Breaking Bad Financial Habits
Executive Summary
We all have bad financial habits. Every day we have a choice to continue with these habits or to break the cycle. It is not easy, but a habit breaking process gives you the best chance of success. Lawyers who implement such a process have a better chance of achieving financial success. This process includes recognizing undesirable habits, replacing them with better habits, avoiding pitfalls along the way, and accepting failure as part of the process. Habits take time to replace, but doing so leads to better financial outcomes.
No one is perfect. Especially when it comes to our finances. When you reflect on your own financial decisions, can you think of any bad financial habits you want to break? Some examples of bad habits can be:
Spending too much money
Failing to say no to things
Missing important payments
Too focused on spending in the present and not saving for the future
Too focused on saving for the future without enjoying the present
Not sticking to a spending plan
The truth is that we can all make better financial decisions in our lives, but often our bad habits may lead our behavior astray.
So how do we break these bad habits to make better financial decisions?
Implement a habit-breaking process!
Recognize Your Bad Habits
The first step in breaking a bad financial habit is recognizing those which do not benefit you. There are both good and bad habits. We want to encourage good habits and replace bad habits with good ones. Bad habits are difficult to cut out. But each bad habit has a purpose. Removing the bad habit will not lead to it going away forever. To give yourself the best chance of breaking a bad habit, you need to replace it with a good one.
Find a Good Habit to Substitute
We all recognize when we have a habit that is not helping us. We consider it a bad habit because it usually does not align with the outcomes we want in our lives. But these habits start as a way to fulfill something in our lives. Removing it often leaves a need unfulfilled.
If you ignore the need that the bad habit was fulfilling, you will likely go back to it later. You have a better chance of breaking a bad habit by replacing it with a good one.
Take an example of a bad habit where a young lawyer always spends too much with their credit card. A good habit may be to set a spending limit for each paycheck period. A good replacement habit is to withdraw a certain amount of cash for spending. Then the lawyer holds themselves to spend only the money they have on hand. This new habit doesn’t cut out spending. It replaces it so that the young lawyer cannot overspend with their credit card.
Cut Out Triggers
Anyone with a habit usually has triggers that cause us to lean on the bad habit. A strong will can overcome many temptations, but less of your willpower is needed once you remove the trigger.
For young lawyers who shop too often on Amazon, it can go a long way to unsubscribe from Amazon emails and remove the Amazon bookmarks on their browsers.
Avoiding triggers is a challenge of breaking a bad habit. Often these triggers are a part of our lives. Removing them may mean cutting out something that you enjoy in your life. This removal can be difficult, but if you are serious about breaking your habits, then you will do it.
Give it a try! Reflect on your bad habits that you want to change and think about which triggers in your life encourage you to lean into these bad habits. How can you remove these?
Once you identify the triggers and consider how to remove them, then do it. You may find that it isn’t just one trigger but multiple triggers. Try your best to remove all of them.
You may find that it is impossible to remove all triggers. If ads are a trigger to shop, it’s nearly impossible to avoid all ads. Even ad blockers cannot block everything. Instead, be aware of these triggers and try to mitigate them as well as possible. Every little bit helps.
Automate
Bad habits become bad habits because we lose self-control at times. One of the best ways to overcome these shortcomings of self-control is to remove yourself from the process entirely.
We live in a time where computers are capable of taking commands and implementing them on our behalf. Use that to your advantage!
Many lawyers struggle to save enough. One good habit is to automate an automatic transfer to your savings account every payday. This automation transfers money automatically to your checking account before you have an opportunity to put it towards something else.
Automation allows you to replace a bad habit, remove triggers, and save yourself time.
It is one of the most effective ways to break bad financial habits.
Surround Yourself with Supportive People
It’s surprising how much of our spending is influenced by the people around us. When lawyers spend time with people who live more lavish lifestyles, there is a perceived need to keep up. The perception leads to spending more money than you may spend outside of this group of friends. Lawyers who surround themselves with frugal people are more likely to save more and do less expensive activities.
