Perspectives on Success

Have Your Clients Asked: How Can I Improve My Financial Life?

The interesting connection between habits, outlook and long-term thinking

by Gregory J. McLaughlin, MS, CFP

Mr. McLaughlin, MS, CFP® is a financial planner with Centinel Financial Group, LLC in Needham Heights, Massachusetts. He can be reached at 781.446.5016 or by email at [email protected]

At some point in everyone’s life they have been told how to be financially successful. Maybe it was a parent, a sibling, a friend, a book, something seen on television or read on the internet.

Everyone remembers that moment when they said, “I can do this.” In the simplest terms, it is the belief that if one lives within their means, saves for a rainy day, invests for the future and takes all emotions out of the decision making process, they will achieve their goals.

However, the reality is that everyone has emotions and feelings and although I understand the simplicity of the above statement, as a financial advisor I recognize how challenging the implementation can be for many people.

In working with my clients, I have found that the first step to improving their financial life is their decision to truly want to improve. Once an individual has committed to this goal, they are ready to explore tangible action steps to help get them there. I have identified three key components that can lead to an improved financial life.

First and most important, what are some simple habits that one can incorporate into his or her daily life? Second, I will explore the ability of a person or business to have a long-term focus and the impact this has on decisions, managing emotions and ultimately the achievement of goals.

Lastly, I will discuss the importance of having an optimistic outlook which is reflected by the legendary basketball coach John Wooden when he said, “Success comes from knowing that you did your best to become the best that you are capable of becoming.”

Amazingly simple habits

Whenever someone reads or hears about a person who has experienced success in any area of their life it seems the initial reaction is, “wow, they are so disciplined.” The reality is that this statement is partially true because regardless of whether a person is financially successful, mentally resilient and positive, or physically fit, as you peel back the layers of the onion you often learn they have amazing simple habits.

The comedian Jerry Seinfeld was known for a very common habit that is now referred to as the “Seinfeld Strategy.” In the simplest terms, after Jerry Seinfeld was famous, he was asked by another comic how to become successful and much to the surprise of the comic his response was to write jokes each and every day. At first glance this seems obvious but Jerry Seinfeld took it one step further and said that he tracked his joke writing on a calendar and each day he wrote jokes he put an “X” on the day and after a while he did not want to break the visual chain1. I often ask my clients what is one thing in their life they would like to do each and every day that they know would help improve their financial picture.

Shawn Achor, a Harvard psychologist and author of The Happiness Advantage, states, “research shows you can increase your levels of happiness by exercising, journaling, writing down three things you are grateful for, meditating or doing one random act of kindness.”2 One may ask what does being happy have to do with improving their overall financial life.

Money Cannot Buy Happiness

I often have seen people who have wealth but are the furthest thing from happy. While that can be true, when one is happy or exercises regularly, it leads to higher self-esteem, better mood, better focus and a 9% higher average salary.3 Once this concept is understood by a client, the next step is critical and that is to decide on something so small it is almost hard not to do.

James Clear, an author, exercise enthusiast and photographer, suggests stacking a new habit on top of something a client already does without even thinking about it.4 For example, each day a person could write three things they are grateful for, send a random email to someone they appreciate, or meditate for 30 seconds the moment they open their eyes for the day. From a financial perspective, simple math shows that if a recent college graduate starts savings $1/day or $30/month and invests it at 5%, at age 67 they will have accumulated $60,000.

These examples show that something so simple and attainable can have a positive long-term impact. Life is not about where one starts but where one ends up. It is important to focus on the habit first, and then each day, week or month it can be built upon. Like compound interest, which Albert Einstein often referred to as the eighth wonder of the world, it takes time to see the results. However, with some patience the results can truly be amazing.

The Long View

In addition to the importance of habits, the ability to have a long-term focus can be instrumental to staying on track with one’s goals. The word American is almost synonymous with instant gratification today and the thought of really looking and thinking long term is almost against how our society is evolving. Although technology has dramatically improved certain facets of our lives, it has challenged the ability to look beyond the moment. One of the major benefits of thinking long term is that it helps take the pressure off the day, the week or even the month.

