Kobus Venter Sanlam, Sasolburg – Small habits that can make a big impact on your finances in 2021
Changing behaviour is never easy. However, implementing good financial habits can create new behaviours, which, in turn, can secure our financial future and enhance our lives. This is particularly significant since habits account for about 40% of our behaviours on any given day.
Cassidi Beck, business development executive at part-payment platform Payflex, says understanding our current habits, as well as how to build empowering new ones act as stepping stones to our overall success and wellbeing.
Beck says forming healthy financial habits takes time, effort and perseverance.
“We all know change doesn’t happen overnight. Typically, it takes an average of two months to cement a new habit. Same applies for the way you use your money every day. You’ve got to create good spending and savings habits and cement it into your life.”
Beck suggests four tips to help transform poor financial habits into empowering behaviour:
1. Make good habits easy, bad habits hard
In Good Habits, Bad Habits, the social psychologist Wendy Wood says the central force for eliminating bad habits is ‘friction’. In other words, make bad habits as inconvenient as possible so you can’t impulsively deviate from your financial goals.
“Conversely, reducing friction makes it easy to instil good habits. Rather than trying to be perfect, set yourself up for success by making your goals as easy to complete as possible. Create a strict budget and download a daily financial tracking app. You should also consider automating your savings. A repeatable process means less of a time commitment.”
2. Start small
Making bite-sized changes on a daily basis can help you to develop a new behaviour or habit. Using the 1% principle, where a small improvement is made on a task or project every day for a year yields marginal gains, which compound into big results. This principle helped the British cycling team win seven out of 10 medals at the 2008 Olympics when they improved small details of each element of competitive cycling from cycling gear to the pillows used for sleeping.
“It works like this. Instead of buying your daily cup of coffee, put the equivalent amount in a savings account. Then compound it by 1% each day. That means you could improve your savings habit by roughly 37% in one year!”
3. Use your willpower wisely
Minimising your debt is vital to creating financial independence. But, many of us are concerned about our lack of willpower to do so, especially when it comes to that must-have-dress or sneakers. Research from Columbia University, suggests willpower is like a muscle, and like other muscles in the body, your willpower gets exhausted from overuse. Conversely, it can also be strengthened with practice.
“You’ve got to actively look for solutions, and orchestrate your life so that good habits eventually become easy. For example, change your spending limit or consider moving away from traditional means of credit altogether. Look for alternative, interest-free payment methods such as Payflex’s part-payment-plan that allows shoppers to pay over six weeks.”
4. Reduce exposure to triggers
Triggers such as time, location and mood act as catalysts to creating a particular behaviour. They are the key to forming new habits and breaking old ones. Focus on reducing your exposure to negative triggers such as unnecessary spending by removing yourself from certain environments.
“Bad habits are constantly reinforced by triggers. You need to break the negative habit cycle by reducing your exposure to potential triggers. Replace negative behaviour with healthier, more positive habits. Sometimes even a simple tweak can derail an entrenched unhelpful habit.”
It’s never too late to hit reset
Your money habits may be highly ingrained and you might think you can’t change. But, it’s never too late to hit the reset button and change your relationship with money. The maxim – “Motivation is what gets you started. Habit is what keeps you going” – rings especially true in this case. The key is to plan, prioritise and be prepared. And if you do fall back into your old ways, don’t be too hard on yourself, most people fail multiple times before they make it work.
Once you’ve identified the habit you want to remove and broken down the negative behaviour cycle, you are empowered to make lasting change!
It’s important that you are covered against life’s uncertainties, particularly those concerning your health. Speak to us via phone, email, social media or our website at www.sanlam.showme.co.za