Recently, most of us have had many opportunities to consider the financial condition of our economy and how that impacts us. For some of us, this is the time to change the way we have been managing our money.
But, altering our behavior is not easy. In fact, changing money habits can be especially difficult. How we’ve always handled money feels familiar, comfortable, and predictable – not only to ourselves but also to those around us. Family and friends often expect us to act and respond in certain ways and may even have vested interests in having things continue as they are. Because family members and friends may feel uncomfortable when they see us trying to make changes, they may set up barriers – either subtle or obvious — to prevent change. We may not be clear about how to implement change – what is a better way to manage? Change is not easy or straightforward. We may try things that don’t work so well for us, or we may get discouraged when our attempts fall short of what we desired. One good source of information and suggested ways to start new money management practices is the following site: http://www.extension.org/personal_finance In addition to the suggested practices and practical advice by experts found at extension.org, the research below provides guidance on setting and accomplishing financial goals.
Research sheds some light on how we might be most successful in changing financial behavior.
The first step in changing our money management is to set a goal – what do we want to achieve and by when? Research studies have pointed to three main keys to increasing success in accomplishing your goals. The first point is that goals should be clear, narrowly focused, accomplished without much difficulty, and completed relatively soon (naming a specific date). Tip #1: Set goals that are specific in terms of what you want, how much it might require of time, money and any other resources, and when you want to have it.
The second key to being successful in reaching your goals is to know why you have chosen the goal. In the terminology of some psychologists today, “you need to own your goal.” In other words, a goal should come from you for your purposes and NOT be handed down by someone else. It must fit with who you are and what you need and want, being realistic about your time and money resources, of course.
The goal may also have to be planned with others in your family or household. Everyone involved needs to be considered and everyone needs to feel ownership in, and commitment to, the goal in order for it to be accomplished. Tip #2: Set a goal that is one you want to achieve and know why you want to achieve it.
Having your goal defined and being sure you know why you have set it are two important contributors to goal success. The third key factor is having a specific plan to reach your goal. The action plan will need to have dates attached to it, so that you know when you will start, when you will reach certain milestones along the way, and when you will fully accomplish your goal. Sometimes there are dates imposed by circumstances outside yourself, such as holidays, vacation dates, birthdays, graduation dates, weddings, etc.
The other important part of action planning is to recognize that you will have some distractions and temptations to use your time or money for things other than achieving your goal. These opportunities to spend now rather than save for the future come to everyone and most of us find it hard to avoid these temptations. These enticements may prevent you from reaching your goal on time. It is easy to become discouraged when these things happen. However, if you plan for ways to avoid or recover from these disruptions, you can quickly get back on track. Tip #3: Establish a target date and create a detailed plan of action to follow that will act as a guide to achieving your goal, including ways to overcome obstacles or temptations that could interfere with completing your goal.
Koestner, R., Lekes, N., Powers, T. A., & Chicoine, E. (2002). Attaining Personal Goals: Self Concordance Plus Implementation Intentions Equals Success. Journal of Personality and Social Psychology, 83 (1), pp. 231-244.
Prochaska, J., Norcross, J., DiClemente, C. (1994) Changing for Good, New York: Avon Books.
Seiling, S. (1999) “Behavior Change and Money Management” in McKinney, C., Seiling, S., Little, F. and Varley, I., Pathways to Money 2000+, Section 1, pp. 18-23.