“More than 40 percent of our daily activities are not conscious decisions, but rather habits,” Jay Mooreland reminds us in the Journal of Financial Planning. These daily activities include decisions about investing and other financial choices.
Here at Worley Erhart-Graves Financial Advisors (WEFA), we’ve developed a respect for the power of healthy - and unhealthy – habits. At the same time, while we encourage establishing savings habits as early as possible, we think it is important for our clients to know that it’s never too late to change counterproductive habits.
Mooreland reviews the three-part neurological pattern in our brain, a pathway that is followed once a certain stimulus is presented. The pathway begins on a conscious level, but the more frequently the pattern is followed, the less conscious and the more “automatic” it becomes.
- The habit “loop” has three parts:
- The cue (the stimulus)
- The routine (the habitual behavior)
- The reward (the desired outcome)
As an independent fee-only financial planning and investment services firm, our approach is personalized, detailed, and realistic. We realize “habit cues” are different for each person, even if the “routine” two different clients are following appears the same. Our confidential discussions begin by guiding clients to identify their desired outcomes (meaning the reasons they are seeking saving, investing, and tax planning help).
It’s unrealistic to expect a new habit to replace the old one over a period of weeks or months, Jay Mooreland admits, and people, he points out, will need to understand this so they won’t get discouraged.
We agree the effort to get into a positive habit loop is well worth it. A small amount from each paycheck can turn into millions of dollars over the span of a career. That’s why, just as we automate other aspects of our lives, we tell working clients to make automatic investing and savings a priority. And for those going into retirement, they need good spending habits, too!
At every stage of our financial lives, improving habits can mean much-improved outcomes!
Content was prepared by a freelance journalist on behalf of Worley Erhart-Graves Financial Advisors