 | | ILLUSTRATION: TAMMY LIAN | | |
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| Often when I ask people where they learned their financial habits, the answer I get is personal: from my mom, or a savvy relative, a roommate who was great at cost sharing, an acquaintance who works in finance, or something I read somewhere ("but I can't remember where"). | | |
| Financial habits can be learned, but they can also be inherited from the people in our lives. I've seen this at work in my own life: At my first job, my desk neighbor and work best friend taught me a habit that stuck with me. If all is well (rent paid, debts payments up to date, basic costs taken care of, etc.), her mantra went, spend half of your first paycheck on something for yourself. Part celebration, and part a release from the austerity of the job search, I loved this ritual in my early 20s. Once, I remember, I went on a kitchen spree: hot plate, rice cooker, nice coffee maker—all of which felt like luxuries at the time. Fast forward to when I moved in with my boyfriend, who is now my husband. Now on more stable footing, my husband watched me change jobs several times and spend half of my first paycheck on non-essential things. He didn't ask why the first time, but by the third he finally did. We had just gotten married and paid for our own wedding. Our honeymoon trip to Italy was coming up. "Can you just spend it on the train tickets or plane tickets we're going to need?" "But it's my RITUAL. It's my thing that I do!" Days later I came around, because the habit I'd long relished wasn't helpful anymore. It was time to move on. Getting rid of financial habits or rituals that are no longer relevant to your life is hard. Whether we learned it from family or a favorite author, it's hard to let go of something that was once useful, to acknowledge that you've moved on. But doing so could help you financially, and reassessing and restrategizing at different points of my life has worked for me and may be helpful to you. So bad tips be gone! It's time to exorcise our inner financial demons. — Bourree Lam, Deputy Coverage Chief, Life & Work | |
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 | | WARM-UP: "Bad Habits" by Ed Sheeran | Before you get rid of those unhelpful tips or habits, let's send them off with a dance-pop jam. Put on this song (or a pink suit like Ed Sheeran) and get ready to get mental. | | | | | | |
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| Savings Tip: | Start by reading. | | |
| If you're looking to break bad financial habits or develop timely new ones, start by checking out some of our favorite personal finance books: "Broke Millennial" by Erin Lowry, "The Year of Less" by Cait Flanders and "Why Didn't They Teach Me This in School?" by Cary Siegel. —J.J. McCorvey | |
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| ⏰ Suggested Time: 1 hour, or the time you'd spend skimming google results for "how do I get better at finance." | |
| Step 1: | Identify your financial habits and where they came from. | | |
| For example: How did you come up with how much money to save each month? How do you decide what to invest in? Where do you stand on buying coffee? (Option: Skip the last question.) Identify whether these habits came from a parent, a friend, a blog post from the year 2000 or a book from a favorite author. Writing all this down will help you be more objective about your financial strategies, identify whether some are ingrained because of the people in your life and determine which ones need to be re-evaluated in light of the goals you're trying to reach today. | |
| Step 2: | Once you have your financial habits identified, write down specific, realistic financial goals. | | |
| Setting realistic, specific goals is important, said Dan Egan, managing director of behavioral finance and investing at Betterment LLC. Too often, new-goal enthusiasts set themselves up for failure with big, lofty targets or vague, undefined ideas. It's the difference between "I want to exercise more" and "I will commit to doing yoga (virtually or otherwise) on Wednesdays with my two other friends who also want to exercise more." | |
| Step 3: | Combine the findings of Step 1 and Step 2. | | |
| Look at your goals and financial habits and see if they make sense. Are the habits you developed leading to you accomplishing your goal in the timeframe you hope? Or are the habits counterproductive? Evaluate the results of your financial habits vs. your goals. If it's helpful, match the goal with the habit that's supposed to take you there either using paper, or a list format. | |
| Step 4: | Looking at the results of Step 3, identify the combinations of goals and habits that: | | |
- Are working well, and don't need tweaking
- Could be better. Let's do some tweaks
- Just aren't working or relevant anymore. Crumple these pieces of paper and put them in the trash
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| Step 5: | Revisit the goals and habits that fell into the second category, and make the tweaks you need. | | |
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| At the end of this, you should come away with a few realistic goals and specific habits that are contributing to your achieving them. | |
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| A small trick: Habit experts recommend getting started at the beginning of a new year or right before a milestone birthday. It may sound silly at first, but research shows this can inspire us and boost our self-confidence. "We rationalize that it was 'the old me' who failed, but this year will be different," said Katherine Milkman, a professor at the University of Pennsylvania's Wharton School. So mark a date on your calendar when you're going to search "WSJ Money Challenge" in your inbox, pull this email up, and do this challenge again. (Read more about this trick.) | |
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| 🐿️ COMING NEXT WEEK: How to be a squirrel (The kind that saves, not the kind that goes nuts.) | |
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| Was this challenge too difficult, too easy or just right? Give us your feedback, along with any tips you want to share with others who have subscribed to this challenge, by replying to this email. We'd also love to see your goals note, so please feel free to take a screenshot or a picture of it and send it to us—we'll be reading! This newsletter course was created and edited by Bourree Lam, Julia Carpenter, Robin Kwong and Allison Foley. By submitting your response, you are indicating that your answers may be investigated and published by The Wall Street Journal and you are willing to be contacted by a Journal reporter to discuss your answers further. In an article on this subject, the Journal will not attribute your answers to you by name unless a reporter contacts you and you provide that consent. By submitting photographs or videos ("material") you agree that Dow Jones & Co., publisher of The Wall Street Journal, has the perpetual right to use, publish and modify the material in any medium. You represent and warrant that you own the rights to the material you submit, and that the material and any other information you submit are accurate and not false or misleading. | |
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