How To Adopt Good Money Habits

Are there new habits you want to develop but can't seem to stick with? According to author James Clear, between 81-92% of New Year’s resolutions fail. It’s likely not the habit that is causing you to fail, but rather the technique you’re using to establish a new habit.

Habit stacking, a productivity technique developed by BJ Fogg, involves linking a new habit you want to develop with an existing habit.

Here's how it works:

Identify Existing Habits

Start by making a list of habits that already exist effortlessly in your daily routine. They could be as simple as brushing your teeth, getting dressed, making breakfast, walking the dog, starting your car, or checking your email.

Select a New Habit

Identify the new habit you want to adopt. Examples are exercising, meditating, praying, drinking more water, eating healthier, cleaning, saving money.

Pair the Habits Together

Combine the new habit with the existing one by committing to perform the new behavior immediately after completing the old one. 

Some examples: 

If you want to read more, you could pair it with walking your dog. So, after you walk your dog in the evening, sit down and pick up a book. 

If you want to start praying regularly, you could commit to praying every day after getting dressed. 

If you want to eat healthier, you could commit to eating vegetables at every meal.

If you want to drink more water, you could take a drink of water every time you check your phone.

Repeat and Reinforce

Consistently repeating the habit stack causes it to become automatic. As your association between the two habits strengthens, it becomes easier to maintain the new behavior until it is automatic.

Using habit stacking in your finances can be a powerful way to build new financial habits and achieve money goals.

Here are some ways to apply this to your finances:

Desire: To spend less

After filling your online shopping cart, go for a walk around the block before confirming the purchase.

After you add an item to your online shopping cart, check your home to see if you already have an alternative to the same item. 

When you want to buy something more than $50, wait 24 hours before making that purchase.

Every time you desire to purchase something, write something you are grateful for in a gratitude journal. 

When you return home from any shopping, track your spending.

Desire: To save more

After you make an online purchase of a want, put a predetermined percentage of that amount into your savings account.

On the day you get paid, make a deposit into your savings account (or set your bank account up to do this automatically - you are not regularly performing the behaviour but your mind is aware that it is the ritual).

After paying your monthly bills, commit to reviewing your spending to identify areas you can cut back.

After making your morning coffee/tea, transfer money into your vacation savings fund.

Desire: To stay out of debt

After you use your credit card to make a purchase, log into online banking and make the credit card payment. 

Before you go to the mall, take your credit card out of your wallet.

A simple shift in mindset can create significant changes in your finances. If you’ve been struggling to meet financial goals, it may be time to try something new.

Developing new financial habits can be done in four simple steps: identify existing habits, select new financial habits you want to adopt, pair a new habit with an existing habit, and repeat regularly until it becomes effortless and automatic.