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  • Writer's pictureBridget Sullivan Mermel CFP(R) CPA

Habits and Goals: Be effective and happy while improving your life

Updated: Mar 3, 2021

Bridget Sullivan Mermel CFP® CPA and John Scherer CFP® talk about how to form effective goals and establish new habits.

Resolutions are often forgotten after a day or two. We talk about how to make changes in baby steps to improve your situation.


Habits and Goals: be effective and happy while improving your life

Bridget: Resolutions. Making changes. It's that time of year, and Friends are Talking Financial Planning. How do we make changes and resolutions with our finances most effectively?

I'm Bridget Sullivan Mermel, and I've got a fee-only financial planning practice in Chicago, Illinois.

John: And I'm John Scherer. I run a fee-only financial planning practice in Middleton, Wisconsin. And I'm looking forward to talking today, Bridget, about how to make changes, resolutions.

That's such a weird word. Like, there's something magic that happens on New Year's Eve, right? And suddenly I'm going to be better tomorrow. And I look at things like a lot of people I'm sure do, as sort of more progressive. I actually had a friend who used to do a winter solstice celebration, December 21st, and I started making some changes earlier in the year to give me a head start on the New Year's thing.

And one of the things that I wanted to talk today about is that so many changes can be overwhelming. And new year's resolutions, right? Everybody resolves to workout more and lose weight, eat better, and all these things. And by January 4th all those things have gone by the wayside.

And I think a similar thing happens with a lot of folks as they talk about their financial goals, and especially when new clients coming to talk to you and I. "We're going to make all these sweeping changes. I'm going to start saving 25% of my income and stop spending so much, stop eating out, doing all these things. And you've got these great big home run swings.

And it works for a little while, and then it's just so overwhelming, because it's... I like to say to clients that a lot of the things that we need to do to be financially successful are simple, but they're not easy. It's not complicated. But man, it's not easy to do.

So one of the things I recommend people do is to take baby steps when it comes to changing their financial habits or setting their financial goals. And at this time of the year, one of the big ones that I talk about with folks is saying we try to get people be saving 10 or 15% of their money into their 401K plans, and man that's hard when maybe you're just getting the company match and only saving 3%. Like, how do I suddenly cut out 5% of my income?

And one of the ways to do that is just in baby steps and we talk about just every year increase by 1%. If you don't, if you're giving 5% your 401K right now, make it 6%. Or maybe you get a raise this year, and you get a 4% raise, we'll take 2% and put it into your 401K.

And it's one of these things, that it's not sweeping, right? It's not these grand things, but it's that sort of.. what's the.. Chinese water torture sort of thing like the dripping, the dripping, the dripping, and that's how the Grand Canyon got carved out. Like that sort of just, that slow consistent... and I really think that there is... and there's of course some evidence and research that says consistency build strength.

And if you can do something consistently -- whether it's putting just an extra 1% into your 401k, or if you're a coffee person, maybe going out for coffee 4 times a week instead of 5, those little itty bitty things -- it doesn't feel like much, but that's the stuff that future success is built on. And so I try to get momentum, or encourage people to get momentum, in their changes that they want to make in their lives.

Bridget: Yeah, that makes a lot of sense, John. And, you know, I definitely can be subject to overwhelm when I'm thinking about all the things that I could possibly do. And how do you suggest people narrow down what they want to do? I am such a flawed person. I have so many things that I could improve. What would you say? Don't tell me what I'm going to improve. I don't want to hear it!

John: Dr. Freud is the house. I'll fix you here.

Bridget: But how do you suggest that people narrow it down, just to be most effective?

John: Yeah, I'll tell you how I do it. But I'm also interested in how you think about this, too. So I'm going to throw this back at you, just as a warning on that.

What I'm talking about here, when I think about these things, are behavior-type things, meaning changing the behavior and the things that you do on a daily basis are really significant in the long-term picture. And so that's where I talk about saving a little bit of extra money.

Or budgeting is one where people think, say, "Oh, I'm going to keep track of every cent I spend." And I go, "Man, that is a big ticket to do that." But maybe you can keep track for a week or for two weeks, or take a look at one month and kind of put it in bite-size pieces.

