Reflection can be a useful tool when entering a new year and looking to build upon what you have already achieved towards your goal. Reflection can help identify present habits that are either aiding (desirable), or hindering (undesirable), you on your path to achieving your future goals.

For those undesirable habits, it’s important to understand how they have been formed and ways to effectively change them. On this point, in a previous article on New Year’s resolutions, we shared research-backed information* about habits, including how they are formed and, if necessary, changed.

At the time, we shared this information because when New Year’s resolutions often tend to fail, more often than not, there can be an undesirable habit or two at play. As a refresher, here are six key takeaways from that article:

1. A habit, whether desirable or undesirable, can form as you pursue a goal in your daily life.
2. When you repeatedly perform a behaviour in a context, a link between these two forms in your memory. As the link strengthens, your intention and goal to perform the behaviour is replaced by a habitual response.
3. An internal or external ‘context cue’ can automatically draw your attention. Upon your perception of the context cue, a habitual response can be automatically initiated.
4. The persistence—and resistance to change—of a habit can depend on the strength of the link between a behaviour and a context that has been formed in your memory.
5. You can stop a habitual response from being initiated by inhibiting it or by changing your environment. The latter is more effective long-term but needs reengineering foresight due to the disruption of context cues.
6. Life-course changes can be effective in disrupting context cues and creating a window of opportunity to make decisions and implement new intentions and goals (and form new desirable habits).

In light of the above, here are 16 key desirable financial habits worth considering for 2022. Please note: Some habits are combined with, or encapsulated in, simple yet effective daily use-case financial rules of thumb.

1. Don’t overleverage yourself with debt.
2. Save for retirement sooner rather than later.
3. Understand your options for saving and investing.
4. Spend less than you earn (ie live within or below your means).
5. Measure financial success by your own standards instead of others’.
6. Review your financial situation, goals, and objectives at least annually.
7. Spend your money on needs before wants, and limit your splurge purchases.
8. Compare features, costs, and benefits to make an informed purchase decision.
9. Protect yourself, your loved ones, and your possessions with appropriate insurances.
10. Think about the positive and negative effects of today’s purchases on future financial goals.
11. Put aside extra money to pay off your mortgage, reduce other debt, and build long-term wealth.
12. If you’re not willing to pay cash for it, don’t buy it on credit (including buy now, pay later services).
13. Regularly invest in your financial literacy, and seek professional advice when and where appropriate.
14. Create an appropriate ‘needs, wants, and savings’ budget and monitor adherence by tracking your spending.
15. Pay bills on time, consider automating this (if appropriate)—automation may be appropriate elsewhere.
16. Build an emergency buffer (equal to at least 3 months of living expenses) to weather a financial emergency.

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*Carden, L., and Wood, W. (2018). Habit formation and change. Current Opinion in Behavioral Sciences, 20.