Better Money Habits in 3 Easy Steps

3-step guide to better money habitsWhy do we do the things we do?

As creatures of habit - how exactly were our habits formed?

According to Charles Duhigg author of The Power of Habit, our brains have a 3-step process for forming a habit:

  1. Cue - a trigger that activates an action or routine
  2. Routine - an action or response we’ve learned to do that gives us access to a predictable reward
  3. Reward - something our brain craves.

The key to forming a habit is through repetition. Then after enough repetition, actions and routines become automatic. There’s no more thinking required from our part...we just DO.

We’ve picked up many habits we’ve observed and learned over the years...

But how many of these habits were intentional?

How many were accidental - those habits we had no control over and were the result of the situation we were in at that time?

Can we create new habits that we want?

And can we break old habits we no longer want?

Let’s explore...

Create Habits You Want

If life is about growth, then it’s never too late to learn something new.

I took French immersion for 4 months and stayed at Sainte-Anne’s University a few years ago. I chose Sainte-Anne because of their reputation. Their immersion program is well-known to be effective because of this one strict rule: students are to speak ONLY French during their whole stay on campus. After 3 strikes, you’re out of the program - no refunds!

I was in my mid-twenties and I thought I was getting too old to learn a new language. But then I met my 80 year old neighbor, Shirley. Our rooms were next to each other. Shirley did not speak a lick of French before coming to Sainte-Anne.

She struggled with French. But did that stop her? NO - because she was thrilled to be there. Fueled with unwavering determination, Shirley only spoke in French over the next few months.

If Shirley can train her brain to learn a new language at 80, then surely we can learn to create smart money habits now.

How are habits created?

“The craving brain” drives habits, according Charles Duhigg. A habit is formed when we crave a specific reward after being exposed to a cue or a trigger.

I’ll use my toddler boy as an example. My 2-year old hates blowing his nose whenever he has a cold. But if he doesn’t blow his nose, the pressure from that mucus build-up leads to an ear infection. So, the doctor prescribes flavoured kid’s antibiotics which he happens to love. In other words: there’s no reward for him to blow his nose. But there is a reward when he doesn’t.

What’s a mama to do to break this cycle - and prevent another ear infection (and more antibiotics)?

  1. Cue (trigger) - my toddler catches a cold and his nose if stuffed
  2. Routine (action) - I ask my toddler to blow his nose multiple times until it’s cleared
  3. Reward - my toddler is offered a very tiny piece of dark chocolate after successfully blowing his nose

Is this bribery? I wonder that same thing myself. And maybe it is. But I prefer to call it (positive) conditioning. I’m helping my toddler know that blowing his nose is a pleasant experience. (And btw, it’s a small piece of 70% dark chocolate - so it’s actually pretty healthy.)

The reward doesn’t have to be big. It just needs to be pleasant enough so our brain can crave it. In my toddler’s case, it’s the unusual (good) taste of a dark chocolate.

But how can we create a habit of saving money?

Let’s keep in mind Charles Duhigg’s 3-step process...

#1) Start with the end in mind: define your reward

What makes you tick?

Here are some other specific questions:

  • WHY are you saving money?
  • Are you saving for something specific? What is it - and WHY is that thing important to you?
  • What happens when you accomplish that specific goal? How does that change your life?

Be crystal clear and ultra-specific when you define your rewards.

#2) Then step back and set your cue

Cues serve as a reminder (a trigger) that we need to take action in order to get our reward.

Cues are things that we see, touch, smell, taste or feel.

If you’re saving money towards a house downpayment. A visual cue you can create is a picture of your dream home on your fridge so you can see it multiple times a day to remind you what you’re saving for.

You can also write down how much you want to save, and how much you’ve saved so far. The key is that you display this somewhere you can see everyday. Maybe multiple times a day so that it can serve as your cue/trigger to save money.

If you’re saving towards that dream vacation. Another visual cue similar to the above can work…

This is a chance to be creative and inventive - so have fun with it!

#3) Bridge the gap between cue and reward with a routine

To go from cue to reward, we need a routine action in between.

