If you want to be better with money, you need to take a close look at your money habits. The nature of habits is that we are inherently tied to them, as over 40% of what we do on a day-to-day basis is habitual, meaning we operate in auto-pilot mode for most of the day. Whilst habits can certainly be a time-effective, safe and energy-saving option, they also bind us to behaviours and keep us in a loop that continually produces the same result. If that result is debt or living payslip to payslip, perhaps your money habits are in dire need of a reset.
- Know Your Triggers
Have you ever checked your bank account statement only to see numerous purchases that you don’t recall making? Whilst for a moment you’re certain your card has been skimmed, you later realise there’s no denying that the culprit was none other than yourself. As Sun Tzu says in The Art of War, “know thy enemy”, and begin to take close notice of when and why you’re spending money frivolously. Perhaps you celebrate every small win with a cart-full of indulgence, or you mask your feelings with purchases when you’re down. Although deep down you recognise you should save & invest, often emotional triggers triumph over that logic.
- Utilise Direct Debit & Automated Deductions
If you’re aiming to put away a fraction of your payslip each month into a savings fund, set up an automatic deduction that occurs each pay cycle. Each day is filled with many decisions, but the more choices you’re forced to make the more likely you are to hit decision fatigue where your brain begins to act impulsively. By minimising the number of choices you’re forced to make, the more likely you are to make informed, sensible judgments when it comes to your money management.
- Start Small
Making a dramatic change too quickly is a universal reason as to why many resolutions derail and fail. Alternatively, focus on taking baby steps that will eventually lead to goal success, rather than trying to achieve it all at once. Small steps encourage us to manage our cognitive load efficiently and handle distraction better, as the less that we have on our plate to resist, the more success we will attain. If your goal is to stop spending money on coffee during your working week, cut it down by one day per week. When you reach the week where you only allow yourself to purchase one coffee, the change won’t feel as dramatic and you’re less likely to relapse and go back to your indulgent five coffees a week.
- Save for your big purchases
Reminisce back to your childhood days of collecting your $5 per week pocket money to purchase a novelty on your wish list and return to the habit of saving rather than using credit. By cultivating the ability to delay the gratification that comes with a purchase, you give yourself more time to decide if the buy is necessary and to look around for the best, accessible price. In doing this, you’ll also save interest on the purchase itself, but overall you will become much less reliant on your credit card, minimise your debt and create money-saving habits.
Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regard to your circumstances.