Building Healthy Financial Habits

By: Stacey Nickens

While building habits can be challenging, healthy habits are necessary for our well-being. Habits reduce the amount of decisions we have to make in a day and thus free up brain space to work on more important projects. For example, we build a habit of brushing our teeth such that we don’t have to decide each day to brush our teeth. Instead, our morning brain space can go towards planning out the day ahead. Similarly, healthy habits help ensure that we are living in a way that meets our needs. A habit of brushing our teeth helps us maintain our dental hygiene. Healthy financial habits help us develop savings, maintain emergency funds, and complete other financial goals.

However, developing and maintaining habits is easier said than done. Beyond repetition, studies show there are three key steps towards developing sustainable habits. Using these studies as our baseline, let’s take a few minutes to review how to build healthy financial habits.

1. Build simple financial habits that can fit within your current lifestyle. Pretend you’ve never gone for a run before. However, your New Year’s Resolution is to run for two hours every single day. You will likely never build this habit because it is too far from your regular routine. If you decide to instead run up the stairs instead of taking the elevator each day, you may actually start building running into your daily routine.

Habits are easiest to build and keep when they are simple. You may want to build the financial habit of paying off your credit card debt each month. You can simplify this habit by building it off of your regular routine. For example, if you eat out every Monday night, you could work towards the simple habit of saving your Monday night eating out money and using those funds to pay off a portion of your credit card bill. This habit is easy to remember and doesn’t ask you to make a big departure from your regular routine.

2. Reduce temptation in your environment. Many of us who have tried out diets understand the necessity of this step. You probably won’t reduce your sugar intake if your pantry is filled with cookies. Similarly, you can delete shopping apps off of your phone and leave the house with only the cash you’ve budgeted for your outing. If you want to save more, move money into your savings account as soon as you receive your paycheck. Better yet, set up automatic transfers to your savings account so you can’t tempt yourself to spend all the money from your paycheck. All of these steps will help clear your environment and make it easier for you to maintain your financial habit.

3. Reward yourself with incentives. Your brain works best when you create positive associations with a healthy habit. Accordingly, when you follow a healthy habit, reward yourself with something inexpensive. Perhaps you get a fancy coffee drink or get to enjoy a guilty pleasure TV show. These rewards will help you maintain your habits by making your habits feel pleasurable.