Who you surround yourself with does impact your financial habits. Especially early in your life as a lawyer. The people you surround yourself with today and the habits you establish early are likely to persist over your life.
Be intentional about the people you interact with regularly. If you don’t have people in your life who live a more saving-conscious lifestyle, you can also lean on a financial planner to support you. As a financial planner, I want to see every one of my clients achieve their financial goals. I fully support my clients in making better financial decisions.
If you need someone to be supportive, reach out. We don’t even have to work together, but I can be there to send you support messages. Anything to help you financially is something I am willing to do.
Visualize Yourself Succeeding
Visualizing your goals helps when you attempt to break bad habits. Triggers are a powerful force when it comes to bad habits. Visualizing success is a trigger in the opposite direction.
If your financial dream is to own a home, but you struggle each month to put money towards your down payment, visualizing that home can be a powerful reminder to save more. Your visualization can be a printed-out Zillow ad for a house you want to own someday. It can be a daily reminder to save money that you can transfer to a savings account. Whatever helps you visualize your success is worth adding to your process.
Accept That You Will Fail, And That Is Okay!
Failure increases the chances of breaking a bad habit and falling back into your old habits. The key is not to avoid failing. The key is to embrace failure as part of the process. No one is perfect, and life will be a series of wins and losses.
When you fail, you have to determine how you will respond. Will you give up on breaking the old habit because it is too hard? Or will you reflect on why you failed and do something about it?
When you fail, take your failure and refer to one of the steps above. Then determine if there is a way to avoid the same pitfall in the future. Implement your solution and get right back to breaking your bad habit.
Failure is fine. Failing to learn and retry is the actual failure when attempting to break a bad financial habit.
One helpful principle is the Lindy Effect. It is a principle that states that things that have been around for a long time are more likely to last for a long time than newer things. Take music as an example. Music has been around for thousands of years in some form or another. Music will likely continue to be a part of the human experience for another thousand years.
This principle applies to habits too. If a bad habit has been happening for years, it is more likely to continue to be a bad habit than a new good habit you just implemented to replace it. The trick is acknowledging that your new good habit will benefit from the Lindy Effect. Two days of breaking the bad habit and replacing it with a good habit makes it more likely to continue to succeed the next day. Each successive day of breaking the bad habit and using the new good one makes it easier to continue.
Bad habits are broken one day at a time. Keep up the momentum, and don’t regret starting again if you fail. You can and will remove those bad financial habits.
Final Takeaways
We all have bad habits, and you should not be ashamed. Instead, they are a challenge we can overcome to make better financial decisions.
After creating a process to break your bad habit, you are more likely to find success. This process can include:
Recognizing your bad habits
Identifying a good habit to replace your bad habit
Cut out triggers
Automate your new good habits
Surround yourself with supportive people
Visualize yourself succeeding
Accepting that failure is part of the process
Breaking away from bad habits and filling your financial life with good habits improves the chances of experiencing good outcomes.
Bad financial habits are a part of every financial life, including my life! For years my bad habit was to over save and never spend on my current life. It is still a bad habit I work hard to fix, but I am improving. This process is a product of my experience, and it has worked for me. If you are serious about your finances and want assistance in breaking your bad financial habits, I can help. The Developing Financial Process takes into account your current financial situation and habits. Then we craft a vision for what an ideal financial future looks like to you. Once we have this vision of success, I support you in replacing bad habits with good habits, removing triggers, and automating as much as possible. There will be times when we fail, but I will be there to support you and hold you accountable to continue making progress. Take the first step towards breaking bad financial habits by talking with a financial planner. I am here to be a resource for you. Our first meeting can be a 30min chat about your finances. This Meet & Confer is the first of two free meetings I offer, so you can be assured that I don’t use this meeting to sell to you. If you are interested in this, schedule a Meet & Confer today!
Disclaimer: Nothing in this blog should be considered financial advice or recommendations. Your questions are unique to you and your own personal financial circumstances. You should consult with a financial professional before making a financial decision. See full blog disclaimer.