you probably don’t need convincing of either the value of creating a golden financial situation, or the methods by which we pursue it. Understand and optimize your spending with happiness as the prime directive, while improving the rest of your life and increasing your ability to earn money as a side-effect.
First is the issue of basic financial knowledge itself. Most of your neighbors believe that borrowing money for cars and kitchen renovations is a perfectly reasonable thing to do, a 5-10% savings rate is admirable, and credit cards are a way to borrow money when life’s little expenses temporarily outpace their salaries. With assumptions like these, wealth will always prove unattainable.
But even with a solid understanding of financial concepts, you still have to get over an even bigger hill: changing your behavior in a way that sticks.
After all, we already know that to get rich on an average income, you need to have lower-than-average spending.
But to use just one common example: But a big part of average spending goes into car ownership. So that will be one of the first things you’d want to address, by doing less pointless driving around in your car, right? But you’ve become very comfortable with habitual car trips.
It will mean making fewer visits to restaurants, bars, and coffee shops. But that has become a pleasant and comfortable habit too.
Booze, drugs, cigarettes, TV watching, video game playing, procrastination, unhealthy eating, sedentary living, convenience and comfort-seeking and unnecessary shopping are other habits that are widespread in US society. And most of these stand between the average person and a truly wealthy life as well.
Recently, some important heavy iron plates of missing knowledge have been clunking into place in my mind, due to a string of really interesting practical psychology books I have read in recent months. Blink, Nudge, The Tipping Point, 59 Seconds, Switch, and most recently The Power of Habit, which is a great book.
As simple as it sounds, the missing piece has been the concept of habits, and how ridiculously important they are to the human life – every human life.
If someone asked you to define “habit”, what would you say? Until recently, I probably would have said something like “a repeating pattern of behavior, which is hard for some people to change, and easier for others. And the ability to change habits is sometimes called “willpower”.
But I was surprised to learn habits are much more than that. As it turns out, habits are little chunks of auto-pilot behavior that get burned right into your neurology – permanently. Once you develop a habit, you can never truly erase that groove that has been worn into your brain, even if you manage to deactivate it.
It gets even crazier than that: when your brain starts running one of its many habit scripts, a good part of your conscious judgement is shut off for the duration. The habit takes over, controls you until you get to the end of the script, and then dumps you out at the end.
and this is not just a rare occurrence – depending on who you ask, habits are in at least partially in control for between 50 and 90% of our waking hours.
Consumer marketers have been all over the concept of habit formation, as it is the basis for much of the sales and profits in the world’s vast Unnecessary Products industry. But now the cat is out of the bag, and the fruits of this scientific study are available for you to use to your own advantage, instead of Coca Cola and Apple just using them on you.
If we can gain a more accurate understanding of what habits are and how to change them, we can get much more control over our own lives. And the studies that figured all this out have been fascinating.
Arranging your towels and clothes, starting the shower, and going through the full routine of washing and drying yourself is probably one good example of something you do automatically.
Reversing a car out of your driveway or driving or biking very familiar route that you’ve done hundreds of times is another.
Coffee drinkers (myself included) are certainly familiar with the process of habit formation. And smokers can be some of the modern world’s most dedicated creatures of habit.
And it goes beyond that. The way the average person responds to certain luxury products and makes purchases is highly habitual as well.
- Need to go somewhere more than a block away? Grab the car keys.
- Hungry at work? Head out to one of the usual restaurants.
- Have a problem with your house? Begin worrying immediately as you try to find a professional who can fix it for you.
- Uncomfortable or Inconvenienced? Find a product to address it.
And here we get to the meat of the issue as it pertains to financial success: because habits become so automatic, they become effortless. This is a bad thing if the habit is destroying you, but wonderful if the habit is a life-boosting one.