Do you have plans to make big financial changes this year? If so, good for you! This is an incredibly common goal for many Americans this year, on the heels of a very financially stressful 2020.

Unfortunately, it is human nature to become overwhelmed by big goals and allow that stress to stand in the way of making any change at all. The solution? Take it one step at a time.

If you want to make sure that you are meeting your retirement savings goals, a good start is to make sure that you are saving 1% of your income, then increase it to 2%, and so on from there. These small changes then become the foundation for more monumental shifts further down the road.

I recommend you read a recent Wall Street Journal article by Anne Tergesen titled “Tiny Changes Can Help You Achieve Savings Goals for Retirement”. In it, she outlines seven strategies that you can use to make the small foundational shifts that can set the stage for monumental changes in the new year.


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Tiny Changes Can Help You Achieve Savings Goals for Retirement

Here’s a suggestion for those planning to make big changes in the new year: Consider making them small instead.

This approach is likely to be especially helpful in 2021, after a year when many have been under financial strain. People who are stressed or overwhelmed, “cannot make big changes and aren’t likely to even try,” said BJ Fogg, a behavior scientist at Stanford University.

To boost the odds of success, he recommends focusing on small, even tiny, changes—such as doing two push-ups a day or saving 1% of pay.

The easier the task, the higher the odds that you will keep it going when motivation inevitably flags, said Dr. Fogg, author of “Tiny Habits: The Small Changes that Change Everything.” When a small habit becomes ingrained, it creates a foundation for bigger habits—for example, doing six push-ups a day or saving 2% of pay.

Here are strategies to consider.

Don’t rely on motivation

New Year’s is when many people feel motivated to make changes, including making saving for retirement a priority. But motivation can dissipate quickly, as anyone who has joined a gym in January and stopped going in February knows.

“Motivation may suffice for one-time feats but it’s not enough for sustained change,” said Dr. Fogg, who instead recommends finding ways to shrink your goals to make them easier to accomplish.

Keep the bar low

Dr. Fogg says people often set themselves up for failure by choosing goals that are vague or overly ambitious, such as achieving financial security.

The key is to attach such goals to specific actions, such as establishing an emergency fund or catching up on retirement savings, and to start with a realistic step, said Dan Egan, managing director of behavioral finance and investing at Betterment LLC. For example, you might decide to save $500 in an emergency account or 1% of pay in your 401(k).

By sticking with a 1% savings rate, you are more likely to keep the habit alive when an unexpected expense arises, Dr. Fogg said.


This article was originally published in The Wall Street Journal on December 28th, 2020.

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