I recently met with an employee who mentioned he was facing financial hardship and wanted to understand his options to withdraw money from his 401(k).

He unfortunately didn’t have enough in his "rainy day fund" to cover the expense and was considering tapping into his 401(k). While this option would help him cover the hardship, he would have incurred a 10 percent early withdrawal penalty and paid taxes. Plus, the money would no longer have been invested and growing for his retirement. 

April is Financial Literacy Month, an excellent time to consider your approach in this scenario and others regarding money. Will money control you or will you control your money? As much as I would love to encourage you to spend within your means, it’s important that you conquer the steps to learning how to do this while and overcoming self-control bias, including:

• A budget is critical. "If you fail to plan, you plan to fail” as Benjamin Franklin said. He was right! Without a plan, you are setting yourself up for failure. To do this, compile all of your inflows (income) and outflows (expenditures) into one place. Then, start separating out your non-discretionary (non-negotiables) and your discretionary spending. Finally, identify your strengths, weaknesses, and opportunities to find a path forward. 

• Develop a pattern of behavior for success. Now that you have a budget, then comes the hard part: sticking to it.  Develop a pattern of behavior to set yourself up for success by examining your lifestyle and see if you can identify behavioral patterns that are putting you in a position to fail. Maybe you scroll through social media a lot and have a lot of ads for your favorite items pop up that may cause you to impulse buy. Perhaps instead, you go on a walk or read a book to free up your mind. You may spend a lot of time with friends and tend to purchase unplanned food or shopping items. Make your friends your allies - be upfront with them that you are trying to manage your spending to help you avoid unnecessary purchases. When you head to the grocery store for your dreaded weekly shopping, think about bringing cash instead of a credit card to help avoid items that aren’t on your list. Having a fixed amount available to spend will help you to be more cautious about what you spend it on. 

• Find an accountability partner. You can hire one, like a financial counselor or planner, or identify someone who you trust and manages money well and ask them to hold you accountable. A good friend cares about your long-term success.

Avoiding self-control bias can be hard, but it does not have to be. Consider the action plan outlined above to help you on your path to being more financially fit this April. The actions of today can have a profound impact on the results of the future, and you may see results sooner than you think. The next time you find yourself surfing the web or window shopping with your friends, ask yourself what you would like to accomplish and keep perspective to help you make the best decision.   

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