Here are 4 tips how you are able to break your bad spending habits:
1. Identify Your Habits
To figure out how you spend, you have to identify your spending habits, that drive how you handle money. To take control over these habits, you have to identify them. And to do that, you need to look for patterns in your spending. Analyse your spending:
When do you spend? Is it more often on weekdays or weekends? Mornings or afternoons?
Do you make a few big purchases or a lot of small ones?
Do you spend more when you are with your friends or alone?
It won’t take long to find some basic patterns and those patterns will highlight the routines that shape your financial life.
What’s the cue for this routine? Is it boredom? Genuine needs like food and rent?
Do you spend to socialize or entertain yourself on your own?
Do you crave the things you buy, or the shopping experience itself?
To figure this out, you need to experiment.
2.) Look for Rewards
Rewards are powerful because they satisfy cravings. But we’re often not conscious of the cravings that drive our behaviours. To figure out which cravings are driving particular habits, it’s useful to experiment with different rewards. The idea here is you need to experiment with different rewards to figure out what you’re actually craving. Your spending habits are the same way: when you would normally spend, experiment by doing something else. By experimenting with different rewards, you can isolate what you are actually craving, which is essential in redesigning the habit.
3. Isolate the Cue
Experiments have shown that almost all habitual cues fit into one of 5 categories:
1. Location
2. Time
3. Emotional State
4. Other People
5. Immediately preceding action
Write down 5 things the moment the urge hits:
Where are you?
What time is it?
What’s your emotional state?
Who else is around?
What action preceded the urge?
Write down your answers to the five questions to figure out your habit’s pattern. After just a few days, it was pretty clear which cue was triggering my habit.
4. Have a Plan
Once you’ve identified the reward driving your behaviour, the cue triggering it, and the routine itself, then you can begin to shift the behaviour.
You can change to a better routine by planning for the cue, and choosing a behaviour that delivers the reward you are craving.
What you need is a plan. Your plan should look something like this: When I see CUE, I will do ROUTINE in order to get a REWARD.
Usually it does not work immediately. But, eventually, it gets be automatic. Then it has become a habit.
Your habits are automatic for good reason. If you had to think about every little thing you do before you do it, your brain would be exhausted.
But don’t let your brain’s natural shortcuts get taken advantage of. Give yourself a spending habit audit and follow above rules to break bad spending habits.
Sven Franssen