What are Money Habits?

Habits are the actions you perform or decisions you take every day, as a part of your daily routine.

There are 3 kinds of habits you have.

1. MECHANICAL HABITS

You brush your teeth, you have a bath, you drive to work, have tea, coffee and your meals without thinking.

2. DISCRETIONARY HABITS

You make a choice. You exercise and eat healthy to remain fit. You dress in a certain manner and drive a certain car to declare your social status.

3. IDENTITY HABITS

You perform certain actions because you identify yourself in a certain way.

1. A shopkeeper bills me less due to a calculation error. When I realise it, I drive back three kilometres to pay the balance amount. It is because I am honest.

I identify myself as an honest person. I will not be true to myself if I do something else.

2. I dress formally because that is how people working in the finance domain are expected to dress.

I identify myself as a finance professional.

CAN WE CHANGE HABITS?

Yes. We need to do something different, till the action gets embedded in our daily routines.

Coaches talk about 21- 45 days to create a new habit. Actually, it may take longer than that.

Why should I do it?

What is the driving force to make me change?

I may start and discontinue after sometime, as it happens with gym routines or healthy eating habits.

Change will not happen unless there is a clearcut goal. The drive to achieve that goal should override all other reasons to break the resolution.

How should I do it?

· Identify the trigger points which make you act in a certain way. Change the triggers.

· You indulge in alcohol, cigars or junk food when your friends come over.

· Would you still do it, in the absence of friends?

· Understanding the mechanism right will help you in devising an action plan to overcome it.

What happens when I change?

· Does change have an impact on my identity?

· What will people say if they see me cycling to work?

· Change the identity.

· Do you like to be known as a fitness conscious person, or a prosperous person who owns a fancy car?

· What will someone think if they see me dressed casually?

· Let them think I’m a creative writer, an artist, a freelancer other than working in the finance domain.

· There is a difference between the following two sentences.

I’m trying to give up alcohol.

I am a teetotaler.

· In the latter case, a paradigm shift has happened. The identity has changed. Now, it becomes easier to adopt the new habit.

Money habits are often confused with spending habits.

Spending is an act which creates money patterns in our life. It is not the pattern.

We save money by deciding not to spend.

We spend money by deciding not to save.

How does one decision override another?

1. SUBCONSCIOUS IMPRINTS

Dorrit Karlsen, a Leadership by Heart Coach from Norway narrates this incident from her childhood. When she asked for a pair of expensive white boots, her mother told her she was not worth it.

The idea got ingrained in her subconscious. She finds herself spending on her home, family, dogs but not on herself.

Watch her explaining how behavior patterns about money get ingrained before the age of seven years.

Money habits get ingrained in childhood — YouTube

Soma finds herself buying only the best because her mother always derided those using cheap stuff — “Yuck, how can they?” At that moment, affordability does not matter. Living by a certain mental model does matter.

People buy larger houses than they can afford, and let the EMIs drain their personal finances, because they have set up a ‘minimum’ benchmark for lifestyles. The idea of dropping below that point is anathema.

Whatever the parents say in childhood, becomes our inner voice, but we are not aware of it.

2. WHY IS IT DIFFICULT TO CHANGE THOUGHT PATTERNS?

We do not go with the merit of an idea, facts or thoughts. We go with our sense of belonging to a certain tribe. It can be your community, family, social circle or anyone you admire and follow. Doing something that contradicts feels disloyal.

You want to belong. You don’t want to get thrown out of the tribe. So much of what we do in life is to maintain affiliation, to follow rules and not stand out like a sore thumb.

We wait for others to change, a few people to nudge us and then we may do something to change behavior patterns.

We go with the identity we have established for ourself.

Watch Rinku Bhardwaj talk about how she identified herself with her pay packet, and it dictated behavior patterns after she quit the job.

3. IS IT POSSIBLE TO CHANGE?

We need to become aware of the thought patterns that drive our actions first.

The course of action will go as follows

• Awareness
• Acceptance
• Identify triggers
• Reset response
• Develop a system
• Work in communities