How to Use Habit Stacking to Become Financially Free

Chihee Kim
Personal Growth
Published in
8 min readDec 22, 2020

Being financially literate is your ticket to making smarter, more informed decisions about your money

Photo of a financially free woman holding an umbrella while floating in the air!
Photo by Edu Lauton on Unsplash

A few years back, I was a disciplined pianist who would claim the winning title at piano competitions.

I had also racked up $150,000 in student loan debt.

Both of these feats (one considerably less impressive than the other) were because of my habits. I grew up playing the piano, instilling at a young age a sense of rigid discipline. I could thank my parents, albeit begrudgingly, for this skill set. Yet, practicing every day led to the piano becoming second-nature.

Inversely, I wasn’t practicing how to become financially literate. Personal finance wasn’t required in my school’s curriculum, like the majority of most schools in the United States at that time. Unequipped with the knowledge and skills needed to manage my money effectively, I spiraled down into a hole of debt.

And let me tell you, it was not a fun place to be.

It became clear that I had to become financially literate. Understanding the basics was how I could make sound financial choices so I could manage and control my money, instead of the other way around.

Fortunately, just like playing the piano, becoming financially literate is a skill. And like all skills, they are learnable.

The best way to adopt a new skill is to practice consistently. For something to be consistent, it must become a habit.

Learning about personal finance is a habit that can be weaved within your life like any other habit. It’s only a matter of using the power of habit stacking to integrate this new habit atop of the ones you’ve already established.

Habits Make Up Your Life

As keynote speaker Jim Rohn said,

“Your level of success will seldom exceed your level of personal development, because success is something you attract, by the person you become.”

The biggest outcomes in life seldom happen out of the blue. They are usually the result of our habits, actions that are deeply ingrained in our everyday routines. Performed consistently, these actions compound to have remarkable effects.

Certain habits are helpful, like brushing your teeth twice a day. Others not so much, like perusing Instagram late-night on the hunt for dopamine snacks before bed. Small habits can seem inconsequential, but over time they contribute to our personal development.

Habit Stacking

Identifying the habits you currently have isn’t as easy as it seems, because they’re taken for granted. This is because when habits are repeated over time, they become cognitively effortless.

Each time you repeat an action, your brain builds a strong network of neurons to support that behavior. The more you do something, the stronger and more efficient the connection becomes.

If you attempt to build a habit from scratch, chances are you’re setting yourself up for failure. It’s the same as building a penthouse in the middle of an abandoned field. It would help to have a solid foundation first.

Habit stacking seeks to take advantage of the connectedness of behavior. It’s exactly as it sounds like — “stacking” new, healthy habits over the ones you’ve already developed.

The general formula for habit stacking is:

After/Before [CURRENT HABIT], I will [NEW HABIT].

Certain examples could be:

  • After brushing my teeth, I will gargle with mouthwash.
  • After I wake up, I will meditate for ten minutes.
  • After I brew my cup of coffee, I will write my to-do list for the day.

You get the gist. It’s straightforward stuff.

The Importance of Financial Literacy

When people feel inclined to adopt healthier habits, they tend to default to the obvious such as exercise, mindfulness, or hygiene.

Don’t get me wrong: these are all viable pursuits. Yet, there’s little discussion when it comes to treating financial literacy as a habit that’s critical to our personal development. This is alarming when you consider that unlike meditation or exercise, you can’t really go a week without mention of how much something costs.

Yet, financial literacy’s absence in the cultural conversation is plausible. Currently:

  • The United States ranks №14 in terms of financial literacy, as financial education isn’t required at the majority of its public institutions.
  • Less than half of The United States (only 21 states) require a High School student to take a personal finance course yet the classes are rudimentary in their principles.
  • In fact, two-thirds of American adults can’t pass a basic financial literacy exam.
  • Money talk is considered taboo. People would rather spill details on their latest Tinder hookup before discussing credit card debt.

Being financially illiterate leads to real consequences. Without a proper understanding of how to make sound financial decisions, one won’t be able to navigate both major and minor life events.

Because let’s be real: big life events come with a hefty price tag. Consider paying for college, marriage, buying a house, and retirement. But it’s little moments and actions such as budgeting, saving, paying off debt, and investing that matter. Not doing these things can put you at a critical disadvantage and create a strenuous relationship with (or your lack of) money.

How to Use Habit Stacking To Learn Personal Finance

To use habit stacking to become financially literate, you’ll need to implement the following steps:

  1. Becoming aware of your finances
  2. Learning personal finance
  3. Explaining what you know

Becoming Aware

You’ll want to begin by becoming aware of your finances. This means measuring how much you’re spending, making, and saving. With this information, you’ll be able to make realistic financial goals for yourself, such as how much money you want to save up by next year.

