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Habits Behavior and Achievement

July 01, 2016

Behavior combined with discipline are fundamental to achieving a better life, including preparing a sound financial foundation for your retirement. This includes achieving the American Dream, however you wish it to take shape.  To begin with lets’ talk about ways you can develop better habits. 

Six Steps to Better Habits 

Chances are, you made a number of firm resolutions at the start of the year—and, if you’re normal, you failed to live up to several of them.  Is there a better way to stick to your sincere resolutions to get more exercise, eat better, floss more often and lose weight? 

A recent report suggests that there are actually six ways to improve your follow-through on self-improvement. 

The first is to start with a keystone habit, like exercise.  A keystone habit is one that improves a variety of other habits by helping you see yourself in a different way.  If you exercise, you tend to feel better about your body, eat more healthfully and procrastinate less often—a three-for-one deal. 

Second, start small.  If you want to floss more often, start by flossing just one tooth.  Yes, that sounds silly, but eventually, if you start lazily, you’ll get in the habit of having the floss in your hand once or twice a day, and you’ll address those other teeth in your mouth.  If you start off too ambitiously, meanwhile, the habit is never formed in the first place. 

Third: make a plan for how you’re going to follow through on the resolution.  One interesting study (Published in American Journal of Preventive Medicine) showed a group of students photos of what could happen to them if they failed to get a preventive tetanus shot.  Another group were given a map to the clinic and were helped to put an appointment on their calendar.  Guess which group showed up to get the shot?  28% of the students who left with a plan followed through on it, while only 3% of those who saw the awful consequences of contracting tetanus got the shot.  Writing down your goals, and putting your times to exercise on your calendar, can improve your odds of keeping your resolution. 

Fourth: bribe yourself.  Pick something you want, and give it to yourself only if you follow through on your resolution.  One study participant wanted to listen to the audio book of the Hunger Games, so she only allowed herself to listen to it at the gym.  Suddenly, she was looking forward to sitting on the exercise bike. 

Fifth: remind yourself.  You can set the alarm app on your phone to encourage you to save money, reduce smoking or go to the gym.  You can make a checklist of the things you want to do every day. 

Finally: Get your friends to help you keep your promises to yourself.  Your support network can hold you accountable for stopping smoking or spending more time at the gym.  They might even agree to accompany you.

And if you fail to follow through despite all these tips?  The research says that you should follow the advice of the great Stoic philosopher Marcus Aurelius: forgive yourself and try again. 

Basic Principals to Achieve the American Dream 

In his 1931 book, author James Truslow Adams, The Epic of America, the American dream is described as: 

“That dream of a land in which should be better and richer and fuller for everyone, with opportunity for each according to ability or achievement…It is not a dream of motor cars and high wages merely, but a dream of social order in which each man and each woman shall be able to attain to the fullest stature of which they are innately capable, and be recognized by others for what they are, regardless of the fortuitous circumstances of birth or position.” 

Everyone’s path to reach the American dream is different.  Yet there’s always some common ground---namely, that through hard work we hope to retire comfortably and on your own terms. 

Five Basic Principles to Help You Seek to Achieve the American Dream 

Unfortunately, as we’ve seen from a number of recent polls, Americans aren’t necessarily on solid footing.  U.S. personal savings rates are pretty poor, debt levels middle-class families are high, and distrust of the stock market still exists following the credit bubble and mortgage crises that precipitated the Great Recession.  Now more ever the American dream appears to be on the brink of disappearing. 

But it doesn’t have to. 

If you follow five basic principles, you can achieve, you can achieve the American Dream of a comfortable retirement for you and your family. 

  1. Get a degree 

It’s perhaps one of the oldest debates: “Should I go to college?”  Not going to college means saving potentially five or six-digits in student loan costs, but not getting a degree could constrain your ability to move up the socioeconomic ladder.  As Pew Research showed in a study two years ago, not going to college could have dire consequences on your ability to comfortably retire. 

Based upon Pew’s analysis, which looked at the median salaries of millennials ages 25 to 32 who were working full-time, those with high school degrees were earning $28,000 annually.  By comparison, millennials who obtained bachelor’s degrees or higher were netting $45,500 per year.  Both of these figures are in 2012 dollars.  This $17,500 difference could be huge over the course of four decades: Not only can this income difference be invested and compounded many time over, but presumably the college graduate will have greater opportunities to move up the economic rungs to collect an even higher wage. 

If you want to get your retirement savings off on the right foot, you need to seriously getting a college degree. 

  1. Save as much as you can 

Secondly, Americans need to kick their loose spending habits and learn to live on a budget.  A Gallup poll conducted in 2013 showed that only around a third (32%) of U.S. households kept detailed monthly budgets.  Not keeping a budget makes it very difficult for you to understand your cash flow, and if you don’t understand how money is entering and leaving your checking account, you’ll have a tough time optimally saving for retirement and funding your emergency account. 

Thankfully, the solution is easier than ever these days: budgeting software.  There are countless choices when it comes to budgeting software, and all programs handle the grunt work of doing math.  Many can even help you formulate a strategy to save money.  But budgeting also takes resolve on your end.  This is where some keen budgeting tips (building better habits) can come in handy.  Make sure you’re doing what you can to get everyone  in your household involved so you all remain accountable for your spending habits, and consider having what you save automatically deposited into a savings account on a weekly, biweekly or monthly basis to reduce the urge to spend. 

