Harness the power of good habits to pursue your financial goals

There is no one-size-fits-all approach to achieving your financial goals. The approach that will work best for you is specific to your income, expenditures, debt, goals and more. That’s why our advisors coach clients to focus on the fundamentals, starting with a strong foundation of money knowledge.

The results of our 13th annual financial readiness test show career military families struggle in this area. Only 2% of military test takers correctly answered all nine questions, which is designed to measure basic money knowledge associated with financial readiness. This compares to 6% of civilian respondents.

While financial education plays a role in improving military families’ money mastery, it’s not the only solution. There are two other key elements — which go hand-in-hand — that can help military families improve their financial readiness.

Using good habits to pursue goals

The role of everyday habits cannot be overstated. In his book “Atomic Habits,” James Clear asserts “habits are the compound interest of self-improvement.” He makes the case that daily, seemingly insignificant choices — saving a few dollars, investing consistently, or avoiding unnecessary debt — compound over the years into something powerful. Clear proves the point that small habits can lead to big transformations. First Command Financial Advisors see this in action every day as they coach military families in their pursuit of financial security.

We recommend consistency in simple habits, like automatically depositing a portion of each paycheck into savings or an investment account or sticking to a budget. While this can be easier said than done, 2024 might be an ideal time to increase your savings. Service members are expected to receive a 5.2% pay raise in January, one of the biggest annual pay raises in the last 40 years. Consider stashing a little more money into a savings or investment account. First Command Advisors believe in the merits of the 50/50 Plan. The idea is to allocate half of every pay raise to upgrading your current lifestyle and the other half to building a foundation for your financial future.

Creating systems to form good habits

Many people set out to adopt new habits but fail without a system to achieve the habit. For example, you may have a goal to stick to a budget. While this is a worthy aim, without a budgeting tool and time set aside to make sure you’re staying on track, you likely won’t. In many cases, the probability that you’ll form a long-lasting habit is as likely as the strength of the system you have in place.

Katy Milkman, author of the book “How to Change,” advises this five-pronged approach to habit formation.

• Set a specific goal. Try a specific goal like “I’ll save $100 each month.” Research shows a benefit to being specific about exactly what you want to achieve.
• Create a detailed, cue-based plan. You need to think about exactly how you’ll fit this goal into your life. For a budget-based goal, this could be “I’ll review my budget every Tuesday after dinner.”
• Make it fun to repeat. If the idea of reviewing your monthly budget sounds like pulling teeth, consider adding a positive reward to sweeten the routine. This could look like trying a new restaurant for takeout or enjoying your favorite beverage.
• Foster flexibility. If your routine becomes too brittle, you’ll follow through less often. If your original plan doesn’t pan out, be OK with pivoting.
• Find the right kind of social support. Milkman emphasizes the importance of social support in building and maintaining habits. For some habits, this could mean sharing your goals with family and friends. For financial habits, this could be the support of a financial advisor. 

Financial advisors: Your financial habit building support team

The second way you pursue financial readiness is by enlisting the help of a financial advisor. The First Command Financial Behaviors Index shows that, on average, military families who work with an advisor report average monthly contributions to savings and retirement accounts totaling $3,316 per month versus $1,298 for their colleagues without an advisor. If you’re looking to improve your financial literacy and set good habits, start by reaching out to a financial advisor who knows the military lifestyle.

You work hard in service of your family and the nation. Don’t neglect to pursue your financial goals. By establishing a system to nurture good financial habits and working with a financial advisor, even your most far-fetched goals may be possible.

Mark Steffe is president and CEO of First Command Financial Services, Inc.

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