Establishing a Routine for Successful Investing and Building Wealth
We’ve all been told that following a routine is important in many aspects of life — for physical fitness, good eating habits, solid work patterns, and so on. But many experts are telling us that establishing a routine is also necessary for successful investing and building wealth.
At an early age, my mom drilled into me that it wasn’t how much I earned, but how much I saved. I’ll add that it’s not just how much we save, but how and when we save — ideally, without overthinking it. When I think about my clients who have managed to reach financial independence, I’d say they also have very defined patterns that help them save and track their finances.
Let’s take a look at what some prominent people have said on the subject and then I’ll share my tips on how you can apply their observations to upping your own personal finance game.
To change a habit, ‘understand its structure’
The advice: In his best-selling book, “The Power of Habit,” Charles Duhigg found people who stick to a daily routine are more likely to make smarter financial decisions. “Habits are at first cobwebs, then cables,” Duhigg wrote, referring to his observation that building wealth through investing takes time and consistency to develop good habits and see results.
“The brain can be reprogrammed. You just have to be deliberate about it,” Duhigg wrote. This can be applied to investing by recognizing that you can change your financial habits and mindset with deliberate effort.
Automatic behaviors carry us along
The advice: Wendy Wood, a 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 along.
My take: If you typically invest in individual stocks, consider diversifying your portfolio by also adding mutual funds or exchange-traded funds that track a broad market index.
Daily actions outweigh ‘once in a while’ moves
The advice: In podcaster Gretchen Rubin’s best-selling book, “Better than Before: What I Learned About Making and Breaking Habits,” she explores the science of habit formation and gives advice for making positive changes.
My take: Establish routines that support financial goals. Make a choice that you’re going to get serious about saving by committing to establishing good habits — including forming and following a budget, making saving from each paycheck a priority, adding to your investments regularly, and paying off credit card debt.
5 ways to build habits that improve your finances
You can develop the habits that will help you achieve financial success by consistently following these steps: Identify the cues, routines, and rewards that drive your financial behavior. Make small adjustments to your investment strategy. Set specific goals. Contribute regularly to your accounts. Recognize that wealth-building is a long-term process.
— By Winnie Sun, co-founder and managing director of Irvine, California-based Sun Group Wealth Partners. She is a member of the CNBC Financial Advisor Council.
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