The Nudge Effect

Forming healthy habits is important! These habits are generally centered around the foods we consume and our physical wellbeing. A holistic approach should also include healthy financial habits and this can be achieved by restructuring our thinking to accommodate our desired financial outcomes.

A good way of doing of this is by setting up a nudge action. Say you want to save for retirement for example- you can set the saving parameters of how much and how often you'll move funds from your paycheck to your 401k at initial setup. It will run like a well oiled machine in the background without you having to put the time and energy into it every pay cycle. If extra savings are desired, automate the sequence to increase by a certain percentage on an annual basis. The positive reinforcement happens when you see the growth on your monthly or annual statement.

The Take Way:

1. This type of strategy can be done when investing (Dollar Cost Averaging) your broker should be able to set it up for you. You save on average during periods of high volatility and great when it's a long term saving goal (saving for college).

2. When saving for big purchases and vacations, set it up with your bank or use an app like stash.