Making lasting changes requires time, discipline and a dive into the psyche to figure out why, exactly, you handle money the way you do
But making lasting changes is easier said than done, experts say. Replacing ingrained, financially unhealthy habits with sound new ones requires time, discipline and a dive into the psyche to figure out why, exactly, you handle money the way you do.
Psychologist G. Alan Marlatt refers to it as retraining the brain. “You have to look at habits as learned behaviors,” says Marlatt, director of the Addictive Behaviors Research Center at the University of Washington in Seattle. “Bad habits are learned,” he says, “and they can be changed.”
Below, Marlatt and other experts discuss eight ways to retrain your brain into healthy financial habits.
1. Figure out your triggers. Foul moods and feelings of being out of control can set off bad habits, such as overspending. Judy Belmont calls it the paradox of control: Spending might lend a temporary feeling of control, but in reality, it’s irrational. Belmont, a psychotherapist and life-skills educator in Allentown, Pa., compares such behavior to screaming during an argument. “They think they’re in control, but they’re not,” she says.
To reveal triggers, keep a financial journal for three months, recording each purchase, including when and why it was made, says Buffalo-based author Cathi Brese Doebler. Doebler self-published her book, “Ditch the Joneses, Discover Your Family,” after successfully revamping her financial life to enable her and her family to live on one income. “If there is truly a problem, you’ll see a pattern,” says Doebler. Once you identify the pattern, you can catch — and stop — bad behavior before it happens.
2. Sort out “wants” versus “needs.” Kathy Nelson, a laboratory supervisor who lives in Pueblo, Colo., wanted to give her two daughters a private education. So she did, even though the public schools in her area have an excellent reputation. Nelson paid tuition with a check and put all her living expenses on a credit card. “I was coasting by,” she says.
Soon, Nelson coasted her way to $48,000 in credit card debt, most of it carrying a 24 percent annual percentage rate (APR). After talking with a credit counselor, she realized that while she wanted private school for her daughters, they didn’t need it — and it was destroying her financial future. She transferred the girls, now 12 and 9, to a public school, where they’re thriving socially and academically.
Nelson has whittled her credit card debt down to $10,000. Her daughters know why they switched schools, and as a result, they are much more conscious of money and its value. “When we buy ice cream, they get the kind that’s on sale, and they know that if we see a movie, that’s something special,” Nelson says.
3. Think first, act second. The longer you ponder an action before actually taking it, the more likely that action will be rational, experts say. Marlatt advises working through a four-part decision matrix, looking at the immediate consequences, positive and negative, of giving in to an impulse, then looking at the same set of consequences if the impulse is not indulged. Not only does the matrix explore every corner of a decision, it also eats up a buzz-killing half-hour, he says.
Visual cues can halt impulsive actions as well. Todd Mark stuck a picture of a famous mouse in his wallet to remind himself of his long-term financial goal: a trip to Disney World with his children. “Every time I opened my wallet, I looked at Mickey and thought, ‘Do I really need this extra DVD or Wii game or whatever?'” says Mark, vice president of education for Consumer Credit Counseling Service of Greater Dallas, a nonprofit agency.
4. Start small. When embarking on a new, healthier financial life, start with a small, manageable step. When Mark talks to his clients — who, on average, carry $28,000 in credit card debt — he suggests different strategies for paying off debt. “It’s not about what’s fastest or easiest,” he says, “but it’s the one that will reinforce you to stay on track.”
One strategy, called laddering, calls for making minimum monthly payments on all cards but one, and “throwing everything else at the one with highest interest,” Mark says. The immense relief they feel at finally paying off that high interest card gives clients momentum to continue on the path toward financial health.
5. Think positively. Words and phrases can mean the difference between success and failure when it comes to forming new habits. One example is the word “budget,” a favorite with financial planners. “It feels like deprivation, says Susan Hirshman, author of “Does This Make My Assets Look Fat? A Woman’s Guide to Finding Financial Empowerment and Success.” Hirshman, who lives in New York City, prefers “spending plan,” a term that helps consumers focus on what they can enjoy, not on what they can’t have.
6. Plan ahead. Make shopping lists, and stick to them. Another trick: Bring only enough cash to the store to buy what you need. Doebler goes so far as to advise giving not only children, but the adults in a household a weekly allowance. She also advises taking a trusted friend — the kind who will help you rein in habits, not the kind who encourages indulgence — along on big-ticket shopping trips.
7. Don’t become a Puritan. “People don’t like to be deprived,” says Belmont. Reward yourself for good behavior, such as finally paying off a car loan or credit card bill, with a small, controlled indulgence. The operative word, she says, is “controlled.” It needn’t be a Coach handbag. How about a nice pair of socks?
8. Work through setbacks. One tumble from the wagon — an extravagant impulse buy or a late credit card payment, for example — and it’s easy to say, “I blew it,” and then give up. Keep going, Marlatt says, adding that the first three months of any shape-up program are the toughest, and the highest risk period for backsliding.
Mark suggests a laser-sharp focus on the end result: More money in the bank, less worry about financial woes. He likens it to dieting. “Getting healthy might not be as much fun as sitting around eating dessert,” he says, “but you have to focus on how good it will feel.”