And I think that part of it is identifying for each individual what's going to have the most benefit from a financial standpoint is one. Like, listen, if we're behind on our retirement savings, then maybe that's the best place to do it. Or if we've built up a little too much debt, maybe paying off a little extra debt every month, that's going to do it. So some of it's really personal as far as what's going on.

And then the other side of it is also -- as I think about making changes -- is if there are big ticket things, like one-time things that are going to make a swing in their financial lives, like saving up to buy a car that's coming up or certain other things. There can be other things that are sort of one-time that maybe we need to do some triage and think about what's your really big goal for the year, and then think perhaps a little bit differently about those day-to-day, like exercise and eating and those financial habits that are just those little things that build up over time. So maybe there's actually two separate things.

And your question was, "How do you prioritize?" And I think, as I think about that question, it really is so personal, depending on the situation and what's going to have the biggest benefit, whether it's in dollars or in emotions. Like, if I feel really good about what I'm doing and how I've built this up, then I'm going to be better at handling some of the other things that go on in my financial life. What do you do? Tell me your approach to that.

Bridget: Well, it sounds like you are distinguishing habits versus goals.

John: Yeah.

Bridget: They are different, right? So a habit is just something... If you're trying to change a habit, that can be a little different than making the commitment of having a goal.

So a goal, it implies that it's going to be over, whereas a habit, it's like, "Well, I'm going to try to stick with this, or at least stick with this for a good, long while." And so it seems like having some... I think that people can tend to...

Saving is the number one habit that we like to have with clients. Saving 10% of their income. And the #2 habit is probably having some grasp on what you spend. So the goal that I like to have people have before retirement is "I've got some idea about how much you spend." Okay, how much I spend a year, I have some control over that. Because, think about it. Once you're retired, you're not bringing any money in anymore from your regular sources, and knowing how much you are going to spend helps a lot.

So those are two habits, but those are hard. Both of them can be hard. Like you said, with a habit, like spending, like a savings school, like breaking it down. And that's how I started saving myself. It was bit by bit. Increase it by 2%, not okay, all of a sudden I'm going to start saving a lot. And so I would say, with savings, okay, "I've got to have the savings habit. I'm going to start one bit at a time." Same with having your spending kind of under control. Okay, "I'm going to cut off these credit cards and see what happens. See what's life like then."

John: Yeah.

Bridget: Those would be two major things that a lot of people need to tackle.

John: It's interesting as you talk about habits versus goals. And of course, those are two different things. And yet in my mind, I don't often think about those as different things, because maybe the habits are what leads to the goals.

To have a certain amount of money, and whether it's health or money, the goal, it's not like it's done when you pay off your debt, right? It's part of the process. By getting there... as I'm thinking about, like, okay, how am I thinking about this? How do I talk with clients about it? It's "Yes, we want to have this much liquidity for... have enough liquidity." And "Yes, we want to get to retirement, have enough money for retirement." And "Yes, we want to have those debts paid off." But it's those habits that get there.

It's to set that goal and go, "I'm going to do this." And you can put your nose to the grindstone, but if after you get your debt paid off, you go right back into debt, that doesn't do you any good.

So maybe it's really what I'm talking about. It's that goals or resolutions aren't... Maybe my approach is more that it shouldn't be this finite thing, but it is that it's those habits, those actions that really influence that. I never really considered that before.

Bridget: I actually think that goals can help you with getting confidence that you can have this as a habit. But I have seen that somebody has a goal of paying off their credit cards, and then they rack up the credit cards after they pay off their first credit card. Which, I mean, I think that that was actually more of a sign of compulsive spending, which is like a whole different problem than normal behavior, like it's kind of outside of normal behavior. So most people spend off their credit cards and then they stop.

John: Yeah.

Bridget: But I also say that savings is a habit to start before you pay off your credit cards, because it's a different... it's just like you work your... you don't start working your biceps only after you have worked your quads.

John: Right.

Bridget: You start them at the same time. It's just a muscle. And it's all about becoming more conscious of your money.

