“Your net worth is a lagging measure of your financial habits.” - James Clear, Atomic Habits
Arguably one of the most popular self-help books ever written, Atomic Habits shares the “secret sauce” for establishing and maintaining healthier habits over time. By applying the principles outlined in his book, investors like you can harness the power of small actions and incremental progress to build lasting habits—specifically, wealth-building habits.
How Your Neural Pathways Can Help You Build Wealth
Patience is important, as new habits aren’t solidified overnight.
Repeating behaviors strengthens neural pathways in your brain. The more you repeat the behavior, the more streamlined and effective the neural connections become. When you repeat a behavior enough, the connections solidify and the behavior becomes less of a conscious decision and more of an automatic habit.
But how does this relate to building wealth?
Wealth building isn’t exciting or action-packed. Success in building wealth is found in the mundane decisions that, when repeated over and over and over again, become impactful. Of course, it’s easier said than done to build and stick to those healthy habits all on your own. That’s one reason why working with a financial advisor is so critical to your wealth-building journey.
Think of working with a financial advisor like working with a personal trainer. Could you, theoretically, work out on your own? Sure. But going it alone means you won’t have someone holding you accountable for building those repeatable habits.
Not to mention, a trainer brings his or her expertise to the table—just like a financial advisor. They’ll examine your current habits, discuss your goals, build a personalized plan to help you get the results you want, and celebrate your successes along the way.
Maintaining Healthy Habits Over the Long Term
Creating new habits is one thing. It’s another ballgame entirely to be patient enough to stick with them over the long run. You still need to continually commit yourself to your goals and check in with your progress to course correct as necessary.
This is a big reason why people choose to work with a financial advisor. An advisor serves as your sounding board and keeps track of your progress alongside you. If they see things going off course, they’ll be the first to help you reassess and potentially recommit to your goals and habits
Another way to stick with your healthy money habits over the long run is by expanding your goals beyond a dollar amount.
Consider which of the following would be a more effective motivator for you: saving $75,000 or having enough money to put a down payment on your dream vacation home. The number by itself is daunting and uninspiring. But when your money has a specific purpose, it’s more motivating to stick with your goals and maintain those critical habits.
Remember, money is the tool to achieve your goals, not the goal itself. Try instead to envision yourself achieving your biggest goals—celebrating your first day of retirement by gardening in the backyard, sitting in first class on your month-long trip to Europe, seeing your granddaughter walk down the aisle, and anything else you envision for the future.
Accounting for Emotion with Your Habits
It’s impossible to be unbiased when it comes to managing your own money. In other words, you have an inherent emotional attachment to your wealth. That’s why it’s difficult for investors to watch their portfolios grow and shrink from day-to-day market movements. In fact, the entire stock market is regularly impacted by investor sentiment.
Consider how the market reacted to recent events like the onset of Covid-19 in 2020 or the crisis in Ukraine. Or, what happens to a corporate stock price when the mainstream news reports a scandal. Whether it’s within your own financial world or the stock market, emotion will always play a role.
With that in mind, it is possible to account for your emotions within your wealth-building journey. For example, fear makes us naturally resistant to change, and therefore fear can create hurdles when trying to form new habits. If that’s the case, it may take a bit longer to form and stick with those habits. It is often helpful to discuss your fears and review the potential “what ifs” of taking the leap forward and prevent stagnation.
Establishing Better Wealth-Building Habits? We’re Here to Help
While patience is certainly key to forming new habits, having a partner to help you through it is critical to long-term success. Our team at Northstar Financial Planning is dedicated to helping our clients navigate every stage of their financial life. If you’d like to learn more about working with us, please feel free to connect with our team.