I like to judge a book on the ideas that come from it. Chip and Dan Heath’s recently released book Switch, is filled with ideas to improve Gen Y Wealth and my life.
The book is all about making change when change is hard. The changes can be as simple as getting up earlier or as complicated as improving the culture in your work place. The authors believe that there are certain traits to every successful change.
Instead of summarizing the book, I choose three common patterns that the Heath’s identified to successful changes. I applied them to a very important financial habit, starting a budget. You can just as easily apply them to other financial habits such as saving, investing, impulse spending, overuse of credit cards, and not paying your bills on time.
Follow the Bright Spots – Identify positive habits and rituals that you have in your life and clone them.
Hopefully you’re brushing your teeth twice a day. Chances are you do this without even thinking. For me, once in the morning before I shower and once at night right before I go to bed.
Another daily habit I have is exercise. I get in a light workout in the morning, right when I get up. Also, there are a few days a week I go to the gym to play basketball (Thursday at 7 P.M. and Saturday at 7 A.M.) and go to yoga class (Tuesday at 7 P.M.).
There is a common theme here. If I schedule a time and a place for executing my daily habits, I generally complete them without much thought.
While scheduling might not be what makes your daily habits successful, chances are there are common themes you can identify
What’s working for you? Even if it’s something as simple as brushing your teeth and taking a shower, why do you do these tasks without much thought?
Stop trying to learn from your failures. Instead, think about replicating success.
Point to the Destination – Know where you’re headed and why you want to get there.
The goal of starting a budget is so you can optimize the money coming in and out of your life. A budget makes it simple to tell if your expenses are congruent with your goals. If traveling the world is more important to you then eating out, hopefully you’re spending more each month saving for your world tour, than you spend eating at Panda Express.
Personal finance starts with setting goals. If you want credit card debt, an underwater mortgage, and work from January to March just so you can make a car payment, don’t worry about starting a budget. If you’re hoping for a little more out of life, then it makes sense to spend consciously.
Before you dive into budgeting, decide what you want to come out of it. If you’re budgeting to save for a trip, a home down payment, or a car, remind yourself each time you sit down to record your income and expenses. It will make it a lot easier to maintain the habit.
Find the Feeling - Knowing facts usually doesn’t cause people to change. What make people change are feelings.
As we move more and more to a paperless personal finance system, it’s easy to take all feeling out of spending. Not only is our dollar not backed by gold anymore, but our dollars are often just numbers on a computer screen. This makes it very easy to have no emotional attachment to what’s going in and out of our bank accounts each month.
Here’s what I would do to put the feeling or some emotion behind starting a budget. Say you think you can save X amount of dollars by budgeting, get that money in cash and keep it as motivation for making a budget. Now put that cash in a familiar place where you will see it each day.
For example, if you think you can save $150 a month by starting a budget, tape to your bathroom mirror $150. This way, you have Benjamin Franklin and Ulysses S. Grant, kindly reminding you not to forget to record that $20 you spent last night in cash.
From Bad to Good Financial Habits
Change is hard. There is a reason so many people are in debt, it’s easy.
It’s easy not to track your spending. It’s easy to forget to pay your bills on time. It’s easy to just put it on the credit card and worry about it later.
If you need help, which we all do, changing yours or others actions, read Switch.
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