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How to Build Good Money Habits


 

"Don't fear failure. Fear being in the exact same place next year as you are today."


-Unknown

 

I sit down at my desk to pay my bills. I have a lot of credit cards. And those credit cards have significant balances on them. I racked up a good amount of credit card debt while I was in college. Now I'm here staring at all of the bills in front of me. I'm trying to pay $1,000 every month to repay this debt. That's a good chunk of my first-year salary, but I run some numbers, and I’m motivated to get this debt paid off.


A year-and-a-half later, I pay the final balance on my credit card debt. I thought it would be a struggle to pay that money each month, but I got used to living on what was left over after those credit card payments. I decided to keep the habit going. I already sat down once a month and got rid of $1,000. Before, I got rid of it by paying credit card companies. Now, I can get rid of it by putting that money into an investment account.


Before long, that money grew into five figures, which is a lot for me at the time. It wouldn't have happened if I didn't have a habit of moving money from my checking account into my investment account every month.


Habits are powerful, and when they are good habits, they can work very well for you.


good money habits are the foundation to good financial outcomes

Good Money Habits


Good money habits are behaviors that we partake in and they are automatic; often we don't even know that we're doing them. Automation is a strong tool that we can use to align our financial lives with what's important. Habits are the automation of behavior. Habits happen automatically, so turning our good financial behavior into habits is very powerful.


good money habits are automatic behaviors that are good for you

Bad Versus Good Money Habits


It's easy to know what we don't want. Our minds have a strong negativity bias, and as a result, we notice and pay more attention to the negative events in our lives. Good things happen to us, as well, but we don't tend to focus on those. That's why it's easier to know what we don't want. There's so much negativity that gets into our brain, and the simple thing to do is wish we didn't have those negative things happening.


It is far more difficult, however, to actually articulate what it is we do want. Ironically, we suffer from a concept called choice paralysis. Intuitively, it would seem that having more options would be better for us. In reality, the more choices we have, the less confidence we have that that was the right decision for us.


So it's harder to know what we want with any confidence, but it is worth the time.


figure out what you want to build good money habits

Determine What Money Habits You Want


If you want to implement better money habits, it is important to know what behavior you want to implement. A vague idea about a future outcome is not very useful. For example, wanting to have savings or to be a saver is vague. Moving $100 per month from your checking account to your savings account is a specific behavior that you can try to form into a habit.


Think about what good habits you want in terms of the specific behaviors you want yourself to do.


good financial habits are helpful when you break it down

Building Good Money Habits


Once you know what behavior you want to turn into habits, the next step is to implement your new habits. The trick here is to make it as easy as possible.