How to Make Better Financial Decisions in 2020

Ushering in a brand-new year has a way of sparking real reflection; personally, professionally and financially. It’s a fresh start—a time to absorb the lessons of 2019 and look ahead to the coming year with a sense of renewed energy and motivation.

So what will you do with your clean slate? Now’s as good a time as any to put systems in place to make better financial choices in the new year. Changing your mindset and, in turn, your behavior takes intention and accountability. Set yourself up for success in 2020 with these simple action items.

Check in With Your Financial Goals

It’s tough to know where you’re going if you don’t know where you’ve been. Take some time to look back on 2019, specifically on any financial goals you’d set for yourself. Whether you’d planned on increasing your retirement contributions or paying down debt, examine whether you moved the needle or fell short.

If it’s the latter, abstract thinking may have been what held you back. According to one University of Chicago study, delayed gratification makes us less likely to achieve our long-term goals. Look at it this way: when you’re saving for retirement, you may not feel the benefits for another few decades, so staying motivated can be difficult.

Try leveraging your emotions. According to financial psychologist Brad Klontz, naming your different savings accounts, for example, may help you save more. Calling one of them “Bobby’s College Fund” can go a long way in making your financial habits feel more real. Similarly, picturing your goals, even if it’s on a digital pin board, can make the abstract feel more concrete.

Identify Which Financial Behaviors Are Holding You Back

Which financial habits are helping you—and which ones are creating road blocks? Psychologist Thomas W. Phelan says many behaviors fall into one of two categories: start and stop. Financially speaking, start behaviors are things we want to begin doing, like finally getting around to estate planning.

Stop behaviors, on the other hand, are habits that are holding us back, such as overspending. What are your financial stop behaviors? Get honest with yourself and look for patterns. This is your roadmap for success. The next piece is converting these behaviors into good financial habits.

Bonus: Download free financial planning checklist that will help you organize your finances for 2020.

Take Research-Backed Steps to Change Your Financial Habits

It isn’t enough for someone to simply tell you that you need to change. Behavioral economist Dan Ariely recognizes two critical actions that need to happen if you want to change your behavior—removing friction and increasing motivation.

The first is shorthand for removing any obstacles. Want to increase your 401(k) contributions? Contact your plan sponsor to see if you can automatically up your contributions by a certain percentage every year. If, instead, you’re aiming to be less reactive to market ups and downs, think about disabling your daily stock market push notification. Changing your environment is how you change your behavior.

Increasing motivation, according to Ariely, has to do with making the invisible visible. This comes back to the power of visualizing your financial goals. Tap your emotions and ask yourself why you want to adopt a specific financial habit. The desire to pay down your debt, for example, is really a desire to free yourself from stress and worry and start building your wealth.

How would living that life make you feel? Think about this every time you put money away toward this goal. Making it visible is what stokes motivation—and fuels lasting habits.

Hold Yourself Accountable

This is perhaps the most important factor. The best laid financial plan won’t stick if you don’t stop along the way to evaluate your progress. Mark your calendar periodically throughout 2020 and check in on how you’re doing. Are you going strong with your new financial habits? If not, what’s getting in your way? Troubleshoot and recalibrate as needed to help keep you on the right path. Otherwise, it’s easy to slip back into our old patterns.

2020 isn’t just a new year—it’s a new decade. Start it off right by shedding old habits and leaning into financial success. At Opal Wealth Advisors, we specialize in helping clients cultivate the behaviors and habits they need to meet their unique financial goals. Let’s talk about how we can help you achieve financial freedom in 2020. Our comprehensive financial planning checklist is the perfect place to start.

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