Making Small Adjustment to Your Finances Can Pay Off Big Time
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Why is New Year's a good time to reset your finances?
Here's your money briefing. I'm J.R. Whelan at The Wall Street Journal in New York. Saving more, making more, and getting out of debt. Figuring out your money is one of the top goals people set for the new year. But it's one thing to make a resolution and another to actually make a change.
When people actually write down a plan to meet a goal, it feels a little bit more formal, maybe a little bit more like a contract with yourself so that people are less likely. First of all, they're more likely to remember the fine points of their plan. And second of all, they're less likely to break that promise to themselves.
Wall Street Journal reporter Ann Tergesen spoke with motivational experts and behavioral economists who say there are a few simple steps to maximize the odds of success. That's coming up.
Many of our New Year's resolutions go right out the window not long after the start of the New Year. Converting good intentions into action and creating behavioral changes is harder than it seems.
What research explains why fresh-start dates boost financial motivation?
It takes repetition and being realistic about your abilities. And when it comes to your money, cracking the code to stick to best practices can mean a lot for your wallet. Let's bring in Wall Street Journal reporter Ann Tergesen for more on this. So, Anne, you know, we're not saying making resolutions at the New Year is a bad idea, but academic research says it's an ideal time, especially to take stock of your money and your finances and even do it on your birthday.
Yeah, so there is some very interesting academic research that looks at... you know, that issue of motivation. So when are we, you know, we like to sort of make promises that we're going to change things in our lives for the better. And so there are studies that have looked at keying those types of promises to yourself around sort of birthdays and New Year's in particular.
How can writing down a plan improve your chances of financial success?
And these are dates that represent sort of a fresh start where people kind of take stock of how things have been going. And they have a sense that, you know, this is the start of a new year. So I can begin a whole new, I can turn over a new leaf. I can begin, you know, to focus on a whole new me.
What simple automation tactics help you save more without willpower?
Whereas, you know, just saying I'm going to, you know, lose 10 pounds next Tuesday, maybe doesn't have quite the same resonance with people.
And whatever kind of goal you set, whether it's your health or whether it's your finances, it's important to give yourself small victories to enjoy along the way.
Right. So there's a difference between I mean, I think we're all familiar with this. You know, everybody makes sort of a lot of people make New Year's resolutions. And then, you know, a couple of weeks later, maybe we lose our momentum and we don't sort of carry them through. And over time, I think, you know, the repeated kind of failures to make good on resolutions can actually kind of take a toll on your self-confidence and your ability to do so. So I think it's important to take, you know, specific steps, not just to kind of promise yourself that I'm going to kind of revolutionize my approach to savings and spending or whatever your goal is, but to take specific steps to actually make it more likely that you're going to be able to carry out your goals.
And in terms of your finances, a good way to do that would be to automate your savings.
Yeah, so that's sort of advice 101 for people is when they make a promise to themselves, say you want to increase your savings rate by a couple percentage points, you should just automate it because that takes out the whole issue of willpower from the equation.
And by all means, write down your plans.
Well, it's an interesting thing that I've spoken to a number of behavioral scientists for this article. And one made the point that when people actually write down a plan to meet a goal, it feels a little bit more formal, maybe a little bit more like a contract with yourself so that people are less likely. First of all, they're more likely to remember the fine points of their plan. And second of all, they're less likely to break that promise to themselves.
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Chapters
7 chapters
1
Why is New Year's a good time to reset your finances?
0:05–1:08
2
What research explains why fresh-start dates boost financial motivation?
1:08–1:54
3
How can writing down a plan improve your chances of financial success?
1:54–2:16
4
What simple automation tactics help you save more without willpower?
2:16–4:09
5
How does 'mental contrasting' help set realistic retirement and savings goals?
4:09–5:08
6
What practical steps break big financial tasks into manageable actions?
5:08–6:11
7
When should you consider hiring a financial planner and how to start?
6:11–7:19
Speakers
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