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 Developing new money management habits can be difficult, but these small steps can help!


Small Steps Lead to Big Change

by Laura Hendrix - January 21, 2020

Most adults in the U.S. (76%) will make New Year’s resolutions about money, according to a recent survey by the National Endowment for Financial Education.  The top goals among those who will set a financial resolution include setting and following a budget (43 percent), planning to get out of debt (37 percent), establishing savings (33 percent) and boosting retirement savings (30 percent).

Starting a new money management habit can be tough.  Sometimes good intentions aren’t enough for us to do new things consistently. There may be difficult days.  There may be setbacks.  Strategies for behavior change can help.  In the book Small Steps to Health and Wealth, authors Barbara O’Neill and Karen Ensle discuss how consumers can apply strategies from psychology to help reach goals. Here are a few of these strategies.


It’s easy to disconnect from the reality of financial practices.  This disconnect is denial and it can be a real problem if you’re trying to improve financial stability.  In fact, awareness is necessary for behavior change.  There are five “A’s” of behavior change: Awareness, Ability (able to make the change), Ambition (desire to change), Attitude (positive about the change), and Action (taking the necessary steps).  A first small step toward successful change is to become aware of your current situation and practices.

Unload Childhood Baggage

Childhood experiences can influence money management behaviors.  We develop beliefs from our families and culture.   Your current decisions are influenced by what you’ve seen and heard since childhood.  Once you understand the origins of your beliefs, you can unload any baggage that’s been holding you back.  “Baggage” includes any false beliefs that distort rational thinking.  Some examples are: “You can’t change” or “It’s normal to have a high amount of credit card debt.”

Put Your Mind to It

Make up your mind to take control of your finances.  Think positive.  Remember your strengths and successes.  Challenge negative influences that may surround you.  Declare to yourself “I can” and “I will”. Learn to use visualization.  Visualization is a powerful tool for behavior change.  Change your life by visualizing what you want to achieve.

Commit to Making a Change

Most consumers can improve financial management.  However, positive change requires commitment, motivation, action, and time. Identify where you are.  Make a commitment.  Find your motivation. Transition to the positive.

Control Your Destiny

Are you the master of your own destiny? OR is your future in the hands of fate?  People have either an internal or external Locus of Control.  Locus of Control (LOC) refers to your view of how your actions impact life.  Internal LOC people feel in control.  External LOC people credit luck, fate, or other people for life’s outcomes.  An internal LOC helps you improve money management behaviors. 

Make Progress Every Day

Sometimes a big change can seem so overwhelming that we just feel like giving up.  If you’re starting from “0”, building a large savings fund may seem almost impossible.  The secret to making progress is getting started and moving forward each day. 

Get Help and Be Accountable

The Beatles sang “I get by with a little help from my friends.”  We all need help sometimes.  Others can provide information, offer support, or hold you accountable for increasing wealth.

Meet Yourself Halfway

Want to cut spending but just can’t give up going out to eat or buying the latest trend? Can’t seem to find the extra money to build a retirement fund?  Try meeting yourself halfway.  Track current behavior.  Try to limit your spending or increase saving by half. 

Compare Yourself with Recommended Benchmarks

What about your financial situation?  If you’re not sure, there’s an easy way to keep tabs.  Compare yourself with recommended benchmarks. Check net worth, debt-to-income ratio, and monitor your credit score.

Automate Good Habits

New habits are easier to maintain if you make them automatic.  You don’t have the opportunity to second guess your decision or talk yourself out of it.  Use direct deposit and automatic bill pay.

Live the Power of 10

Use the number “10” to help reach your goals.  Personal finances can seem like a jumble of numbers. Streamline the process by using multiples of 10.  It’s easy to multiply, divide, and remember.  Save an extra $10 a week. Set aside 10% of income for retirement. Look for ways to cut expenses by $10 per month. 

Kick It Up a Notch

An easy way to change your habits is to focus on taking small steps that are doable for you.  Start where you are today and kick it up a notch! Add an extra 1 or 2% to your savings. Pay a little more toward your credit card bill each month. Add an extra $25 toward the principal on a loan.

Control Your Environment

The term “stimulus control” refers to changing your environment to inspire certain behaviors.  Trying to cut back on spending?  Window shopping can be a negative environment. Use positive stimulus. Direct deposit part of your paycheck into a separate savings account.

Expect Obstacles and Prepare for Relapses

Roadblocks may arise on your journey.  Don’t give up.  Have a plan to overcome obstacles and relapses. If you have a flat tire, it doesn’t mean you’re not going to finish the trip.  It’s okay to stop and fix things along the way.  An income loss or spending spree may mean that you must adjust your spending plan.  View every set-back as a learning opportunity, not a sign of failure.  Use what you’ve learned to develop a planned response for next time.

Set a Date and Get Started

Successful behavior change requires a firm commitment and a plan of action.  Write your goals. Identify action steps.  Make a written list. Set a date to begin. 

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