Breaking Bad Money Habits
We all get inspired by successful people and want to know the secret behind their success. Usually, behind success lies hard work, patience, knowledge, and the right habits. Yes, you read that right. Habits are essential in transforming your life, sometimes for the better and sometimes for the worse. Good habits lead to positive outcomes, and vice versa. Building new habits may seem easy, but you must focus and be consistent. Oftentimes, we have built bad money habits and don’t even realize it. To be financially successful, you must form new, healthy financial habits.
Why do we form habits? Your mind creates a habit to save you time and effort. A habit is a way of behaving that you repeat so often that it no longer requires your mind to work consciously. This means that to break a bad financial habit and create a positive one that will last, you must bring your current habit into consciousness.
Bad Money Habits Bring Pleasure:
The hard part is that your habit or routine brings you joy. Many bad money habits do bring pleasure. For example, living beyond your means (a luxury car, a big house), shopping, and always buying lunch during the workweek. All these things bring pleasure to an individual. Read, Five Bad Money Habits, to learn about some of the most common unhealthy money habits.
Now, keep in mind that habits can be good or bad. If you have paid off all your debts, have healthy emergency savings, and have your retirement savings intact, and there is extra money still in the budget, then continue to get that coffee daily.
However, if at the end of the month you get a sinking feeling in your gut when you see your credit card statement and realize how much you’ve spent again. Maybe you even told yourself you’d cut back last month. Well, it is time you learned to form a new lasting habit.
Tips and Tricks to Breaking Bad Financial Habits:
If you are worried about your finances and want to create new healthy money habits with a fantastic payoff, try the following tips.
1. Understand the Habit Loop:
The habit loop has three parts: cue, routine, and reward. To understand your habits, identify the loop. For instance, every day, going to the office, you leave your house, go to a cafe, buy a coffee, drink it while chatting with your friend working there, and then go to the office. One day you realize your habit and the cost of your habit. This scenario is a habit loop.
To identify the components of the habit loop, you need to ask yourself what makes you go there and buy coffee, what are the cues that trigger this behavior, and what pleasure do you get in return? Identifying the loop components will help you create a new habit by breaking the older one.
It may not seem like a big deal to spend $3 daily for a coffee; you’ve got a steady, good-paying job after all, and work hard for your money. However, what is the total cost over those six months, and how can your money work harder for you?
Avoid Spending Triggers:
You may know about some of the places that make you spend more. These places may include your favorite food cafe, jewelry shop, clothing store, etc. Try to avoid those places. It will help you avoid spending when you don’t need to. For example, if you want to lose weight, it doesn’t help you to keep your food pantry stocked with junk food. As soon as you open that pantry, you have a trigger point. This holds true with money habits. In return, you can set up a good trigger or the right environment.
Here’s another example of using a good trigger: you are waiting in line somewhere, and you see someone wearing those new AirPod headphones. You think you could use a pair yourself, so you pull out your phone to look up the price. Instead of seeing your browser, you have put that expense-tracking app front and center on your phone. That would be a healthy reminder and trigger. Another healthy trigger is printing out your financial goals and sticking them somewhere you will see them often, maybe by your desk, and when a coworker asks you to lunch, you have a reminder of your bigger goals.
Practice Gratitude:
You may be worried about saving and your spending sprees, but practicing gratitude enables you to be aware of your earnings by reminding you how blessed you are to have things that many people desire, or you realize you truly have all the necessities that you need. Thus, gratitude prevents you from unnecessary spending. This mindfulness exercise not only can help you develop better money habits, but it can also help you become happier. The best option is to express your gratitude for one possession you come into contact with daily. If you can express it verbally to a partner, friend, family member, or coworker, the gratitude you feel has a better effect.
Substitute a Bad Financial Habit for a Good One:
It is better to replace one habit with another rather than trying to suppress your thoughts. For instance, if online shopping is your bad financial habit and you typically do it when you get home from work while watching tv, then do this. As a substitute, when you get home and are watching TV, look at your budget or bank statements on your laptop. As well, you don’t need to try to suppress your thoughts of wanting to look for new skis or clothes. By trying to suppress your thoughts by telling yourself not to shop online today, your brain is still hearing those words. Instead, you need to redirect those thoughts to a more positive behavior.
Balance your Habits to Avoid Money Scarcity Mindset:
Don’t be overly strict; make some room for balance. Research shows that you will overspend when you view things through a scarcity lens rather than an abundance lens. This has been shown to be a factor that keeps people from rising out of poverty. However, it impacts all economic classes and varying habits.
The scarcity mindset creates an unconscious panic. When our mind is spending energy not in the right way, we unconsciously lose willpower and discipline. This stems from survival instincts. In a scarcity mindset, when money comes in, you feel the need to spend it immediately.
In order to form a healthy new financial habit, don’t completely cut the bad habit out. You might create a scarcity mindset if you do. Instead, limit it. Set aside a small amount of money each month for that habit. For example, maybe that small amount of money allows you to buy a few cups of coffee throughout the month instead of daily. That way, you will be able to avoid the scarcity mindset.
There are many other techniques you can use to avoid the scarcity mindset. Check out this article.
Conclusion. It Takes Time to Create a Sustaining Habit:
Building new habits is not impossible, but it requires effort and patience. Remember the 20/90 rule for any habit, whether financial or otherwise. Create a goal and stick to it for 20 days. It will become a habit after three weeks. Once established, continue it for 90 days to make it part of your lifestyle. Breaking bad money habits is up to you, and you need to make the first step, but you don’t have to do it alone. A financial coach, just like a personal trainer, can work with you to establish and help you stay accountable to your new financial habits. Sign up for a discovery session with Colorado’s best financial coaches today.