Ask a Trainer: How Should I Reward Myself For Hitting My Financial Milestones?
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Great question, Financial Friend!
At the heart of your question is the concept of habit formation. Reward mechanisms can be a big motivator when we are working on creating new habits.
In some cases we work the rewards into the formation of a new habit so we can get a little boost each time we work on our goals. For instance, I used to meet up with my friend to work out in the mornings, and seeing someone who I loved spending time with was the reward that got me out the door at 7am (and it was also great for accountability). For financial goals, some couples I work with make their money date a time where they get some nice wine or takeout so that aligning on money stuff can be part of a nice time that both people happily anticipate.
Other times we have a timeline for a goal, and we can plan to celebrate it, and it keeps us marching forward. Knowing your credit card payoff date, for example, allows us to keep our eyes on the prize and plan for how we’ll treat ourselves when we get there.
The one thing to keep in mind is that there’s a lot of research that shows the most effective reward mechanisms keep you moving towards your next goal and not away from it. That means if exercising more is your goal, then you shouldn’t reward yourself for 10 straight days of 10,000 steps with a day on the couch. If weight loss is your goal, you shouldn’t celebrate a milestone with something that deviates from your healthy eating habits. In terms of money, that means you should choose a reward that doesn’t result in blowing your budget.
Instead, think about something you want that is in alignment with keeping your progress going. If you have met a fitness goal, maybe buy yourself that kettle ball you want. If healthy eating is your goal, spring for a cold pressed juice at your favorite cafe.
When figuring out how to celebrate your financial wins, take a look at your financial plan and the goals that drive it. One of my clients, for instance, REALLY wanted to start investing, but his debt was dragging him down. Since it was unlikely that his earnings on his investments would make him more money than his credit card interest was costing him, we decided that once he paid off his Discover card balance, he could repurpose that payment to fund his M1 Finance account. For another client, we decided that every time she passed up a $5 coffee in the morning she could make a $5 contribution to her Public account. For others, maybe a successful couple of months on an all cash diet means they can apply for a travel rewards credit card that they have learned to use responsibly.
These types of rewards are effective because they keep you on track and show you that what you’re doing is working. It goes along with what one of our favorite podcasters, Paula Pant says: you can afford anything, but you can’t afford everything. Living an intentional life is about deciding what trade offs help you live the life you want.
Does this mean that reaching your goals can never mean having an indulgent dinner out? Of course not, but it should be a part of your financial plan. Maybe once you make that last student loan payment or get a great deal on refinancing, you can reallocate that money for date nights or increase your variable spending budget to accommodate another dinner out every month. But the point is, it’s still part of sticking to the plan.