The New Year represents a time for new beginnings, and many pledge to break the chains of bad habits and make the coming year the year to start achieving specific goals. Healthier financial habits are a great place to start.

For Vicki Bogan, associate professor of applied economics and policy and Geller Family Faculty Fellow in the Charles H. Dyson School of Applied Economics and Management, achieving healthy investing habits for households means developing a solid grasp of financial literacy, embracing diversification, fighting inertia and taking advantage of investment programs and plans offered by employers and governments.

Grasping financial literacy, embracing diversification

The rise of commission-free investing platforms over the past year, such as Robinhood, has reduced barriers to financial market access. In March, Bogan testified before the U.S. House of Representatives Committee on Financial Services about these new platforms and what research tells us about behavioral influences with regard to retail investing. In her testimony, Bogan warned about the ‘gamification’ of investing, which can cause individuals not to be able to recognize the real risks involved.

“Financial literacy when you’re accessing those platforms is key,” Bogan said in an interview, pointing to such platforms targeting younger people less likely to have investment experience. “When we see this precipitous decline in transaction costs through such platforms, financial literacy becomes even more important.”

Lower trade costs make it easier for users, but they may lack the requisite financial literacy to know what they should be doing.

“This is exacerbated by the information provided online and through these platforms, almost overloading users with information,” she said. “Being bombarded with so much data and material, it’s very difficult to figure out how to parse what information is good and what information is bad.”

Bogan suggests if people are new to participating in markets, they should dip their toes in and start small, keeping in mind that diversification of a portfolio is key compared with trading in individual stocks.

“You do not want to put all of your money in one or two specific stocks.  Investing in individual stocks is pretty risky,” Bogan said. “You want to think about diversification and starting to invest with mutual funds, which can give you broad exposure to the market.”

Overcoming inertia, leveraging employer/government plans

“It’s hard for people to feel the pain (or cost) of saving when the benefits of those choices are enjoyed in the future,” Bogan said. “When you think of retirement savings, it’s magnified because retirement is very far in the future.”

For example, in a recent Magnify Money survey, 17.5 million Americans leave ‘free’ retirement plan money on the table. More than 1 in 10 working Americans don’t contribute enough to their workplace retirement plan to get the full company match. Further, numerous academic studies have shown that most people don’t actively manage their retirement savings, making few changes to 401k allocations and contributions over their entire careers.

Inertia, or the status quo bias, is another big influence on retirement savings behavior. In essence, this reflects the facts that it is far easier for someone to do nothing than to act. Investing for one’s future is complicated, and people don’t know where to start, so they just simply put it off.

 “Overcoming that inertia, to just even sign up for your 401k plan, is important,” said Bogan, who points to tax advantages and employer contributions as significant bonuses to such company plans. “Many of these plans allow you to opt in and then employee involvement is limited as the fund is managed for you.”

According to Bogan, this is similar for investing in a child’s education through such programs as state-organized 529 plans.

The primary benefit of a 529 plan, Bogan said, is that it is a tax-advantaged account. Investing in the New York 529 Plan, for example, allows you to deduct your contribution (up to a certain amount) from your taxable income. This can generate a significant state income tax savings for households.

“Another significant benefit with 529 plans is that you can choose how your money is going to be allocated. Most plans have age-based options in which there is more risk taking in fund allocations when the child is young, and the funds are rebalanced into less riskier investments as the child approaches college age,” she said.

Bogan said automatic deposits for retirement plans and 529 plans also allow you to avoid status quo bias (or inertia). “These types of plans can be tailored to your preferences and requirements and then put on autopilot for you, with professionals managing it. That is a major benefit beyond the tax advantages the plans provide,” she says. “You can set it and forget it.”

Stephen D’Angelo is a writer and content strategist with the Cornell SC Johnson College of Business.