Once you’ve laid everything out, you can see how money is flowing in and out of your life. You’ll have some surprising realizations, like coming to the conclusion that monthly Target binges or takeout nights aren’t doing you any favors.

At first, you might resist doing the work to manually type out your expenses. Yet what’s important to understand is that we don’t learn from our experiences (in this case, spending or earning cash). We learn from reflecting and internalizing these experiences. And in this case, taking the time to measure your money and see it all in front of you forces you to do some deep reflecting.

In this case, habit stacking could look something like this:

  • Before closing my laptop for the day, I will enter my expenses/income for the day in an excel spreadsheet.
  • Before buying something expensive, I’ll put in the “wishlist” excel sheet and wait at least 24 hours. (If you couldn’t tell, I’m a big fan of excel.)

These small actions make you become mindful of keeping tabs on your finances.

Once you’ve got a grip on how money is fluctuating throughout your life, you’re prepared to tackle the next step. AKA, the nitty-gritty of actually learning the basics of personal finance and how it applies to your current situation, as well as future financial goals.

Learning the Basics

Chances are, you think that learning about personal finance will be as exhilarating as watching paint dry.

I’m here to tell you that that’s not the case.

Once you begin to understand the fundamentals, you make the powerful connection between financial literacy and a higher quality of life. It triggers a reservoir of curiosity on how to make your money work for you.

There are a plethora of books, articles, and podcasts where you can begin to learn. But, the abundance of available resources can be overwhelming and time-consuming.

Not to mention, for habit stacking to be meaningful, you need a game plan. Learning about personal finance isn’t difficult but should be taken one step at a time. Saying “after brushing my teeth, I will learn to be financial literate” is like saying “after brushing my teeth, I will learn how to drive a motorcycle.”

Where do you even begin with something like that?

The key is to have goals that provide specific instruction of when and how to act. This helps turn the goal into a system where you can measure your progress. If your goal is to become financially literate, you’ll want to establish a system where you observe the learning process over time and build feedback loops.

One idea on this is to use Finny. Instead of diving into personal finance topics not knowing where to start, you’ll have digestible, short quizzes that teach you the essentials in a fun and curriculum-based way.

Here, habit stacking could resemble:

  • After opening my laptop at the beginning of the day, I will complete one five-minute lesson on Finny.

Once you train yourself on the essentials, you’ll then be better prepared to delve into the specifics of personal finance. For instance, if you’re keen on learning more about dividend investing, you can dive into books, articles and podcasts that will help round out all you need to know.

Over time, you become well versed in what parts of personal finance specifically apply to your life. Certain people need to know about tax-loss harvesting or gift tax. For others, it might be how to allocate funds within their 401K. But in the end, becoming financially literate enhances everyone’s quality of life and lets them make smarter decisions.

Explaining What You Know

As Albert Einstein once said,

“If you can’t explain it simply, you don’t understand it well enough.”

Try to tell a ten-year-old everything you’ve learned about personal finance. If you can do it, then congratulations: you fully understand it.

To practice this ability, you’ll want to chat with others who might not fully understand personal finance.

Here, habit stacking could look like:

It’s relatively easy to practice. And next time, you know that if someone is making something sound way harder than it actually is…

Then they probably don’t understand it very well.

And, there’s another bonus that comes along with learning personal finance: confidence. People who know how to manage their money, budget, save, and invest are in greater control of their lives. They have an improved relationship with money and are on the path to financial security and freedom.

If you’re feeling empowered by the ability to make financial decisions on your own, you should be seriously proud of yourself.

Final Thoughts

Becoming financially literate is a critical skill. I’ll argue it’s as or more useful than learning how to meditate, exercise, or play the piano because you use it without fail every day. Without understanding the basics of money, you might end up tens of thousands of dollars or more in debt (ahem..).

Holding the reins to your personal finances allows you to feel confident and decisive with your money. You make better, more informed decisions about avoiding debt, using the power of compounding interest, saving and investing to achieve financial goals.

To become financially literate, it only takes a small few habits at a time. Stack these new habits — tracking your finances, learning the fundamentals, explaining what you’ve learned — on top of your old ones. And soon enough, you’ll be on the path to financial literacy and freedom.

If you’d like to begin incorporating learning about personal finance into your habits, you can sign up for Finny for free here.

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Chihee Kim
Personal Growth

Co-founder of Finny, fruit gatherer, beach lover, and mom of 2 fun kiddos who are really good at ro-sham-bo!