Ask a Trainer: How do I Form Good Financial Habits?

So much of our day-to-day lives are made up of habits: small actions we perform frequently without much thought—checking our phones when we first wake up, brushing our teeth, or crashing on the couch after work, for example. These small actions compound and have a major effect on our well-being over time. This is especially true for our finances. If you aren’t achieving your big financial goals, it’s time to look smaller and examine your financial habits. 

What is a financial habit?

A financial habit is something you do regularly, either consciously or unconsciously, that impacts your overall financial health or financial goals for better or for worse. These include actions such as reviewing your credit card statement monthly, paying your bills on time, online shopping when you’re bored, and ordering Uber Eats when you’re busy.

What makes a financial habit “good”?

Whether a financial habit is “good” depends on you and your goals—it’s not universal. A “good” financial habit brings you closer to your financial goals while a “bad” financial habit sets you back.

How do I build or change my financial habits?

While building or changing habits is going to take time, there is a wealth of knowledge on strategies to help. Books on the subject including Atomic Habits by James Clear, Tiny Habits by BJ Fogg, and Better than Before by Gretchen Rubin have been wildly popular over the past few years. Here are a few proven strategies from these experts:

Interrupt the Pattern

Habits follow a pattern of cue (an external stimuli), craving (an internal desire), response (the action/habit), and reward (a psychological or physiological benefit). If you can interrupt this loop, you can change your habit. In many cases, eliminating the cue is the easiest way to break the cycle. For example, if you find yourself drawn to shopping at your favorite store on your commute home from work, change up your route to bypass the store.

Start Small

When you want to change, there is a temptation to go big or go home, but you’re setting yourself up for failure. Rack up wins by starting small. If you want to work up to tracking your expenses, begin by just logging into your banking app daily and checking your balance for a few weeks. Once you’ve got that down, you can start building on it.

Track It

As the saying goes, what gets measured gets done. Tracking a habit or action keeps it top of mind and helps you quantify progress. If you’re trying to reduce your spending, track the number of “no spend” days you have in a month. If you’re trying to pay down debt, mark each day that you don’t use your credit card and try not to “break the chain.”

Stay Accountable

Many people find it difficult to do something positive for themselves simply because they want to, but they will do it if someone else is expecting them to. You can harness this weird fact of human psychology by consciously setting up an accountability system. Find a buddy who is also trying to make a change in their life or work with a financial trainer.