NOV. 30, 2019
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Breaking Bad

WE ALL DO things that make us feel good right now, but which aren’t so good for us over the long haul. Yes, even me. Yes, even you.

Some of this behavior stems from hardwired instincts passed down to us from our hunter-gatherer ancestors, like our tendency to consume whenever we can and to focus too much on today, while giving short shrift to tomorrow. Other damaging behavior is the result of habits we’ve developed, often learned from our parents, that we’re now trying to unlearn.
Fighting our instincts and breaking these bad habits is tough. We could try summoning the necessary willpower. But that can be mentally exhausting. It may even backfire, when we decide the effort just expended deserves a reward—and, the next thing we know, we’re in the drive-through at McDonald’s.

Similarly, knowledge isn’t power. We all know we should exercise regularly, eat more fruits and vegetables, and save 10% to 15% of income. But knowing better doesn’t mean we’ll behave better.

So how do we change our habits and keep our worst instincts at bay? Consider three steps.
First, know yourself. What causes you to spend too much, eat too much or drink excessively? Do these things tend to happen at a particular time of day, or when you’re with certain people, or when you’re at certain places, or if you’ve had a taxing day?

For instance, you might eat too much or eat unhealthily when you go to certain restaurants or if you’ve had a rough time at work. You might drink too much when you’re with certain friends or on Friday evenings. You might shop to feel better if you’re despondent. You might trade more when you have CNBC turned on.

Psychologists have identified five key personality traits: agreeableness, conscientiousness, extraversion, neuroticism and openness. Those who display a strong conscientious streak tend to have good financial and other habits. By contrast, those given to neuroticism—the tendency to respond negatively to events—often have a harder time maintaining good habits. If you’re in the latter camp, you’ll likely find it especially difficult to avoid, say, going on a shopping spree after you’ve had a tough day.
"Anything that slows us down can potentially nix bad behavior, because straying from the straight and narrow might seem like too much effort."

What to do? That brings us to step No. 2: Make it harder to engage in damaging behavior. Get the potato chips out of the house. Have your regular savings automatically deducted from your paycheck and bank account. Limit the number of times you go to the shopping mall each month. Don’t bookmark retail websites on your computer. Delete food delivery apps from your phone. Use a debit card rather than a credit card, so the money comes straight out of your checking account. Alternatively, spend cash only.

Anything that slows us down can potentially nix bad behavior, because straying from the straight and narrow might seem like too much effort. In addition, it gives time for the contemplative side of our brain to wrestle with the instinctual side, and we might decide we don’t really need another pair of shoes.

It’s also harder to stray if we’ve told others about the changes we’re trying to make. Want to lose 10 pounds or go to the gym three times a week? You might find an “accountability partner”—a friend or family member to whom you confide your goals. In addition, you might look for somebody—perhaps the same person—who also wants to lose weight or exercise more, so you have a companion on your self-improvement journey.

Even as you make it harder to engage in bad behavior, you might make it easier to behave well, by using a strategy called “habit stacking.” Find something you do regularly, and then add on or incorporate the desired good behavior. Do you leave the office every lunchtime to buy a sandwich? Find a place that’s 10 minutes’ walk farther away, so you get some exercise at the same time.

With any luck, by making it harder to stray and knowing what’s likely to trigger bad behavior, you can steer yourself onto the right track. Step No. 3: Keep this good behavior going until it becomes second nature.

Have you heard that it takes 21 days to change your habits? Unfortunately, that notion—which has gained widespread currency and is often asserted as fact—is, in truth, just a distorted account of one doctor’s observation. A subsequent academic study found that forming new habits can take anywhere from 18 to 254 days.

The key is to find some way to keep ourselves on the right track for that long. A key ingredient: positive feedback. When our friends tell us that we look like we’re in great shape or they notice we’ve lost weight, we’re encouraged to continue exercising and losing additional pounds.

Similarly, signs of financial progress can encourage us to keep going. I wouldn’t focus on your portfolio’s value, because a bad market could leave you discouraged and perhaps even unnerved. Instead, I’d focus on the dollar amount you save and see if you can increase that sum each month. Similarly, you might track your monthly credit card bills and strive to charge less than the month before.

If you have a mortgage, you might also add a little to your monthly loan payment, and then watch as both the loan balance and the amount of interest you pay go down. I used to love watching my mortgage shrink each month—and that encouraged me to make even larger extra-principal payments.

Clean Up This Holiday

WANT TO GIVE yourself or a friend the gift of financial wisdom? Check out HumbleDollar's line of dish towels.

Every time you use these high-quality, microfiber dish towels, you'll be reminded of what it takes to succeed financially. They offer the daily affirmation we all need—and they make a great gift for family and friends. Each dish towel costs $15, plus $4.99 for shipping. A portion of the proceeds helps cover HumbleDollar's costs.

Just click on the links below and you'll be taken to Amazon, where you can purchase the dish towels. There are five to choose from, each with a different financial message:

Latest Articles

HERE ARE the six articles published by HumbleDollar since last week's newsletter:
  • How can we get the most out of our retirement? Peter Minnium Jr. suggests taking some tips from the monks of Mount Athos.
  • After 45 years in the same house, Richard Quinn is trying to sell—only to discover that potential buyers consider his home woefully inadequate.
  • This year may bring one last hit tax—a big distribution from your mutual funds. But it isn't too late to do something about it, says Adam Grossman.
  • Want to give the gift that keeps on giving? Bill Ehart recommends four books—all of them considered investment classics.
  • Target-date retirement funds offer the simplicity of one-stop investment shopping. But the evidence suggests many folks use them incorrectly, says Mark Eckman. 
  • Are you on Medicare and own a Medigap policy? James McGlynn explains why Plan G is the way to go—assuming you can qualify.
This newsletter, a product of Jonathan Clements LLC, contains the opinions and ideas of its author. It is distributed with the understanding that the author is not engaged in rendering legal, financial or other professional services. If a reader requires expert assistance or legal advice, a competent professional should be consulted. While the author has endeavored to ensure that this newsletter is timely and accurate, the author makes no representations or warranties with respect to the accuracy or completeness of the contents. The author specifically disclaims any responsibility for any liability, loss or risk, personal or otherwise, which is incurred as a consequence, directly or indirectly, of the use and application of any of the contents of this newsletter.
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