Behaving like rational, analytical robots to manage our money well is really tough. We are after all, human. Emotion, attitudes, and behaviors separate us from other mammals, and are the joys and challenges to bear.
So what do we do? Successful money management does not depend on intelligence or hard work. It’s in the secret of managing good money behaviors – some of which will eventually become auto-pilot, and some of which will become notably deliberate.
1 Degree of Difference
If a ship navigates 1 degree off target, after 600 miles it will be 10 miles away from its true destination. How much can one small habit take us from our saving goal? Let’s say you ordered pizza for the family on a Friday night because you were beat. Now it’s a regular habit. If it’s a lifesaver for you because you’re always exhausted by Friday, then by all means do it. If you just do it out of habit, here’s what it’s costing you:
$40/week is $160 a month. If you could earn 3% compounded monthly for 17 years, it would be $42,500. This could be a contribution to your child’s college education, a new car without a loan, or a few nice vacations without using your credit card. That $40 a week is 1 degree difference from $42,500 more. What if you had 5 money behaviors you could change?
Everybody seems to have an agenda. Often it involves separating you from your hard-earned cash. So maybe you should have an agenda to fight back.
It starts with what is most important to you in life. Maybe you really want to ensure you can support your children so they get the best education and get a great start on life. Maybe you want to start your own business in 10 years. Or maybe just once you’d like to have a special vacation with your partner on a big anniversary. You choose. What’s important is that it needs to be important to you. And if you can estimate the cost, it’s even better.
Then next time temptation stares you in the face – whether it’s one of those huge cakes at Costco that weigh a ton, or a pair of sexy shoes in your favorite store, just stop and compare their agenda to yours. Profit for them – or money for something that will really contribute to value in your life.
We will never be able to say NO to temptation all the time. So get rid of temptation instead.
- Delete all your retail emails. Note that when you buy something online, they auto enroll you again. As soon as the new one pops up, delete it.
- Cancel all the catalogs that appear at your door.
- Don’t walk by or drive by your favorite stores.
- Don’t go down food aisles you don’t need.
- Don’t make shopping a social event.
I personally follow these rules, and they work. My clothing budget has dropped dramatically. This fall I invested in a new wallet and a pair of cute short boots – both of which I needed. I never go down the soda or snack aisles – ever, and I’m much healthier for it.
Add Good Auto-Pilot Behaviors
You have at least 50 anchor behaviors in a day such as brushing your teeth, showering, and maybe feeding the cat. Incorporating a few new auto-pilot behaviors can help you toward a 1 Degree of Difference. And the easiest way to make them stick is to do one of them right after an anchor habit.
Let’s say your credit card is always more than you expect it to be. So what new behaviors can you use to keep it under your target amount?
- Save your receipts. As soon as you’ve signed a receipt, tuck it in a special place.
- Check your balance daily. This behavior needs to be tied to one of your anchor behaviors. Let’s say after dinner you load the dishwasher. As soon as you close the dishwasher door, login online.
- Review your credit card statement once a month. This is trickier because it’s not every day. You may want to make Sunday morning coffee your bill time. When the statement comes, review all the expenses. Do you have any automatic charges for things you don’t use? Cancel them. Is there an expense you don’t recognize? Call them. It’s amazing what you can catch that will save you hundreds over a year. You may even find that your cell phone bill has slowly increased over time and you should look at other carriers.
Related Topic: 4 Steps to Build Better Money Habits
Information shown is for illustrative purposes only and is not intended as investment, legal or tax planning advice. Please consult a financial adviser, attorney or tax specialist for advice specific to your financial situation. Behavioral Cents, LLC and any third parties listed, linked to or otherwise appearing in this message are separate and unaffiliated and are not responsible for each other’s products, services or policies.
Carrie Rattle is Founder of BehavioralCents.com. She helps smart women build money confidence by observing their behaviors with money, and then changing them for the better. Women are then empowered to make wise money decisions.
As a veteran of Financial Services, she sees a significant gap where too few are focused on helping people with their actual money behaviors instead of simply telling them what they should do. Thoughts always welcome: email@example.com.