Part 2: How to Make Financial Resolutions Stick

How many times has January 1 come and you vow that this will be the year you get your finances in order? That this will be the year you get out of debt, boost your savings, or start investing?  Our intentions are pure, our will is strong, yet by the time the next January 1 rolls around, we find that our financial situation does not reflect the change we vowed to make.

“That’s because we don’t understand change,” says Sara Johnson, senior vice president of Research and Product Development at Pro-Change Behavior Systems, Inc. “Change is a process. The key to successfully changing behavior is knowing where you are in the change process and applying the right technique at the right time. We often get anxious and jump to action long before the environment is in place that will allow us to sustain the change,” she adds.

[Related: Becoming the Financial Role Model Your Child Needs]

Johnson works with James Prochaska, named as one of the five most influential authors in Psychology by the American Psychological Society. He mapped the ways in which behavior is changed. He helped identify the six stages people go through when we actually change a behavior, and the techniques we use to move them through. His work is used by countless organizations, academic institutions, and governments around the world. He is also author of the book Changing for Good.

Johnson shared with the mechanics of change and how we can apply them to financial behavior. What is the key to successful change when it comes to financial goals and financial behavior?
Johnson: People need to figure out how ready they are to achieve a goal and begin by identifying one objective and one outcome. When it comes to things like changing spending behavior, are they willing to set aside a certain amount of money each day? How ready are they to take action to make sure they are adequately insured or maxing out their 401(k). The key is in knowing what you are ready to do and doing just that. Let the change process happen, it’s natural. It’s important not to jump to action before you’re ready.

Can you take us through the six stages of behavioral change?
When you’re ‘not yet ready’ to change, you’re in a stage called Precontemplation. You’re not intending to change any time soon. You may not be aware that there is a behavior that needs to be changed.  You also may just feel like you’ve tried to change and failed.  You also don’t see the change as worth it relative to what you have to give up.

When you’re getting ready to change, you’re in the stage known as Contemplation. You’re intending to change some time in the next six months. You’re not sure if you can do it. You may see many obstacles but you do realize there are good reasons to change.

The next stage is called Preparation. You’re planning to start the new behavior in the next month.  You’re committed to the change.  You’re making a plan.

When you reach the Action stage of change, you’ve recently changed the behavior but it’s still challenging.  You may be tempted to go back to your old ways.

If you have been doing it, you’re in Maintenance. You’ve changed the behavior for more than six months.  It’s more of a new habit now.
(Continued on next page)