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Following a routine makes it easier to create wealth. here’s how

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We’ve all been told that following a routine is important in many aspects of life: for fitness, good eating habits, good work habits, etc. But many experts tell us that establishing a routine is also necessary for successful investing and building wealth.

From a young age, my mother made me understand that it’s not how much I earn, but how much I save. I’ll add that it’s not just how much we save, but how and when we save – ideally, without thinking about it too much.

When I think about my clients who have successfully achieved financial independence, I would say that they also have very defined patterns that help them save and track their finances.

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Let’s take a look at what some famous people have said on the subject, and then I’ll share my advice on how you can apply their observations to up your personal finance game.

To change a habit, “understand its structure”

The board: In his bestselling book “The Power of Habit,” Charles Duhigg discovered that people who stick to a daily routine are more likely to make smarter financial decisions.

“Habits are first cobwebs, then cables,” Duhigg wrote, referring to his observation that creating wealth through investing takes time and consistency to develop good habits and achieve results.

Another quote: “The key to changing a habit is to understand its structure – to identify the cue, the routine and the reward – then to modify them,” is Duhigg’s way of emphasizing that it is important to understand your own spending and saving habits. . This helps you identify what drives you to spend money, establish a routine for saving a certain amount of money from each paycheck, and reward yourself for meeting your savings goals.

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“The brain can be reprogrammed. You just have to think about it deliberately,” Duhigg wrote. This can be applied to investing by recognizing that you can change your financial habits and mindset with deliberate effort. By learning about investing, setting specific goals, and staying disciplined, you can reprogram your brain to prioritize saving and investing for your future.

My opinion : Pew Research data confirms this. Pew found that people who establish consistent savings routines are more likely to build wealth over time than those who don’t. The report states that “households benefit from automatic mechanisms for generating savings. Such programs have shown promise for other types of savings and could, with appropriate modifications, provide a valuable platform for building and rebuild emergency savings.

Putting your savings and investments on automatic is a small change that can significantly affect your long-term net worth. Instead of waiting to save, set up automatic savings in your important “goal” accounts. Have money regularly transferred to your emergency fund, your retirement savings, your children’s education savings, your credit card payments and even for your next dream vacation.

“Automatic” behaviors train us

The board: Wendy Wood, professor of psychology and business at the University of Southern California, is the author of “Good Habits, Bad Habits: The Science of Making Positive Changes That Stick.” Wood says that habits give us the freedom to focus on other things while our “automatic” behaviors carry us away.

By establishing routines that support our financial goals, we can free up mental energy to focus on other aspects of our lives. This can be especially important when it comes to investing, which can be complex and stressful. “Small changes in the environment can lead to big changes in behavior,” Wood wrote. Wood also said that “the more we repeat a behavior, the less effort it takes to implement it.” The more you invest, the easier it becomes.

Learn more about women and wealth:

Here’s a look at more coverage in CNBC’s Women & Wealth special report, where we explore ways women can increase their income, save and make the most of opportunities.

My opinion : If you typically invest in individual stocks, consider diversifying your portfolio by also adding mutual funds or exchange-traded funds that track a broad stock index. By making this a regular habit, you will also become more comfortable with the movements of the stock market, diversifying your portfolio and the process of investing and rebalancing. This will require less effort over time and reduce investment fears.

Daily actions trump “one-off” actions

The board: In podcaster Gretchen Rubin’s bestselling book, “Better Than Before: What I Learned About Creating and Breaking Habits,” she explores the science of habit formation and gives tips for making changes positive.

“What you do every day matters more than what you do every now and then,” she wrote. This can be applied to investing by regularly contributing to your investment accounts, even if it’s just a small amount each month.

Another Rubin quote, “Happiness is not a destination, it is a way of life,” can be applied to investing by recognizing that creating wealth is not just about achieving a certain financial goal, but to create a more secure financial future for you and your family. relatives.

My opinion : Establish routines that support financial goals. Make the choice to get serious about saving by committing to good habits, including establishing and following a budget, making saving from every paycheck a priority, regularly increasing your investments, and paying off debt. credit card.

Set specific financial goals, stick to them, and automate as many things as possible, including savings and recurring bills like insurance and mortgage payments. Meet with your financial advisor at least once a year to make sure you stay on track.

5 Ways to Develop Habits That Improve Your Finances

You can develop the habits that will help you succeed financially by consistently following these steps:

  1. Identify the cues, routines and rewards that drive your financial behavior.
  2. Make small adjustments to your investment strategy.
  3. Set specific goals for yourself.
  4. Contribute regularly to your accounts.
  5. Recognize that wealth creation is a long-term process.

— By Winnie Sun, co-founder and managing director of Sun Group Wealth Partners, based in Irvine, California. She is a member of CNBC’s Council of Financial Advisors.

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