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Personal investing

How to get into the habit of saving this Savings Month

Depending on what they are, our habits will either make us or break us – Sean Covey

If you have tried to kick the sugar habit and eat only healthy food, or give up cigarettes and replace the habit with going to the gym, you can probably attest to the fact that old habits are hard to break and new habits are hard to form. According to psychologists, this is because the behavioural patterns we repeat become imprinted in our neural pathways. Just as computers are hard-wired with electrical connections, so too our brains are hard-wired with neural connections that link sensory input and motor output with the brain’s message centres, allowing information to come in and be sent back out. Research shows that neural pathways in the brain begin to solidify by age 25, however with the right activities in place, we can grow more neurons and create new pathways, and through this we can reset our behaviour and form positive, long-lasting habits.

This is good news for our aspirations to uplift ourselves on many levels – for example, through better eating and exercise routines. It is also good news for our savings habits. Habits are formed through repetition – but the process can be rather slow, with the average time taken for a habit to become automatic pegged at about 66 days, according to the European Journal of Social Psychology. However, if the average human works for about 40 years, or 10 400 days, 66 days doesn’t seem that much. The sooner we form good habits, the longer we have to reap their benefits.

Transform your intentional goal into a habit

There are different strategies we can use to transform goals (intent) into habits. Psychologists explain that a habit comprises three parts: the cue, the behaviour and the reward. If financial security is your goal, you need saving to become your habit. Here’s a cheat sheet to set you on course:

1. The cue
A cue is a trigger that inspires action. In the context of investing, a cue could be receiving your salary. This is an external factor that should nudge you towards action. Unfortunately for many of us receiving our salaries is a cue to start spending. If we pay ourselves first, by saving before we spend, we will be on a path to a better habit. But this will mean we need to strengthen the factors that inspire the right behaviour. Try taking these steps:

2. The behaviour
Establishing a habit requires meaningful action. To make an action stick, your behaviour needs to be considered and deliberate and you may benefit from some guidance from a good, independent financial adviser:

3. The reward
The final component required to establish a good habit is reward. Use a carrot not a stick to incentivise yourself. This is particularly important when saving for the long term, when we can feel very disconnected from the reward which is far into the future, and we struggle to identify with this future self. Focus on your progress and celebrate each milestone. This will help sustain your behaviour over time.

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