000 in a year. If you can’t budge on the time period, then you might need to consider alternative sources of income or any expenses that you can cut back on in your budget.
Making habits that won’t slide
You don’t brush your teeth a different way every day, and you probably cook dinner at around the same time daily. A habit is something that you do in the same way every time you do it.
You may want to follow this lead when you’re developing your new money habits - the aim is to keep as many things as consistent as possible.
One way to do this is to set up auto payments from your main account into a savings or investment account after you get paid every cycle. That way you can’t forget to make these payments and the money is tucked away, removing the temptation to spend it.
Another way to keep yourself on track is to get a money squad together. Most things are easier when you’re part of a team, and building good money habits is no exception. So get a friend or two, and start changing your money habits together. You’ll have someone to compare notes with, to pick you up when you’ve had a setback, to celebrate each other's wins, and to hold each other accountable for sticking to your goals.
Becoming a consistent investor
Being consistent sometimes means starting small. Don’t feel like you need to be investing hundreds of dollars a week when you first start building an investment habit. You can start small - even $5 a week.
Get used to the ritual of having the money go out of your bank account, logging into Sharesies, and investing. That way, it starts to feel routine, and becomes easier to stick to the underlying behaviours. You can grow that regular amount as you feel comfortable and have more money available to invest.
For those who have found it tricky to remember to invest regularly, we recently launched auto-invest on the Sharesies platform here in Australia, which is where you can select an amount and a frequency to invest in pre-made orders or a DIY order of different exchange-traded funds. The intention is to help with habit building and investing regularly.
Regular investing also ties in really well to an investment strategy called dollar-cost averaging. Dollar-cost averaging is when you invest the same amount on a regular basis, regardless of what the price is - this strategy aims to average out the short-term ups and downs of the share market!
Now that you’ve got a budget, know what you’re working towards, and have some strategies in mind to keep you on track - all that’s left to do is to get started! Remember that like all things in life, your financial situation is fluid, so don’t be afraid to revisit your goals and make changes along the way as often as you need.
Ok, now for the legal bit
All investing involves risk. There is no guarantee you will make money, and no guarantee that you won’t lose the money you start with. Sharesies does not provide personalised advice or recommendations. Any information we provide is general only and current at the time written. Finally, you should consider seeking independent legal, financial, taxation or other advice when considering whether an investment is appropriate for your objectives, financial situation or needs.
*Brooke Roberts is a sub-authorised representative of Sanlam Private Wealth. Sharesies AU Pty Limited is a Corporate Authorised Representative of Sanlam Private Wealth (AFSL no: 337927).