Is Saving Money Just a Matter of Habit?

Is Saving Money Just a Matter of Habit?

by Roman on September 26, 2012

This is a guest post by Steven Weinberg. He is an insurance agent and finance writer who loves blogging.

Only approximately 40 sense signals are processed by our brains out of about 11.000 signals total, meaning the rest we just do automatically without thinking about it. How often, when you are driving to work, do you suddenly realize you are at work and barely remember the trip? Driving on “auto pilot” isn’t a myth!

Forming Habits

According to Phillippa Lally’s research at University College London (UCL), it takes 66 days for a habit to form and have more of an automatic reaction from brain processing. It more or less creates a new behavior from a “cue” such as when the alarm clock goes off in the morning, it’s time to make coffee or go to the gym.

Easy-to-form bad habits include smoking, biting nails, increasing salt use, driving too fast, doing take-out or fast food rather than cooking, overeating, shoplifting, video games, social networking, little white lies, and increasing amounts of drinking alcohol, soda, or any other beverage that might not be great for your health.

Forming Money Habits

When it comes to forming good habits with money, it is certainly much easier to form bad habits. One of the worst habits can start as early as childhood: Acting on impulse. This could grow very easily into impulsive spending, instant gratification needs, and not learning to wait or work for a reward. If you were raised with very giving parents who made all your wishes and dreams come true, you probably had an idyllic childhood; however, you might find yourself struggling in the “real world” where money doesn’t exactly grow on trees.

Purposefully creating a good habit takes more mental effort, willpower, and deliberate planning. By applying this to your spending and saving habits, you will quickly find that you have much better control over your life and avoid a life-long struggle of putting out fires with paychecks that were meant for bills that eventually turn into their own little “fires” you need to put out until you are constantly robbing Peter to pay Paul.

Convince yourself and promise yourself that you will give yourself two months of building a good habit and avoiding a bad habit. Only make one habit change at a time or you will give up too quickly.  Here is a basic four-step process to make it easy.

Make a plan

The first thing you should do is make a plan. Whether you write it out on paper, put it into an app on your smart phone, or type it on a document on your computer, get some type of plan in place. The easier the plan is too follow the easier it will be to stick to it. This is not the time to make complicated steps or you will give up before you even start because it will seem like it is too much and it could overwhelm even those with the strongest willpower.

A money plan should start with a general budget and a determination to not spend freely until the budget is under control. Don’t overwhelm yourself with a complicated penny-by-penny budget to start. You’ll never even start the budget much less the plan. Start with a simple list of all your “absolutely must pay” bills like housing, utilities, food, and gas. You don’t even need exact amounts, just round them up to ensure it will cover a month’s bill. Put your paycheck totals for the month as closely as you can determine on the top.

After you get the hang of understanding that July 1st paycheck needs to be partially saved for July 13th’s utility payment, you can then begin to work on a more concise budget. Put stop-measures in place mentally to not pick up that new delicious purse or athletic shoes that you happened to see walking past a store.

Create a trigger

If you are an impulse buyer, anytime you have an impulse to buy something, have another activity that you immediately do. It could be to call a friend from a list of friends who are always available (they don’t even have to know why you are calling, but if you have at least one friend who can hold you accountable, it will help in that first couple months). Or you can quickly pull out a piece of gum and start walking fast (away from the temptation). Use it to replace the bad habit with good (talking to a friend or walking.

Keep it simple

The more complicated you try to make your adjustments, the harder it will be for you to stick to it. If you simply need to stop eating out every day rather than starting with a budget, then do that. Next month you can add a general budget that you keep in your wallet/purse that you look at every time you eat a homemade meal rather than eating out. It might need to be baby steps, but any steps are better than none.

Reward yourself

If you make it through the first week with your adjustments, have a reward already in place. Maybe one meal out with a friend (choose a less costly one) or a small purchase of something you really want. After one month, make it a bigger reward. You can even write down your rewards in your initial plan to help keep motivated. Perhaps your big reward could be a cruise with a portion of the money you saved with your new money habits.

Just like with anything else, money habits are habits and they can be good or bad. The sooner you set yourself on a course of good money spending habits, the sooner you will realize that you can live better than some of your friends or acquaintances who haven’t made financial plans and are constantly in some kind of financial crisis.

That will be your ultimate payoff when you can sit back and smile with relief when you realize that you no longer have to wonder if your lights will turn on when you get home because your utility payment is overdue.

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