Four Steps That Can Improve Any Situation

Question of the week

Four Steps That Can Improve Any Situation

As most of you know, I was visiting family earlier this month. I got to see my oldest niece, who I hadn’t seen in almost three years, and meet my youngest niece, who was just born. They are the cutest human beings on the planet.

My oldest niece is four and a half. As the daughter of a British mom and an American dad who lives in Germany, she speaks English, German and French. It’s incredible to see such a tiny creature switching in and out of three different languages.

My brother has lived in Germany for over a decade, but it’s my little niece who motivated me to start learning the language finally. It’s harder for me than for her and even harder for me at 42 than it would have been in high school. The fact that I have other priorities — like running a business and being an adult — just makes it more complicated.

One of my clients pointed out that her difficulty in learning new financial habits was similar to my difficulty learning German. I loved this analogy because it puts my planning approach in perspective, but it demonstrates how, fundamentally, learning new things and creating change in your life is the same. Today, I’ll explore those fundamentals. We’ll look at how you can apply them to your finances, learn a new language, or do whatever else you want to accomplish.

 

Step 1: Start with your Why

Starting with your Why keeps you motivated when times get tough. Most of us start a new task with excitement and enthusiasm. But at some point, this new goal gets in the way of our old routines. It starts to feel more like a burden than something you want to do. I experience this most acutely when I begin my German homework at 11:00 pm the night before class. It helps if I remember why. It’ll help me talk to one of my favorite little people.

Similarly, when I do financial planning with a new client, we begin by exploring their values about money and what they want to accomplish. Then, we use that information as a lens for the decisions we need to make in the future.

We don’t stop with superficial goals. Instead, we dig deep into questions around the legacy they want to leave, how they want to spend their time versus how they spend it, and any regrets they would have if their time was cut short.

So I hear things like, “We want to pass good financial habits and knowledge to our children.” Or “I want to finally stop being afraid of my money and use it in a way that serves me.” The Why should connect with a more profound feeling that motivates you for change. For example, with my German, I want to communicate with my niece in multiples ways, so she knows how much I love her.

As a result, the first step to creating your change is to dig deep into your why. What drives you to want to make this change? And even when you get to that point, dig a little deeper. Lastly, share that Why with someone else — a spouse, family member, friend —  someone that can help keep you moving towards this goal.

 

Step 2: Figure out where you are

When you look at a local map, you start by finding the big “You are here” arrow. Otherwise, all the detail in the world won’t get you to Old Navy.

It’s the same with financial planning. You’ll never get anywhere if you don’t face up to where you are right now. Don’t worry. There’s no judgment. It’s just a starting point so you can realize how far you’ve come when you eventually look back.

My second client meeting focuses on organizing my clients’ current resources. It’s a way of assessing where they are now to capture their progress down the road. In concrete terms, this means creating a net worth statement and cash flow summary. Whether positive or negative, we focus on increasing their net worth by optimizing their cash flow. Being able to see positive change in these situations keeps them motivated for future change.

Seeing steps to progress has also been helpful with my German. I started the class knowing three words: “nein,” “ja,” “danke.” It was frustrating being limited to approximately the same vocabulary as a two-year-old, but it was a start. Now I can at least start a discussion with my brother and wish him a happy birthday. That’s progress that feels good.

So, next, measure your starting point. Whatever method you choose to use, use the same metric periodically for an accurate comparison. Don’t measure it every day. Try once a month or once a quarter. Use a time frame that allows you to keep connected with your goal but won’t make you crazy.

 

Step 3: Create your system for getting where you want to be

As important as the first two steps are, this one might be the most critical. James Clear wrote a blog post and an even more detailed book on our inability to reach our goals. He says our problems stem from focusing on the destination, rather the systems that lead you to achieve that goal: “Goals are about the results you want to achieve. Systems are about the processes that lead to those results.”

If we can focus on our habits that get us even 1% closer to our goal each day, the tiny decisions will have a compounding effect. “Good habits make time your ally,” he says. “Bad habits make time your enemy.”

The details of your habit will depend on your unique situation and goals, but Clear suggests starting with:

  1. Decide the type of person you want to be.
  2. Prove it to yourself with small wins.

Ultimately you want this form of intrinsic motivation to become a part of your identity: “I am a person who speaks German.” Rather than “I am the type of person that wants to speak German.” This switch goes back to the compounding effect; we change our identity bit by bit. As Clear put it, “Every action is a vote for the person you want to become.”

This third step involves creating a path from the starting point to the life they envision for my clients. Again, it’s the step-by-step process including specific approaches to where their money will go and when.

Who do you want to be? Take some time to write it down and then think of three tasks that type of person would do daily—focusing on doing those tasks each day and celebrating the compounding effects.

 

Step 4: Refine your system

Here’s something you may not want to hear when you set out to change your life: You probably won’t nail it the first time. So the last step involves monitoring your progress and making any necessary changes.

Are you sticking with your habits? Is there something that you still don’t quite get or understand? Where are you succeeding? Where do you still struggle?

 

Quote of the Week

“Good habits make time your ally. Bad habits make time your enemy.” – James Clear

 

Task of the Week

I hope that helps create a framework for helping you change your behaviors to meet your goals.

Here are a few last things to remember:

  1. You may not see results right away: Change is hard and often takes time. Clear says habits are like compound interest. The changes start small but build on each other. Sometimes it just takes time for the habits to develop and get to the tipping point you need. So continue to focus on the habits and be as patient as you can.
  2. Reward yourself: Don’t forget to celebrate your successes along the way. Find healthy and safe rewards to celebrate milestones for completing your habits. And remember that these rewards should reward you, not subtract from your progress (for example, buying a $300 watch to celebrate saving $250 by not eating out).
  3. Write down your progress: There’s something inherently beneficial about writing down your progress. Seeing your work on paper makes it more real and finite. So try it out.

I’d love to hear what you do and don’t want to change in your life. Message me below.  Oh, and viel glück — that’s good luck in German.