It’s no secret financial planning can help you grow wealth, reduce anxiety and gain confidence in your future.
But fear, impulsive spending habits, and a lack of knowledge and resources can all stand in the way.
Like dieting and exercising, many people have trouble managing their finances and, eventually, give up. This explains why the vast majority of Americans have nothing at all saved for retirement and cannot answer basic personal finance questions.
April is Financial Literacy Month, which makes it a great time to get motivated to work on your financial health. With the right plan and knowledge, you can make managing money a seamless part of your life. The hard part isn’t getting started but staying on track. Here’s how to discover what will keep you motivated toward a wealthier future.
Your Personal Financial Motivation
Everyone needs to budget. Everyone needs to save for retirement. But not everyone decides to get in financial shape for the same reasons.
One important thing to ask yourself when looking at your finances is this: What do I want this money to do for me?
Do you want to stop worrying about money? Is your goal to eliminate debt and boost your savings? Do you want to buy a bigger house or put a child through college?
Having a personal motivation is key. You see, research suggests there are two major types of motivation. Intrinsic motivation is when you are driven by personal satisfaction or accomplishment, such as living below your means or eating healthier. External motivation comes from an outside reward, demand or obligation, such as filing your taxes or obeying traffic laws.
What motivation works best depends on the desired result. For an individual with long-term goals, intrinsic motivations will improve your chance of success.
A Psychology Today article reviewed studies comparing external and intrinsic motivations. It found that external motivations, such as offering financial incentives to exercise, work well for short periods of time and for getting a greater number of people motivated to do something. But, when driven by intrinsic motivations, studies showed people performed at a higher level and for longer.
Having a specific personal financial motivation – your primary purpose for saving and investing – will help you stay on track when unexpected barriers arise. So, figure out what financial goal is most important to you. Then keep it in the back of your mind throughout your financial journey, and remind yourself what you’re working toward if you ever get the urge to quit.
Need help finding your motivation? Here are what studies have shown to be just a few of the many important reasons to manage your wealth.
- Financial planning leads to greater retirement savings. A behavioral finance study by Morningstar, in which several hundred U.S. adults were polled, found that people who planned ahead by a decade or more reported the highest retirement savings, regardless of age, income, education or gender.
- People in control of their finances are happier. Financial planning can help people reduce stress and feel more confident in their future. In the same study referenced above, respondents were also asked whether they feel they control their own financial destinies or feel they have very little power over them. Regardless of their wealth, the participants who felt in control of their finances said they were happier about their circumstances than those who said they feel powerless.
- It may improve your relationship. Money is the leading cause of stress in a relationship, according to a survey of people in relationships or partnerships by SunTrust Bank. Those who work together on their finances are more likely to live happily ever after. A North Carolina State University report on financial harmony notes that couples who operate as a team are happier than couples who perpetually disagree about finances.
Motivated to manage your wealth? We'll put together a personalized financial plan for whatever motivates you!