Studies have shown that approximately 80% of New Year’s resolutions fail. While we have the best intentions, we’ve all been there, and most of us know how easily our immediate needs and desires can side-track us from reaching longer term goals – whether it’s getting fit, eating, healthy or saving money.
According to Behavioural Economist Erik Vermeulen and Sanlam’s Busisiwe Maswanganyi the best way to set ourselves up for success, is to establish a specific long-term goal with built-in intermediate success measures to make our goal more achievable, and more rewarding.
“Some of us may remember a role model in our childhood who modelled good money habits. I remember my grandmother putting money aside for priorities such as rent, food and transport. It was interesting to see how she prioritised saving, because when unexpected expenses emerged, she could tap into her well-hidden savings chest. This taught me to start saving with what I have available today and to prepare for tomorrow. I still apply this grounding lesson by challenging myself to prioritise saving for the future,” Maswanganyi remarks.
When setting a savings goal, Vermeulen suggests keeping the following criteria in mind to help focus your efforts and avoid getting side-tracked by impulsive spending. This is a good framework to work through with your client and to guide your financial planning discussion and assessment.
| 1. | Your goal must create SECURITY Since loss-aversion is a powerful behavioural driver, goals that promote a sense of security are powerful motivators. |
| 2. | Your goal must be MEASURABLE This can be done by deciding on the precise amount of money you want to save, a timeframe to do this as well as short/ medium-term milestones. This will help you measure your progress. |
| 3. | Your goal must have AUTONOMY The more control we feel we have over the outcome of an action, the more likely we are to continue taking the action. |
| 4. | Your goal must be RELEVANT Make it relevant and make it personal. If you are saving for something that is not important to you, you will probably lose interest very quickly. |
| 5. | Your goal must be EXCITING Keep yourself motivated by creating excitement in both the processes of saving and its outcome. This helps to address the mind’s seeking system and trigger the dopamine release which is a key hormone in regulating joyful behaviours. |
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