1% Closer to Your Financial Goal Everyday
I recently attended a financial conference where I had the opportunity to listen to a keynote speaker by the name of James Clear, author of a book called Atomic Habits. James has done extensive research on how habits are formed and therefore how to best cultivate behavior changes toward the good habit which leads to achieving your desired goals. James’ main point is that instead of focusing on the big goal we have set for ourselves; we should develop a habit of trying to be 1% better each day. When I listened to this presentation, I had an epiphany that this idea of being 1% better could definitely be beneficial in helping our clients shape better habits without feeling overwhelmed which often results in procrastination.
The power of tiny gains
Much like utilizing the power of compounding in investing, we apply the same principal in developing good habits with tiny gains each day. James pointed out that 1% each day may not be noticeable but by doing that, you will be significantly better in 1 year! What this means is we make small choices that will add up and the small choices can cultivate the right habit.
Just a 1% gain every day leads to incredible progress over time. If you examine the math, 1.01^365=37.78. The power of consistency is remarkable.
1% closer to your Financial Goal
Here are some ideas to implement this 1% better behavioral strategy and apply it to your finances, let’s take saving for retirement for example:
Break down your long-term financial goal which may require a large dollar contribution into smaller chunks, perhaps into monthly or weekly goals. Then each week you make a small decision toward that the goal such as saving 1% more each week.
Avoid setbacks by setting smaller incremental goals that are achievable. Remember 1% is not a large percentage, but the continuous improvement does add up. The goal here is to not let frustration lead to giving up.
Inspire yourself!
In this keynote speech, James Clear also shared the story of how a coach for the British Cycling team implemented the 1% gain philosophy to improve their performance in the Olympics. This coach stressed the importance of the “aggregation of marginal gains” by breaking down everything he could think of that goes into riding a bike, then improve it by 1%. The coach redesigned the bike seats, rubbed alcohol on the tires for better grip, had riders wear heated overshorts to maintain ideal muscle temperature, etc.
The result was phenomenal! The British Cycling team went from being Mediocre to dominating 2008 Olympic Games in Beijing and continued to do so in later games. Like the British Cycling team, we can achieve our larger goals and dreams by making small changes. May we all be 1% better each day in our endeavors no matter what those are!
Making progress towards your financial goals
The 1% strategy has many applications to the process of growing wealthy, from saving more money to building a business or even getting a new insurance quote. These small victories, done consistently, do add up over time.
If you wish to discuss your wealth management strategy, contact us to set up a time to speak.
Contributor
Ellen Li is a partner at Financial Alternatives and a lead advisor for many of the firm’s clients and has a special focus on financial planning. Ellen has an MSBA degree in Financial and Tax Planning from San Diego State University and she holds the CERTIFIED FINANCIAL PLANNER™ designation. She is a member of the Financial Planning Association (FPA).
Sources
Clear, James. Continuous Improvement: How It Works and How to Master It. https://jamesclear.com/continuous-improvement
Clear, James. This Coach Improved Every Tiny Thing by 1 Percent and Here’s What Happened. https://jamesclear.com/marginal-gains