Unlocking the Secret to Financial Success: the Power of Habits
Thanks to James Clear’s extremely popular book, ‘Atomic Habits’, the study of habits has become a very popular topic in the last few years. Podcasts, blogs and the personal development field in general have all picked up on it and made it into a trendy topic to dissect and discuss. Personally, and despite having been in what seem to be a minority who have yet to read the aforementioned book, I been increasingly using the power of habit formation to solidify different health and money aspects into my life recently and they have become second nature. Some of these include:
Walking for half hour daily , for a min of 5 days a week: ever since Covid lockdowns were imposed in March 2020, I stopped going to the gym and never been back since. I replaced that with walking, and hiking in the summer. My walks have been such an integral part of my life, that I currently have an amazing 1,000+ day move streak on my Apple Watch! I couldn’t have set such an amazing streak without the power of habit formation, where something becomes almost automatic and not much effort or thought goes into starting it.
Flossing at night : while I have always took great care of my teeth, including period visits to the dentist, flossing is something I was never consistent with. No more. After coming across this article, and applying what I know regarding habit formations, flossing has now become a daily thing since Jan 1st of this year and I have never skipped a day.
Doing 15 push-ups a day: this actually started last year, where I started with 10 pushups a day, and increasing it by 1 every month, so that by December, I was going 22 pushups a day. This made it into a daily habit, so for 2023, I have been a daily count of 15 pushups and I have yet to skip a day.
Applying the power of habit formation to further our finances
The power of habit, once automated, is a force to be reckoned with, . Habits are the actions we take every day, whether we realize it or not. They can either push us forward or hold us back. When it comes to finances and money, habits can be the difference between living paycheck to paycheck and building wealth for the long term.
To start, one of the most important habits to cultivate is saving money. Saving money can be difficult, especially when we live in a culture that encourages us to constantly splurge and spend. However, by making saving a habit, we can set ourselves up for financial success. But how? One way to do this is by automating our savings. Most if not all banks nowadays offer automatic savings plans that allow us to set aside a certain amount of money each month. By doing this, we don’t have to rely on our willpower to save money. It becomes a habit, and before we know it, we have a substantial amount of money saved.
Another important habit is tracking our spending. It can be easy to lose track of where our money is going, but by keeping track of our expenses, we can identify areas where we can cut back. This can be as simple as using a budgeting app or writing down expenses in a notebook, but the latter is not as popular these days due to the advent of apps which makes tracking easier.
In addition to saving and tracking our spending, investing is another habit that can lead to greater wealth. Investing can be intimidating for those who have never done it, but by starting small and consistently investing a portion of our income, we can build a portfolio that will grow over time. What matters is taking that first step, automating it, and then forgetting about it for the most part, other than an annual or semi-annual review and making adjustments if needed.
It’s important to note that building wealth through habits is a long-term process, requiring patience, and not something that will happen overnight. But what is virtually guaranteed is that by consistently practicing good financial habits, we can set ourselves up for success in the future.
One example of the power of habit in action is the story of Warren Buffett. Buffett is known for his incredible wealth, but what many people don’t realize is that he built his fortune through consistent, disciplined habits.
Of course, developing good financial habits is easier said than done. It can be difficult to break old habits and develop new ones. However, there are a few strategies that can make the process easier.
One strategy is to start small. Trying to completely revamp our financial habits overnight is a recipe for failure. Instead, we should focus on developing one habit at a time. For example, we could start by automating our savings and then move on to tracking our spending. Another strategy is to find accountability. Whether it’s a friend, family member, or even a financial advisor, having someone to hold us accountable can make a big difference. These can help us stay on track and offer support when we need it. Last but not least, it’s important to recognize that this requires patience. Developing new habits takes time, effort and dedication. We will likely make mistakes along the way, but it’s important to stay focused on our long-term goals.
In conclusion, the power of habit is a powerful tool when it comes to building wealth and be financially independent. By developing good financial habits, such as saving, tracking our spending, and investing, we can set ourselves up for financial success. While it may be difficult to break old habits and develop new ones, with time, effort, and patience, we can build the habits that will lead us to a more secure financial future.