Recently I made a small change in my diet that had a big impact on my weight and overall health.  At breakfast every day I would eat a whole bagel with peanut butter or cream cheese.  The meal came to about 450 calories.

A few months ago I cut that portion in half, eliminating 225 calories from my diet every day without doing anything extra.  By adding in a mix of daily exercise to complement the reduction in calories I’ve managed to lose eight pounds in two months.

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The fact that it has become habit should ensure that I keep the weight off for good.

Small changes, big results

We all know about the latte factor and how our habits, even those small daily purchases, can have a profound impact on our savings.  We also know that something as simple as making and consuming your morning coffee at home can be a pain and so we’d rather spend 15 minutes and $1.80 in the Tim Hortons drive-thru to get our daily fix.

Years ago I figured out that automation and habit combine to produce powerful results.  Take our morning coffee routine.  My coffee maker has a programmable feature so I can make my coffee before I go to bed at night and have it freshly brewed and ready when I wake up in the morning.

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The simple habit of preparing my coffee in advance plus the automation of the delayed brewing feature shaves 15 minutes off my morning routine and likely saves me from spending $500 a year on coffee at Tim’s.

The same rules of combining habit and automation can apply to your savings and debt repayment plans.

Make it automatic

Imagine if, instead of having income tax, CPP, and EI automatically deducted off your paycheque each month, you were required to pay the government a lump sum at the end of the year.  How many of us would have the discipline to set aside enough to pay the amount in full and not have to borrow every year when that big tax bill came due?

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The government is smart and makes sure to pay itself first.  Why should it be any different when it comes to our personal savings habits?

By deducting $400 per month off your paycheque and putting into a balanced fund inside your TFSA that earns 6 percent a year, in 20 years you’ll end up with $185,000.

Hey, it’s not easy to find $400 in your monthly budget to allocate toward savings.  If you earn $40,000 per year, that’s 12 percent of your gross income.  But it’s a heck of a lot easier if it’s not there to spend in the first place.

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That’s the power of automatic deductions – studies show that you barely notice it’s gone and so you adjust your budget accordingly.

Final thoughts

One last note about habits and behaviour.  On average, it takes over two months before a new behaviour becomes automatic.

That may sound daunting, but when you commit to small incremental changes it can be easier to manage your expectations and embrace the process.

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