4 Steps to Build Better Money Habits

In our last blog, we talked about changing subconscious habits instead of using pure willpower to save money. It takes desire and focus to change, but once the new habit is on automatic pilot, it takes less effort than sheer will power.

A habit loop is comprised of a Trigger, Action and Reward. (1) Charles Duhigg, author of a very interesting book called The Power of Habit, provides the following framework for reshaping bad habits. In our last blog we suggested you analyze your morning coffee habit to get a feel for the process. Our example has been placed in Duhigg’s framework:

1. Identify the Habit/Routine You Want to Change

I love going to the local coffee shop to buy a large size coffee, often a latte or cappuccino, first thing in the morning. I would prefer to save money but tend to really need my coffee and it is convenient.

2. Identify the TriggerLatte_with_Cinnamon

The Trigger drives the habit. Charles Duhigg recommends you ask 5 excellent questions to identify the Trigger and help identify a pattern:

  • Where are you?
  • What time is it?
  • What’s your emotional state?
  • Who else is around?
  • What action immediately preceded the urge?

My trigger seems to be first thing in the morning after I get off the train. I’m trying to integrate myself into the energy of the day, and I need coffee.

3. Experiment to Discover the Real Reward

Since I’m a social creature, the hustle and bustle in the coffee shop makes me feel alive after a quiet train ride. Plus, my commute is pretty long so I deserve a treat, and really great coffee, with maybe a touch of cinnamon, is my reward for travelling a long way so darned early in the morning. So is it the social integration, the great coffee treat, or something else driving this money habit? Here is how I dissected my reward.

a) Went to the coffee shop and ordered tea instead. Need….coffee…

b) Drank the coffee from a street vendor. Need…REAL…coffee. And, I couldn’t settle down to work.

c) Bought a coffee machine and made my chicory coffee from home. Yum. But couldn’t settle down to work.

4. Create Your New Plan

I learned I didn’t need the latte or cappuccino –that was a tempting upsell and wasn’t helping me save money. Good coffee was good enough, and still important. I also learned that I am a social creature and need to visit with people before I roll up my sleeves and get down to work. 

I now make my own robust coffee to start the day off right. I walk out of my office with cup in hand and say good morning to my staff and co-workers. I still socialize and enjoy their morning energy, while having a good cup of Joe and saving a few bucks a day.

(1) MIT researchers defined the habit loop and refer to it as a Cue, Routine and Reward.

This blog is appropriate for all money personalities. 

Get My Money Habits

 Information shown is for illustrative purposes only and is not intended as investment, legal or tax planning advice. Please consult a financial adviser, attorney or tax specialist for advice specific to your financial situation. Behavioral Cents, LLC and any third parties listed, linked to or otherwise appearing in this message are separate and unaffiliated and are not responsible for each other’s products, services or policies.

 Carrie Rattle is a Principal at BehavioralCents.com, a web site for women focused on the mind and money behaviors. She has worked in the financial services industry for 20+ years and hopes to inspire women to better prepare themselves for financial independence. Thoughts always welcome: carrierattle@behavioralcents.com.

Categorized as BC Blog

By Carrie Rattle

Carrie Rattle is a Principal at BehavioralCents.com, a website for women focused on mind and money behaviors. She has worked in the financial services industry for 20+ years and hopes to inspire women to better prepare themselves for financial independence. Read More