”Habits can be the compound interest of self-improvement” James Clear
This phrase really resonated with me as I listened to Atomic Habits by James Clear while driving through storm Ciara in my Fiat 500.
I thought driving in essentially a tin can while the wind whipped past was risky but, a lack of financial discipline is WAY more scary. It is no surprise to those of you that know me that I have been putting off doing my financial homework from my financial advisor, knowing deep down my habits don’t always compound for the good of my bank balance. Repeating poor decisions, rationalising poor excuses and financial errors day after day is why my bank balance looks like it does- wiped out like the garden furniture, fences and trees post storm.
Having a lack of financial resources is a HUGE barrier for us in whatever we want to do in life; career change, travel, support our family, the list is endless. I am so done being stuck in the mud. Time to reframe the situation and here is how I’m starting to do it.
Think about who you want to become
I want to be debt free and able to weather a personal storm if I couldn’t work for say a year. But, I keep circling round the debt drain of just enough at the end of month to pay the bills. Sound familiar?
This is a classic mismatch between my desired identity- a financially secure and prosperous freelancer and my reality.
So, I ask myself what is the behaviour of a person who is financially secure? What are the behaviours of financially prosperous freelancers? I have a few thoughts, but answers on a postcard please :)
Behaviours are just a reflection of your identity and if you believe in that then you will take steps to verify it. Identity is just repeated “beingness”. Every action you take is a vote for the type of person you want to become and small habits can make a meaningful impact on your identity.
Gain awareness of your current reality
Keep a score card of your habits against the type of person you want to become. The trick here is to be mindful, don’t blame yourself for your current financial faults (getting a taxi when you could get the bus) and don’t praise yourself for your successes (not buying your dog yet another present). Call yourself out and note it out loud. This will increase the odds of you taking positive action and forming habits to give your desired identity the evidence that you are becoming that bad-ass finance female (in my case anyway).
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Compound interest with minimal viable actions
My less than ideal reality is not due to poor goals but poor processes or habits. The improvement we can make in our lives by just continually investing an extra small bit over time is astounding and this is true for everything: money, energy, education you name it.
Goals are good for setting a direction but systems help with the habits that get you to that goal. I don’t want to just be financially secure (the goal) I want to be a saver and considered spender. We want to keep the habits going long after the goal has been met and help eliminate the yo-yo effect that we commonly experience when we reach a desired outcome and then subsequently stop the helpful actions that got us there.
So, here comes new rules for using uber and eating out! I’ve scraped the subscriptions that feed my laziness. This is already freeing up finances to redirect into financial habits that help-financial solutions (income protection), savings and investments.
The problem is though if you are like me, you love an instant result. Unfortunately, most financial habits are all about the long game. Acceptance that I don’t have to do earth shattering improvements right now is actually a huge comfort and helps me take that ostrich neck out of the sand.
“Be more concerned with your current processes than your current results. A millionaire who is over spending will become poor very quickly! Cultivate a systems approach mentality of process over product. This means you will be happy while you are working towards your goal and not only happy when you reach it.”
Take away decision paralysis
While you are starting on your new habit formation journey have a look at what you can automate. I am trialling Plum- the AI assistant that grows your money (or at least that’s what it says on the tin). It does it by analysing your spending and sets aside a pot for you, every time. It will even round up your spare change. You can check it out here.
It sometimes helps to take our emotions out of the picture too. Imagine you are the CEO of your company. And that company is you. Would people invest in your company given your financials? If not, then join the community and our financial professional partners can help you switch that answer to a yes!