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April is Financial Literacy Month. To celebrate, we’ve passed the mic to our awesome members to go deep on some challenges and misconceptions they had about the mighty dollar. One of these obstacles? Not repeating our parents’ money blunders. #facepalm
By being self-aware, and putting in the work, you can avoid repeating any financial mistakes you may have witnessed, and develop your own mighty money habits. Here’s how:
The power of positive habits
You’ve tried to cut the carbs, meditate for five minutes every morning, and make cardio exercise a regular thing. So why is it so hard to develop new habits, or break free from harmful ones?
Let’s look at the science behind habit-building. As the brain begins to develop new habits, one region of our brain experiences a brief burst of activity. And as that habit becomes stronger, these bursts get more intense. While it’s common to think that it takes 21 days for a behavior to go on autopilot, it turns out that number is closer to 66, or a little over two months.
But recent research reveals that we might be trying to form positive habits the wrong way. Let’s see how we can go about building new ones with our money:
Dig deep with your money story
We all have our own money story. In a nutshell, it’s a narrative shaped by our early experiences, beliefs, and perceptions. That, coupled with the simple fact that a lot of our money decisions are rooted in emotion, not necessarily logic, might’ve led to not-great choices or habits in the past.
For that reason, the first step is to spend some time unpacking the layers on why exactly you might fall into the same money traps. It’ll help you understand the “why,” behind your habits, which could help you change them.
Case in point: Do you have a tendency to “blue-sky” your financial situation? In other words, you believe that you’ll have a “jackpot moment” and a windfall of cash will fall into your lap, and pull an 180 manueuver on your finances?
Or you side hustle, and you anticipate your take-home pay will get a boost soon (while the truth is that it might flatline or even go down). In turn, you hold off waiting until that day comes to create a budget, or pay off debt? Just some food for thought.
Exercise 1: Curbing impulse buys
Let’s say you have a tendency to justify a major expense—one that you might not be able to reasonably afford—by saying it’s for improving your skills on the job, or that it’ll help you be more productive/focused/on top of your game. Here’s a quick exercise to help with impulse buys.
1. Do a quick inventory of what you already own. Instead of adding gadgets to your Amazon cart and hitting the “buy” button, spend two minutes and do a quick inventory of what you already have.
2. Hit pause. When the urge to spend takes over, instead of indulging in a bout of online shopping, add that item to your list. Note the item, date, and the cost. Then, in 30 days, revisit that list, and see if you still desire that said item.
3. Journal about your money experiences. If you’re curious where such behaviors stem from, start a money diary. It’ll help you build self-awareness. You’ll want to do this every day. (It’s hard at first, but the more you do it, the easier it gets!)
4. Start a splurge fund. Let’s be real: there will inevitably be times when we come across a “too-good-to-be-true” hot deal and we want to splurge. Create a separate savings account just for these spendy moments. It will help protect your emergency fund. Plus, you’re less likely to feel like you’ve failed, and abandoned your money goals entirely.
5. Talk about finances with your family. Chatting about everything else might feel like a breeze. But try to open up about money matters, and you might stop in your tracks.
The thought of it might make you uncomfortable. Or even lead to awkward moments of silence. But not talking about money could lead to misunderstandings, tiffs, and – worse – a missed opportunity to pass on important know-how to your own kids.
Exercise 2: Scheduling money dates
Make a point to discuss money matters—your own mistakes you’ve made, your goals, both big and small, and what you’re doing to get there, and challenges you’re bumping up against. Get real. No need to tiptoe around delicate topics.
Talking about money is a form of financial emotional housekeeping. Just like how you don’t want dust to collect in your house, you don’t want any resentments or miscommunications to build up around money, right? To avoid this, schedule money check-ins.
1. Set money dates so they happen on the regular. These money dates can be with yourself, with your family, or your partner. The key is to make it easy. Do it during your weekly drive to the grocery store, or after dinner on Monday nights.
2. Decide on the topic beforehand. How do you want to best use that time? Do you want to decide how to tackle a shared goal, such as debt repayment or saving to move to a new city? Or do you want to do a budget review, and see exactly where that money is going.
3. Turn it into a regularly programmed event. Whether it’s every week, every few weeks, or every month, commit to it.
4. Reward yourself. Even something simple, like treating yourself to a sweet treat afterward, could really help you stay motivated.
How to build a new money habit
Now that we’ve gone over a few exercises, here’s how you can roll up your sleeves and form a new new habit of your choosing.
Tip 1: Pick one habit to improve
So you want to be a budgeting ninja, crush debt as quickly as possible, and save for a weekend getaway? While your money goals are ambitious, without discipline and structure, your best intentions might fall flat. That’s why it’s best to start small.
Begin by choosing a single habit to improve. Yes. Just one. Here are some examples of habits you might want to develop:
- Getting better about about “paying yourself first”
- Putting money into your savings and debt before spending it
- Having greater awareness of your money situation
- Curbing impulse buys
- Not going over your budget
- Not avoid talking about your debt in your relationship
If you want to eventually save $50 a month, aim for $5 to start. Or let’s say you want to curb impulse buys, and you tend to spend needlessly every day. Instead of going cold turkey, aim to not buy non-essentials a few days a week.
Tip 2: Stack the habits
In other words, stack a habit you’re trying to develop with an existing one. We already do this on some level. If you’re driving down X road, you might go through the Starbucks drive-thru and pick up your favorite seasonal latte. Or if you’re heading to bed, you brush your teeth.
Now try applying it to money. When you drink a glass of water in the morning, pick up your phone and check the balance in your checking. Or if you are about to spend more than, say, $25 on an non-essential purchase, move $5 into your savings.
Tip 3: You can also try a no-spend challenge
Set some basic ground rules, such as allowing yourself to spend on food, gas, and other necessities. But spending on non-essentials is off the table. Then, commit to not-spending for a set period of time. Start with five days or a weekend, and go from there.
Tip 4: Learn up about money management
Chances are, growing up, you might not have learned a ton about basic money management—saving, investing, protecting, and the like. Or you might even have to unlearn a few things.
The good news: You don’t have to invest hundreds into say, a money management course, in order to educate yourself. Toss a pebble in any direction and you have literally thousands of blog posts, articles, and ebooks on personal finance at your disposal. Not sure where to start?
Buddy up with a friend and turn it into a reading club of sorts. Peek into each other’s GoodReads—or some trusted personal finance folks—to get some solid recos. Look up some recommended reading lists on trusted, reputable sites.
Tip 5: Get techy with it
There are loads of great tech tools at your fingertips. Here are a few examples:
- Automatic Savings: If you’re a Chime member, you have the option to tuck away money each time you use your Chime Visa Debit Card. The purchase is just rounded up to the nearest dollar. That savings can go toward an emergency fund, paying off debt, retirement, or anywhere you want.
- Stay on track: Just sign up for a free money management app.
- Build credit: Create an account with a free credit monitoring service.
Bottom line: The world of financial technology tools to up your money game is vast. With a bit of trial and error, you can explore the most helpful options for you.
It starts with you
While circumstances and systemic challenges are at bay, when it comes to money habits, It boils down to you. And that’s a powerful thing. A bit of time and effort, coupled with meaningful intention could work its magic. And that money legacy you create? That’s something that your kids can take with them for the rest of their lives.