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Optimal Finance Daily - Financial Independence and Money Advice
3384: [Part 1] How to Create Sustainable Money Habits by Liz of FrugalWoods on Mindful Consumption
00:12:29
Liz from Frugalwoods lays out a practical framework for building sustainable money habits
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This is Optimal Finance Daily how to create Sustainable Money Habits Part 1 by Liz of frugalwoods.com Today's Make it easy to do the right thing with your money. A major focus of this challenge is enshrining healthy money habits for the long term. It's not good enough to do good with your money one month. You've got to do good with your money all the months. That's the only route to true improvement. Frugality can become your default, and you can train yourself to do the right thing with your money. It's about establishing habits that are easy to follow and that remove paralysis by analysis. I live my life according to habits and routines because without them, I'd be running around the house with baby socks flying out of the laundry hamper, braiding one kid's hair while the other kid eats peanut butter off dirty plates in the dishwasher. Just kidding. That happens anyway, but at least I have a routine for it. Routines for schedules. For money. For life. Listen, routine haters, the routine routinely saves my bacon. If it's not for you, I get it. But if you think it might possibly maybe be for you, hear me out. Routines create automatic pathways for how we live our lives. We can follow positive routines or negative routines. Science has proven this. My favorite podcast, NPR's Hidden Brain, recently aired an episode about building habits, during which I shouted yes. And jabbed my finger in the direction of the stereo. As psychology professor Wendy Wood explained, when we repeat an action over and over again in a given context and then get a reward when you do that, you are learning very slowly and incrementally to associate that context with that behavior. Eventually, that behavior becomes automatic to the point where we aren't consciously thinking about the behavior anymore. Many of the things we do every day fall into this category. About 43% of everyday actions are done repeatedly almost every day in the same context. It's very much like driving. We have this general sense that we're doing things, but it's not driven by an active decision making process. Extrapolating Professor Wood's findings, if we spend money every day in the same way, we're probably doing it without even thinking about it. All we need to do is reverse the habit and make not spending our automatic unconscious default Automate Reward yourself. Reiterate. In other words, do the same stuff every day and do the stuff you.
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Want to be doing.
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If you don't want to spend a lot of money, make it harder for you to spend money. Introduce artificial roadblocks that prevent you from spending on autopilot, such as the 72 hour rule. If you want to spend more time reviewing your finances and goal setting, make it a part of your weekly or monthly routine. Make positive money actions or inactions, as the case may be, unavoidable, easy to accomplish, and consistent Disrupt the Cycle the Uber Frugal Month Challenge is intended to disrupt your spending habits. If you used to buy coffee every morning at the same coffee shop on your route to work, the Uber Frugal Month challenged you to stop that habit and replace it with a new, less expensive habit, brewing coffee at home every morning and taking it to work in a thermos. By the way, I'm not saying that making your own coffee will save enough money to move the needle on your finances. Rather, I employ it here because it's a convenient, easy to understand example. Furthermore, the whole concept of the Uber Frugal Month is to identify as many of these coffee out expenditures as possible and to save on all of them. The total of all of these expenses is likely to tally up to something in the neighborhood of significant. So no, you're not going to reach financial stability by making your coffee at home. But if you couple it with canceling cable, switching your cell phone to a cheaper provider, canceling subscription services, reducing lunches out at work, decreasing dinners at restaurants, reducing your clothes budget, and so on, you're going to reach an actionable dollar amount. It's easy to fall into habits of spending, but it's possible to unwind those habits and thread new, less expensive routines into our lives. Identify Think through your typical day or week and identify every juncture at which you spend money. Disrupt for every money spending event you identify. Make a proactive plan for how you'll eliminate or reduce that expense. For each of these spending junctures, figure out if you can 1 eliminate it entirely or 2 utilize a frugal substitution. The coffee situation is an example of frugal substitution. You're not eliminating the expense, but you're reducing it by substituting homemade coffee for coffee shop coffee. Here are a few other frugal substitution bringing your lunch from home rather than buying it out elimination canceling a gym membership you're not using frugal substitution buying a dress to wear to a friend's wedding at a thrift store instead of new and a combination of elimination and substitution not drinking alcohol on certain days or weeks to reduce your expenditure in that area. I'll also note that it's usually not a good idea to change a ton of things at once. Choose one habit at a time and make that change stick. Research points to success being most likely when you change a small aspect of a habit. Using the mentioned example of making coffee at home, you could start by not buying coffee on Wednesdays. After a few weeks of successfully not buying coffee on Wednesdays, stop buying coffee on Mondays too. And so on until you're never or rarely buying coffee. Avoid temptations. We all have spending triggers and for the most part we know what those triggers are. Mine are almost entirely food related and so I try to make it easy to not spend money on food. The main way I achieve this I don't go into stores that sell food. Sounds ridiculous, but it totally works. Plus, Mr. Frugalwoods is an excellent grocery shopper and the one who does all.
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The cooking, so this is an all.
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Around win for us. Professor Wood, quoted in the New Yorker this time backs me up on the central force for eliminating bad habits is friction. If we can make bad habits more inconvenient, then inertia can carry us in the direction of virtue without ever requiring us to be strong. End quote. Furthermore, the path to breaking bad habits lies not in resolve, but in restructuring our environment in ways that sustain good behaviors. So if we can engineer an environment that doesn't take us past our favorite coffee shop on our way to work, or an environment that doesn't reinforce excessive consumption, we'll be less likely to buy the coffee and spend the money. It's no longer a question of resisting temptation. It's a question of the temptation not existing in the first place. None of this is rocket science. None of this is about sudden, radical transformation. It's about making incremental changes that add up and bear fruit over time. It's about crafting a life that shifts away from a consumer mentality and towards a worldview of simplicity and sustainability. This idea of removing temptations is about setting yourself up for success. For example, since my family tries to eat healthfully, we don't buy chips and cookies at the grocery store. If we had chips and cookies in our pantry, I would eat all of them, but since they're not there, I can't eat them. I've set myself up for not eating chips and cookies by not having them in the house. Figure out what your spending triggers are and then engineer an environment that supports your goals. To be continued. You just listened to part one of the post titled how to Create Sustainable Money Habits by Liz of frugalwoods.com I.
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See dell.com for details. If you've been listening for a while, you're well aware that improving your finances involves tracking your expenses, budgeting, spending less than you earn, saving and investing. It sounds so simple to say, right? If you want to have more money, then simply stop spending it. But how do you actually do that? I think it comes down to shifting your desires and mindset, and that's an intentional thing that I find I need to work on every day. It might be hard to believe when you have a spending problem that getting out of debt, saving and investing will provide the same satisfaction as buying new shiny things or spending money with abandon, but that has certainly been my experience and I think the key is to build more of a desire for freedom than you have for whatever is depleting your money. Today I had a friend back in New York City who was a fitness fanatic and also a ninja when it came to saving and investing. Whether she was talking about healthy eating and exercise or money decisions, she would always use the phrase find a greater want. I would think of this when my alarm would go off at 6am and I wanted to sleep in rather than go to the gym. I would remind myself that as much as I wanted to stay in my warm bed, I wanted the benefits of exercise much more. I was able to find the greater want when I was making a decision in that moment and it made it much easier to get out of bed. And that will do it for today. Have a great day and start to your weekend. Thank you for listening and I'll be back here reading to you tomorrow where your optimal life awaits.