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New Year’s Resolutions

December 21, 2021 | Diandra Ramsammy
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As 2021 is coming to an end, and a brand new 2022 is right around the corner, many of us start to think about New Year’s Resolutions. What do we want to accomplish next year and beyond? Traditionally many look for ambitious goals: make that many dollars, lose that many pounds, read the many books by year-end, and more. In life and investing, success often comes not from a lofty goal with a fixed deadline but rather the process built on helpful habits that lead to favorable outcomes. Let me explain.

The three most popular New Year’s Resolutions cover healthier eating, more exercise, and saving money. Right after better food and more physical activity, our attention falls on money.

In my book, Outsmarting the Crowd, I write about the mantra – earn, save, invest. I explain how the money will grow over time if you underspend your income and invest what’s left. The opposite is true as well; if you outspend your income over a lifetime, there is only excess debt and financial stress waiting for you on your journey.

This is a well-known truth, the same as the need for a better diet and more exercise. Those truths can be seen as almost trivial. It doesn’t make following them any easier, though. The challenge lies in creating little repeatable habits that build the right process.

This year, I enjoyed reading three great books on habits: The Power of Habit by Charles Duhigg, Atomic Habits by James Clear, and Tiny Habits by BJ Fogg. Maybe I was thinking ahead of my New Year’s Resolutions; perhaps I noticed how my daily habits, routines changed since the pandemic sent many of us home last year. Whatever the reason, each taught me something new about the habits in our lives.

If there is one important lesson that they all have in common is to make the desired habit as easy and as repeatable as possible. If it’s an exercise routine, let’s make our journey from bed to the walking, running, or hiking trail as simple as possible. If it’s saving money, let’s automate it and forget it. Taking the pain points out of the process was the biggest revelation. Somehow, I thought that the more ambitious, the harder the habit, the better, but that’s not a good place to start. There will be days and months when we just don’t feel like doing whatever we intended to do; making the hurdle as low as possible is key.

It reminds me of companies that never want to break their dividend-paying record, and in leaner years, they cut the dividend to a single cent. It may be nothing, but it allows them to keep the habit. When the profits recover, there is no question whether they should resume the dividend or not, the dividend policy is in place, and now it’s all about raising it from that single cent. That’s how we can think of earning, saving, and investing. As long a cent trickles in, the habit is alive.

There might be days when no stock looks appealing and worth buying, yet, we still show up, read, research, cultivate the habit, keep the process going because the best opportunity might be right around the corner. If we are not looking, we won’t find it.

As tempting as it may seem to find ambitious goalposts and fix them at a particular point in time, it may not serve us well either in investing or in life.

When I think of my New Year’s Resolutions, I focus on habits that build the process that can lead to favorable outcomes: healthier, happier, more prosperous life. Most of all, I wonder how we can make them as easy as a single-cent dividend –a small deposit into the bank of wellness, well-being and wealth.

It keeps the good habits alive and compounding!

Happy Holidays! Happy Investing!

Bogumil Baranowski

Published: 12/23/2021


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