This is an ongoing series where you ask and I answer! If you have a money question, please fill out this form.
Here we go!
Thanks Lily for asking today’s question:
Hi Sarah, I’m really bad at developing better money habits and making them stick. I want results right away, then I just get so impatient and frustrated and I just want to give up. Do you have any suggestions for me?
There are things that I use on a daily basis to reassess my habits all the time. It sounds to me like you know that having a really good solid foundation by having better money habits is really what’s going to get you on your way to a better financial future. Good for you!
I have three tips for you:
Figure Out Your ‘Why’
You may have heard this in many business books or self-improvement books but this concept is really important because if you don’t understand why you’re actually starting or developing better money habits in the first place, you’re not going to want to stick with it when it starts to get a little tough.
Start with what I like to call “The Five Whys” Let’s say you want to start a habit to save a couple of hundred dollars a month. Then you just ask yourself “why?”.
Once you get the answer to that, then you ask “Why?” again. You do that a few times until you’re really really clear what it is that you want to gain out of developing that habit.
Note: I cover this in more detail in my new book The Authentic Budget: Harness Your Personality to Manage Money on Your Own Terms Like a Pro.
Use the 1% Rule to Develop Better Money Habits
This rule basically means you start super small with this new habit and increase that by one percent each day. You want to do this is so that it seems less intimidating when you’re starting this habit. When something seems unreachable you’re not going to do it. It’s human nature. I’m pretty guilty of this.
For example, a really popular habit that people want to develop is exercise. That’s really hard if initially tell yourself you want to exercise for an hour every day. It’s going to be too intimidating and you’re going to want to give up. Instead, you’d start with the bare minimum, like 5 minutes a day, or even putting on workout clothes that day, and keep building on that.
So for money, let’s say you want to save five hundred dollars a month. What is the smallest amount that you could start saving today? Maybe you can save five dollars a day. That’s great.
The next day, you’re going to then increase that amount by 1 percent, whatever one percent of five dollars is, then keep building up 1% after that. You’ll soon find that because you’re you’re starting small, it’s going to really stick when you start to develop better money habits.
Pair an Existing Habit With Your New One
The important thing is to make sure that the old habit you’re pairing your new one with is something that you do every day without thinking.
An example of mine is when I wanted to start a gratitude practice in the morning. Usually when I wake up, I’m really grumpy and I want a cup of water. I then usually just stretch or do yoga and wake for my son to wake up.
I realized that I automatically have a glass of water the first thing I wake up. So what I did then was I put my cup out every night where I could see it when I walked out of my bedroom the first in the morning. And right beside it would be my gratitude journal.
So without thinking, I started drinking the cup or water and filling this journal out. It soon became a habit and something that I do every day. It actually feels really weird when I don’t do it.
Is there something that you can pair your new money habit with an old one? Maybe you like to check your credit card statements at a certain place in your house. Can you put something there that reminds you of this new habit that you’re trying to develop?
You’ll soon find that when you are doing something that you already do and adding incremental steps to put in a new habit it’s much much easier.
Your turn: Are you trying to develop better money habits? Let me know in the comments below.