"First forget inspiration. Habit is more dependable. Habit will sustain you whether you’re inspired or not."
- Octavia Butler
Most of our lives are dominated by our habits and it holds true even for our finances. As per a study by the Duke University, habits (actions that tend to repeat themselves) make up around 45% of our daily behaviours. So naturally, if we want to change aspects of our financial lives - save more or cut unnecessary expenses or pay bills on time - then the best way to go about it would be to modify our habits.
The good news is that habits are relatively easier to form and sustain. And you don't have to make drastic changes at once - you can start small and build on sustaining those good financial habits over time.
So what are the 3 simple things you can do to improve your money habits?
Start with Smaller Changes
We all have made lofty new year resolutions at some point or the other and failed to keep them. That essentially shows that making drastic changes overnight is hard and unsustainable in the long-run. The trick is to start small to make a habit stick.
Have been thinking about saving money? Initially start with Rs 10 everyday for a month and then gradually increase the amount. Or if you are struggling to pay off your debt then start with repaying the smallest debt first before moving to the second smallest.
This method is called the 'snowball method' and can keep you motivated to gradually clear off all your debt.
The same method can be applied to your emergency fund. Ideally, you would want to have at least 3–6 months' worth of living expenses in your emergency savings. But this can seem overwhelming when you are just starting off. So set out a smaller target initially and work towards achieving it. This way you will want to keep up your savings momentum and make savings a habit.
Scale Your Financial Habits Gradually
Once you get into a habit of practising simple money habits - like saving Rs 10 everyday or reducing unnecessary expenses - then you can gradually start building on it.
Starting with bigger changes and failing to achieve them can be detrimental to your progress. And it is difficult to sustain drastic changes in the long run.
Psychologists suggest that "on average it takes about 66 days to turn even a small change into a routine habit. And even tiny changes can have a ripple effect that eventually creates big results."
So every time you make an effort to save money everyday, no matter how small an amount, you are making bigger progress on making savings a part of your daily routine and habit. Similarly, you can start putting away 1% of your salary in your emergency fund. And every time your pay increases, you can increase your contribution.
Also read: Why Saving Money Is Super Simple
Iterate As and When Needed
No plan is foolproof so you are bound to be faced with setbacks on your financial journey as well.
Maybe you missed saving on some days or bought an expensive item derailing your month's budget. It's okay. Make a note of your mistakes and get back on track as soon as possible.
Consistency is key while making changes to your financial habits so it is important that you learn from your mistakes and commit to your goals to get back on track.
You can also list down probable setbacks that you think would deter you from your financial goals and try to work around these issues to avoid any nasty surprises.
As Colin Powell puts it, "If you are going to achieve excellence in big things, you develop the habit in little matters."
(Check out 'Learn & Grow with Wizely' to read and learn all about personal finance and financial planning.)