Henry Ford said it best: Whether you think you can, or you think you can’t, you’re right

Thinking long term allows for the ability to have perspective and ultimately make decisions which align with one’s long-term goals and objectives.5 If you think about a person who is out of shape, most likely it did not happen overnight and thus they are not going to get back into shape overnight. They focus on going to the gym and eating healthier, and seven days later when they look the same in the mirror and have not lost 10 pounds they may begin to lose focus.

Instead, what if someone was looking to improve their health but was not allowed to step on a scale until they participated in a health program for 180 days? This impact may shift their focus onto how they feel and away from what they weigh. If someone is going to the gym a few times a week and eating better we know they will feel better and that will be the barometer they will measure. By the time they step on a scale the habits are so ingrained and they feel so good that the results at that point are almost irrelevant.

This same train of thought can be applied to one’s mental and financial health. Let’s start with the mental. Imagine someone commits to the positive habit of journaling, and after four consecutive days of journaling they say to themselves that they don’t feel any different. Instead of stopping, it is important for them to be patient and allow time to have the process improve their results.

Instead, if someone commits to eight minutes each morning, which begins with three minutes of meditation, three minutes of journaling, and sending a positive message to someone in their life via email, it seems it would be impossible three years from now for them not to feel better about themselves.

Out of debt… and rich too

Financially, clients often want to be out of debt tomorrow, become rich by next week and retire by age 45. It is important to set a plan that is automated to pay back debt and then forget about it.

Thinking about debt brings negative energy into most clients’ lives so by choosing automation they are able to know the plan will be implemented and won’t become distracted by the negative thoughts. Once the habits are in play they are able to increase what they pay each month, save a little more towards retirement or spend more time improving their overall mental health.

Now that we have discussed some solid habits that are simple to do on a day-to-day basis and the belief in a process which allows you to have blind faith about long-term results, we will complete the puzzle by discussing one’s ability to have a positive outlook.

Henry Ford said it best, “whether you think you can, or you think you can’t, you’re right.” The impact of mindset will be the final spoke in the wheel that will ultimately determine the progress a client will make in each facet of their life. When one thinks about how they look at challenges or opportunities in their life, there are two main responses.

Depending on the person, they could think, “I can’t do this,” or, “this is challenging but there has to be a way to make this work.” Professor Carol Dweck, author of Mindset, boils one’s mindset into either growth or fixed. Throughout her book she references many instances where individuals from everyday people to CEO’s of Fortune 500 companies either excel or underperform through challenging times due to the type of mindset they have.6

The reality for each individual is that they can and will improve. As referenced in Mindset, Benjamin Barber, an eminent sociologist, once said, “I don’t divide the world into the weak and strong, or the successes and failures… I divide the world into the learners and nonlearners.”6 Looking at life through this lens would drastically change how someone responds to challenges, adversity, or aspects of their life that they take for granted.

In summary, the commitment to better habits, the ability to focus long term and having a positive outlook with a growth mindset are strong contributors to success in all facets of life. There also appears to be a connection that shows that mental and physical fitness can result in success in many other areas of one’s life. By taking one idea, figuring out a way to add it to current habits, visualizing achievement and imagining the positive impact it will have, I have seen my clients achieve financial success and believe that everyone is capable of this achievement. Hopefully you now can truly say out loud to yourself, “I can do this.” ◊

 

Registered Representative/Securities and Investment Advisory Services offered through Signator Investors, Inc., Member FINRA, SIPC, a Registered Investment Advisor. 160 Gould Street, Needham Heights, MA 02494. 781.446.5000. Centinel Financial Group, LLC is not affiliated with Signator Investors, Inc. 501-20160414-285561
Sources
1. Clear, James, How to stop procrastinating on your goals by using the Seinfeld Strategy, http://jamesclear.com/stop-procrastinating-seinfeld-strategy
2. Achor, Shawn, The happiness advantage, 2010
3. DeYoe, Jonathan, Nerdwallet, Exercise for health, happiness & success, https://www.nerdwallet.com/blog/advisorvoices/exercise-health-happiness-success/
4. Clear, James, 3 simple ways to make exercise a habit, http://jamesclear.com/exercise-habit
5. SuperMoney, Yahoo Finance, 20 habits of financially successful people, http://finance.yahoo.com/news/20-habits-financially-successful-people-190815719.html
6. Dweck, Carol, Mindset: the new psychology of success, 2006