Are your habits helping or hindering you from achieving your financial goals? We are nearing the end of the first quarter and its time to check on whether you’ve made progress on your New Year’s resolutions. One of the most popular New Year’s resolutions is to get financially fit. You know, save more and/or spend less.
Resolution setting is important to establish your intention. But even more important is to have habits that support the resolution or intention.
A recent article in the Washington Post about habits sheds some light on how to form new ones. The author identifies five myths about habits and provides her countervailing evidence:
– A lack of will power is to blame for bad habits – its routines that matter,
– Apps can change behavior – no evidence they help,
– It takes 21 days to form a new habit – often takes longer for more substantive changes,
– Best way to change a habit is to set realistic goals – nope change the environment first,
– Learning about the benefits of new habits changes our behavior – nope it’s the doing that matters.
The common theme that runs through each myth is that you have to establish a new routine to make the habit stick. One of the easiest ways to establish a new routine is to change the stimuli that makes you do the thing that you want to change. In other words, change the environment. Of course, that’s the hard part. Examining what makes you do what you do.
Self-examination brings ups memories of Socrates from my sophomore philosophy course – “an unexamined is a life not worth living.” Of course he was getting at the fact that as human beings we had the capacity to transcend instinct and desire and to make conscious, ethical choices. But the point is well taken here.
Indeed Suze Orman’s first step to financial freedom is to identify the “money memory” from your childhood that continues to influence your good or bad habits. (Please don’t tell anyone I have read Suze…).
What is so interesting about the five habit myths is how common these myths are applied by to financial goals. In particular, the common wisdom about how to spend less and save more. “Its your lack of willpower that makes you overspend.” And so on.
Part two of this blog will examine some of the reasons for over-spending and under-saving. And, more important, how you can change your habits accordingly to help meet your New Year’s goals.