John: It's interesting. One of the things I'm going to take away from our conversation here is that, as I talk with people about changing habits, my own habits, that a goal is not some ending point, but it's a benchmark.

Bridget: Right.

John: Like, okay, you need to celebrate some of the successes that you have with doing these things, right? It's simple, but it's not easy. And to have something to reach for. But then not to think about that as the end of the line. That's the next stepping point for moving forward from that.

I'm interested in sort of more granular for how you think about it, Bridget. Like one of my key examples: increase your 401 K contributions, 1% a year. Anybody can do that. Increasing it by 10% in one year, that really is a bummer. Do you have any tricks or any things that you do for clients, or yourself even, as you talk about taking some of those actions to reach your goals, making some of those changes?

Bridget: I try to prioritize the highest impact items. So it's going to help me more to save an extra 1% of my income than to cut out my Starbucks. So I'm going to figure out how to do that without cutting out... like how to get the equilibrium without cutting out the thing that I really want. So everybody has some items that they really don't want to give up, and so the best thing is to not pick on that. It's the golf game, or the haircut, and now haircuts are questionable, right?

John: Hey, don't talk to me about haircuts!

Bridget: I know, I've got COVID shag. That's what I'm sporting these days. But anyway, so for me I try to impact try to get the highest impact items. And sometimes it's something that I feel like doing. So I will say, like, "Okay, of these different changes that I could make, what do I feel like doing? What has some energy around it? Because as I go along in life, I realize that having some energy around things really helps. So...

John: That's interesting. As you say, so often you and I have things that we say in different ways, but the same thing. And as you talked about it, I was hearing that as the low hanging fruit: the stuff that you're going to be able to do.

And that's what I mean when I say, "Make little changes," right? Don't cut out all your Starbucks if that's your thing, but make a little change in that. And it's going to be something that you want to do. Having something that you do gives you momentum for doing those other things, and it gives you some of that strength and some of that power.

And I'll tell you, even it seems... I heard you say, "Save 1%." I say that. "Save 1%." It seems like nothing. And it reminds me of a book that a friend of ours, Birt Whitehead, wrote, where it talks about when you put toothpaste in the commercial. That big blob a toothpaste that goes onto the thing. And you go "Okay. Pretty nice. You don't need that."

And so he actually took a tube of toothpaste and measured out how many of those great big blobs come out of a tube and what the price was per... and so well, listen, if you teach your kids just to take half that right. It's how much toothpaste do you put in your toothbrush? How much meaning can that have? How much value?

And he extrapolated that over a lifetime of taking that money and putting it into an investment. And it came out, and the number is in the 6 figures, like $100,000 by managing your toothpaste intake. And if that makes a difference, then how many times you go to Starbucks or how often you go out for lunch, or 1% of your savings, those little tiny things do add up overtime.

And if you can do it in a way, as you said, about things that you want to do, things that are easy to do, things that will make an impact, you don't have to change your world in order to make a difference. But doing something is really the key. I guess maybe that's, as I circle back, one of my takeaways from this is that doing something, taking some action really has some power.

And as I said before, one of the things I'm going to take from this is setting a goal as a benchmark to measure progress on that. That's really important, too, to match up the habits with some achievements and not have either one of them take precedence.

Bridget: Right. You kind of need both. Because you don't want to be in the situation where it all like ends, where all your savings ends the day that you reach some goal.

John: Yeah. So for viewers, I think to find one thing, if you can find one little thing, it doesn't have to be a big thing for right now, that's my homework for people. Take a little thing that you think can be improved just a little bit around the edges and that you're willing to do and you could see yourself doing for 30 or 60 days. And then set a goal for where you want to get with that. I think that can really be helpful as we think about this time of making changes and resolutions and that sort of thing.

Bridget: Sounds great, John. We also like to bring in the Alliance of Comprehensive Planners, or ACP. And you can find them at And I think that's it for this time! Thanks, John.

John: All right. Thanks, Bridget.

At Sullivan Mermel, Inc., we are fee-only financial planners located in Chicago, Illinois serving clients in Chicago and throughout the nation. We meet both in-person in our Chicago office and virtually through video conferencing and secure file transfer.

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