Cue >> Routine >> Reward

The routine is the meat of this process. In a little bit we’ll discuss 5 routines to maximize your money to get your started.

But first, how do you break bad habits?

Breaking Bad

Nothing to do with that TV show…

...I’m talking about breaking bad habits.

We develop habits overtime through many repetitions. The strength of a habit lies with how strong the reward is.

So it’s no surprise that breaking bad habits is not a walk in the park (to say the least).

And it turns out that it’s more effective to replace old habits, than to get rid of bad ones.

Remember habits are made up of this 3-step loop:

Cue >> Routine >> Reward

To increase our success, we can use the same cue and reward - but then change the routine.

Take our eating junk food as an afternoon-snack habit for example:

  1. Cue: grumbling stomach
  2. Old Routine: pick up a bag of chips or chocolate bar from the vending machine
  3. Reward: satisfied craving for food

To break this bad habit of snacking on junk food, the key is to replace the old routine with a new routine.

Instead of going to the cupboard for chips and a cookie, have an apple and carrots at your desk ready for you to grab anytime.

Want to increase your success? Make the new routine easier than the old one.

5 Routines to Maximize Your Money

Good financial habits make a difference now and in the long-term.

Here are 5 things we can do to maximize our money, and bridge the gap between cue and reward:

#1. Get the best value for your money and comparison shop

Make it a routine to compare prices before you make a purchase.

How do you make this easier: bookmark all comparison sites for easy access.

There’s NO reason to pay a higher price for the exact same product that is sold for less by another store.

This topic has been well-covered on HTS, so here’s a little refresher:

#2. Know where your money is going on a regular basis

Make tracking your spending part of your routine and regularly review if you’re meeting your saving goals. Schedule this in your calendar bi-weekly. The reminder that pops up can serve as your cue.

To help, you can try our free budget template that lets you track your income and spending on a monthly basis.

Having a routine that keeps your true financial picture in sight gives you increased confidence and reassurance that you’re on the right track.

#3. Take advantage of reduced prices and stock up

Make it a routine to stock up on non-perishable items whenever they’re on sale. Not only do you save money, you also save time on repeat trips to the store. Here are a few non-perishables that are good for stocking up:

  • Toilet paper
  • Tissue paper
  • Dishwasher detergent
  • Laundry soap
  • Trash bags
  • Diapers
  • Hand & body soap
  • Toothpaste
  • Personal hygiene products
  • Cleaning products
  • Car oil

#4. Get rid of services you don’t use

Start a routine to review your subscriptions quarterly. Schedule a recurring appointment in your calendar.

Subscriptions are an automatic deduction from your bank account. We don’t notice them as much because that money just silently disappears. Some people say that ignorance is bliss…

But when our money does a disappearing act once a month for stuff we don’t really use, it’s time for a wake-up call.

Related: Save on Bills and Services

List all the services you use and decide if they’re worth keeping. If not - call and cancel. If yes - is there a way to reduce your cost?

Here’s a short list to get you started:

  • Cable
  • Internet
  • Phone
  • Video streaming
  • Music streaming or satellite radio
  • Gym membership
  • Amazon Prime
  • Magazine subscriptions
  • Online membership subscriptions

#5. Plan your meals ahead

Make it a routine to plan your meals, prepare your grocery list, and cook at home. Not only do you save money, you also eat healthier and reduce food waste.

Plan exactly what you’ll be eating for meals and snacks for a period of time (usually for the week or the next two weeks).

Related: The $36.9 Billion Cost of Poor Health...and How to Get Real Food for Less

Part of meal planning is to list down the the exact ingredients and quantities you’ll need. The simple act of making a list can keep you focused and avoid buying costly extras at the grocery store.

Once you start meal planning, you’ll never go back. In fact, you’ll wonder why you didn’t start before now. You save so much time, money, and food from going to waste.

Questions for You

Tell me: Do you have other routines that help you maximize your money?

And more importantly...

What’s the reward you get from saving?

Let me know by leaving a comment below!

Disclosure: Some links in this article may be affiliate links. We're letting you know because it's the right thing to do. Here’s a more detailed disclosure on how HTS makes money.

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