  1. Invest for the long-term 

The next step would be to take money that you saved, in excess of your emergency reserve, and look to invest it for the long-term. 

Although your investments could take many forms, I’d strongly suggest considering putting at least some of you money to work in the stock market.  I know what you might be thinking, and yes, the stock market does have its pullbacks from time to time.  Since 2000, we’ve witnessed two separate 50% plus drops in the broad based S&P 500 Index.  However, we’ve also witnessed all 35 stock market corrections of 10% or greater in the S&P500 Index completely erased by bull market rallies since 1950.  Over the long term, as reported by the S&P 500 Index, stock market valuation has an average rate of 7% annually, including dividend reinvestment.  This means you could double your money almost once every decade, assuming this average holds true. However past performance has no guarantee of future results. 

Additionally, you’ll want to focus keeping your investments in a balanced and diversified portfolio, because trying to time your buying and selling activity is almost assuredly not going to out well.  A study by J.P. Morgan Asset Management, using S&P 500 data for Lipper, between December 31 1993 and December 31, 2013, shows that investors who stayed in the market throughout the entirety of both huge 50% plus drops still gained 480% over the 20-year period.  By comparison, if you missed the 10 best trading days, your return dipped to just 191%.  If you missed a little more than 30 of the best trading days over this approximate 5,000 trading-day period, your return would fall into the negative.  That’s the power of long-term investing and compounding in action. 

  1. Be tax-savy 

The fourth thing you’ll want to do is aim to give back as little of your wages and capital gains as possible to the federal and state government.  There’s no way of getting around completely paying taxes (so don’t try it), but there are things you can do to reduce your tax liability. 

One of the smartest moves you can make is contributing to a Roth IRA.   (The Roth IRA offers tax deferral on any earnings in the account.  Withdrawals from the account may be tax free, as long as they are considered qualified.  Limitations and restrictions may apply. Withdrawals prior to age 50 ½ or prior to the account being opened for 5 years, whichever is later, may result in a10% IRS penalty tax.  Future tax laws can change at any time and may impact the benefits of Roth IRAs.)  Although there are numerous investment tools we can choose from, the Roth IRA is arguably the best, because investment gains within a Roth are completely tax-free as long as no unqualified withdrawals are made.  In addition, there are no age contribution limits with a Roth IRA (unlike a Traditional IRA), meaning you can keep contributing well beyond age 70.  There are also no minimum distribution requirements.  This point is important if you want to allow your money to continue growing, or aim to leave a significant inheritance to your family. 

Also, take into consideration where you’re living, as well as how you plan to withdraw your money during retirement.  All 50 states seemingly have different tax laws, with some states being far more tax-friendly than others.  If you choose to live and retire in a tax-friendly state, you could wind up saving a lot of money over the course of your lifetime during your golden years.  Consideration of where you choose to live also needs to consider that location of family and friends. 

Having a withdrawal plan in place prior to retirement means that you’ll have laid out exactly how much money you’ll need each year when you retire.  Having a plan in place can potentially keep you from withdrawing too much money from say a 401(k) or IRA investment account each year, and having the withdrawal bump you into a higher tax bracket. 

Sequence of withdrawals from different accounts as well as small adjustment can potentially save you big bucks come tax time. 

  1. Understand how to use debt 

Finally it’s important that you maintain discipline when it comes to utilizing debt, as high levels of debt can cripple your ability to save, and can crush seniors budgets during retirement. 

What you’ll want to keep in mind is that there are different kinds of debt, and they’re not all bad.  Student loan debt can be a good thing since it allows you to get a better paying job, but what you may want to consider is not going to Stanford or Harvard.  In-state colleges can often be cheaper than the most prestigious colleges, and may even offer a better return on your investment. 

What you’d want to avoid is racking up debt on credit cards because you wanted the outfit or gadgets for your home.  Since nearly all vehicles depreciate in value over time. Auto loans are another notorious source of bad debt you should try to minimize. 

Long story short, the better you manage your debt, the less likely it is to keep you from being able to sock away a food chuck of your income for both your emergency fund and for your retirement. 


The American dream has, and always will require hard work, so be financially proactive and go claim your piece of the pie. 

As both Financial Planners and Financial Advisors, our team works with clients providing life planning, coaching, planning and advising to help our clients work towards their American dream. 

#84 – Habit, Behavior and Achievement 

Information in this report has been compiled from business,, S& P 500 Index, The Epic of America by: James Truslow Adams, PEW Research, Gallup Poll, JP Morgan Asset Management. Lipper,and The Motley Fool. 

The opinions voiced in this material are general information only and are not intended to provide specific advisor recommendations for any individual.  To determine which investment(s) may be appropriate for you consult your financial advisor prior to investing.  All performance reference is historical and is not a guarantee of the future results.  All indices are unmanaged and may not be invested in directly.  Advisory services offered through Strategic Wealth Advisory Group, Inc. (SWAG), a Registered Investment Advisor. 

Investing involves risk including potential loss of principal.  Economic forecasts set forth the presentation may not develop as predicted. 

No strategy can ensure success of protection against loss.  There is not a guarantee that a diversified portfolio will enhance overall returns or out perform a non-diversified portfolio.  Diversification does not protect against market risk. (#84)

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