Like everything else in our lives, there is bound to be an ebb and flow in how we earn, spend and manage our money. Circumstances change, as do our priorities and goals, as we navigate our way through life, and sometimes it’s easy to get thrown off course by curveballs and distractions.

A brilliant way to counter those fluctuations in our financial health is to ensure that we consciously build positive financial habits, to carry us through and keep us moving towards our goals when our focus is needed elsewhere.

Motivation vs habits - why you can’t get to where you want to go using motivation alone

Motivation is a brilliant phenomenon, and nothing beats the rush of energy we get when we have a new idea or project to focus on. Motivation can prompt us to take decisive action, give us clarity of thought and propel us forward towards our goals - but it’s also often fickle and short-lived. There may be times in our lives when we feel very motivated to manage our money well, especially if we have a specific aim in mind, like paying off a credit card, saving a house deposit, funding a once-in-a-lifetime trip or preparing to start a family. 

In the beginning of these endeavours, all we need is that feeling of motivation to inspire positive action, but problems may start to arise when that motivation begins to run out, or we need to use it for something else - especially for longer-term goals, like saving for retirement or building a financial safety net. Unlike motivation, which comes from the executive centre of your brain, habits are stored in a completely different place, and can take over when your motivation starts to fade. Forming habits in the first place requires effort but, once embedded, they will allow you to semi-automatically move towards your goals without sapping all of your mental energy.

Setting goals and visualising the future

In order to identify which habits you’d like to build, it’s a really good idea to have an idea of what your financial goals are, and  to make sure that they are aligned with your life and career goals, too. If your vision for your future is at odds with your financial goals and, consequently, your financial habits, you’re going to find it difficult to feel fulfilled or content, and may find yourself frustrated or feeling like you’re treading water. 

Start by mapping out what you’d like your life to look like in future, whatever that entails - it could be planning to buy a home, start a family, travel, retirement or any combination of things that are meaningful to you. Then, take some time to research the costs involved and you can start to set some financial goals and think about timelines, which will allow you to consider which financial habits you need to build in order to get there.

Which financial habits could I prioritise?

Everyone’s financial habits should be personal to them and tailored to suit their financial goals and circumstances, however there are a few core financial habits that are brilliant to have in place no matter what your plan is:

  1. Budgeting

    Living with a budget will always help you to feel in control of your finances, no matter how you choose to manage your money. A budget doesn’t have to be restrictive or about saying ‘no’ to things, all it needs to be is a plan for your money. There’s no magic method, just keep it simple and consistent and use a medium that works for you, whether you favour an app, a spreadsheet or budget planner. You might like to use a rule of thumb like the 50-30-20 rule to guide your budgeting habit, where 50% of your income is spent on essentials, 30% on enjoyment and 20% on saving and investing, adapting the ratios where necessary.
  2. Save regularly

    Financial security is important for everyone, so saving regularly into an emergency fund is a great way to protect your mental health and wellbeing, and safeguard against any unexpected financial shocks. A fully-funded emergency savings pot is typically 3-12 months’ worth of living expenses, depending on your circumstances (living arrangements, number of dependents, contingency plans etc), but start small and work up from there. Automating savings using a saving app or standing order is a great way to create a habit without too much effort. You could take the ‘pay yourself first’ approach of transferring savings as soon as you get paid and treating them as another, non-negotiable bill.
  3. Talk honestly about money

    For the sake of your money mindset, another great habit to get into is talking honestly about money with friends, family and colleagues. You can learn so much from others’ salaries, attitudes and habits, from what the market rate is for different roles (which will help you to negotiate your own pay) to moneysaving tips and hacks. Communicating honestly about money also helps to keep financial shame at bay, keeps you accountable and allows you to access support that you might need more easily, all of which are great for your long-term financial wellbeing.

Which financial habits might I want to avoid?

As well as forming positive financial habits, we might have already developed some harmful financial habits that we want to avoid or break. Again, one person’s idea of a ‘bad’ financial habit might sit perfectly well with another person’s circumstances and plans, so this is personal, but there are a handful of financial habits that are almost never helpful:

  1. Mindless spending

    Avoiding mindless spending can be very beneficial for your financial health and general wellbeing. We’re encouraged to over-consume in today’s society, which can lead to a feeling of never being satisfied and buyer’s remorse, which can make us feel anxious and like we’ve never got enough money. Spending money on things that you value and that bring something meaningful to your life can be a good thing, but online retail has made shopping so easy that we often don’t realise when we’re overspending, and this is what we need to be wary of. Setting a device curfew, removing automatic payment information from your devices and having a rule about sleeping on considered purchases are all ways to add friction back into the buying process and make mindless spending more difficult.
  2. Overly relying on credit

    If you can possibly avoid it, relying too much on credit is best sidestepped. Any money that you borrow will need to be paid back, and it’s important for both your credit score and your mental health to keep any debt manageable. If you’re taking out a loan, using a credit card or taking advantage of buy now, pay later services, it’s a good idea to always ensure that you can always afford the repayments, and that you make them on time. Don’t overload yourself with different types of debt and borrow within your means.
  3. Bury your head in the sand

    If you want to protect your financial wellbeing, it’s important to stay connected to your money and not bury your head in the sand when money is tight or causing worries. It’s easy to take an ‘out of sight, out of mind’ approach rather than feel overwhelmed, but the end result of this is usually that you will get a nasty shock later down the line. Check in daily with your account balances - you can even get your bank or budgeting app to send them to you via text or push notification - and make sure that you react to any changes to your circumstances in a timely manner, making adjustments to your budget where necessary.

Keeping your habits going and hold yourself accountable

In many ways, beginning new habits is the easy part, and the tricky part, is keeping them going. Habits expert James Clear identifies some brilliant methods for creating sustainable practices in his book, Atomic Habits, which involves breaking habits down into tiny increments and doing everything you can to integrate them seamlessly into your life. The key, he says, is to make new habits that you want to build easy, obvious, attractive and satisfying and old habits that you want to break difficult, invisible, unattractive and unsatisfying.

You could try habit stacking, where you tack a new habit onto a habit that’s already fully formed - such as checking your bank balance during your morning commute - or habit bundling, where you pair a habit that you’re trying to form with something that you love to do.

The main thing is to just keep going, even if you slip up, and to remember to adapt your financial habits to your changing circumstances if necessary. With the right habits in place, you can do almost anything!

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