How do I form an investing habit?
Not long ago, we talked about investing little by little compared to investing lump sums. We reckon the first option is better, for a variety of reasons. But, that’s easier said than done! Investing small amounts every now and then, like anything you do regularly, is a habit.
In order to invest regularly, you need to make sure your investing is a long-term, ongoing habit.
Habits are funny things because once they’re bedded in, they’re really easy to keep doing. Brushing your teeth, making your bed, locking your front door—these are all things that most of us don’t think twice about. Investing can be just as easy to commit to, once you get through the beginning stages. Here are some tips to help you do that.
Start small, then build
This is so important for habit forming. When you’re just getting started with your habit building, it’s more about getting the routines and behaviour sorted, and less about making a big impact. Crawl, walk, then run (if you will).
Don’t feel like you need to be investing hundreds of dollars a week when you first start building an investment habit. Start really small—even $5 a week. Get used to the ritual of having the money go out of your bank account, logging into Sharesies, and buying shares. That way, it never feels too painful, so it’s easier to stick to the underlying behaviours. You can build that amount as you feel comfortable.
Change the way you think about money
You can take a bit more of the pain out of this by changing the way you think about money. It’s easy to think of money in terms of numbers—$5, $10, $50, and so on. But really, money is just shorthand for things you can buy. $5 is a coffee from a cafe, with maybe a little left over. $10 is a craft beer in a bar. $50 is a good chunk of your groceries.
When you think about money this way, it becomes a bit easier to part with some of it in the short term. After all, if you use $10 today (i.e. one craft beer), and it becomes $50 a few decades in the future (i.e. a chunk of groceries), then that’s a pretty good deal!
Keep it consistent
One major thing about a habit is that it’s the same every time you do it. You don’t lock your door a different way every day, and you probably cook dinner at around the same time every day. You should follow this lead when you’re starting an investment habit—keep as many things consistent as possible. The amount you invest, the day you invest, even the time you log in to make your purchases—the more consistent you can make your habit, the easier it will be to bed it in forever.
This also ties really well to dollar-cost averaging. Dollar-cost averaging is when you invest the same amount on a regular basis, regardless of what the price is—it’s a great way to invest consistently and protect yourself from the ups and downs of the share market!
Get a squad
Most things are easier when you’re part of a team, and making an investment habit is no exception. When we did some research earlier this year, we found that 63% of people who own shares are comfortable talking about money with friends and family, compared to only half of people who don’t own shares. This may mean that talking to people about your investing experience may make it easier to invest.
There’s also the more straightforward reasons: if you’re checking in with an “investment buddy”, you’ll feel a bit more obligated to meet your regular goals. Otherwise, you have to confess to someone that you didn’t get there—stink!
So get a buddy or two, and start your investing habit together. You’ll have someone to compare notes with, maybe have some friendly competition with, and you’ll hold each other accountable. Not bad!
Put your other habits to work
You probably already have lots of other habits, both good and bad. One way to help make investing an ongoing habit is to build on top of existing ones. For example, if you get paid once a fortnight, you could set up an automatic payment to transfer some money to Sharesies that day, then set up an auto-invest order to go out the next day! That way, you’ll never forget, because the whole process will happen in the background!
Be kind to yourself
You’re going to slip up here and there. You might forget to transfer money, or you might raid your Sharesies account to buy something nice. If (when) you do this, don’t throw in the towel! Life is busy and everyone misses their goals now and then. It’s much better to slip up once, then get back into your habit, than it is to slip up once, then give up forever.
Start today!
So now that you’ve got some good tips, it’s time to get started! Let us know how you go, and if you have any great habit-forming tips!
Ok, now for the legal bit
Investing involves risk. You aren’t guaranteed to make money, and you might lose the money you start with. We don’t provide personalised advice or recommendations. Any information we provide is general only and current at the time written. You should consider seeking independent legal, financial, taxation or other advice when considering whether an investment is appropriate for your objectives, financial situation or needs.
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