Habits and Keeping up with the Joneses

04.08.2016 |

Episode #8 of the course Financial wellbeing: How to worry less about money by Maureen McGuinness


Continuing from yesterday’s lesson, today we’ll go through remaining behavioral hurdles that, once managed, make financial capability more achievable.


Harmful Habits

We are the sum of our habits. Since our habits, developed through repetition, are often unconscious, we can be unaware of behaviors that negatively affect our finances.

Habits consist of a trigger, routine, and reward. Many of us don’t consciously brush our teeth. We brush our teeth because we’ve developed the habit. We may be triggered to brush our teeth because we see our toothbrush at our sink, or we always brush our teeth after we’ve put on our clothes in the morning. Brushing our teeth has become unconscious. Brushing our teeth is a habit that’s good for us, as it helps prevent future dental issues.

What about habits that harm us? The problem with harmful habits is that repetition of habits that negatively impact our finances compound over time.

Example: Spending all of our paycheck every month.

How to overcome harmful habits:

1. Audit your habits
Write a list of all of your habits. Divide them by whether you think they positively impact or negatively impact your finances. For all those that negatively impact on your finances, identify what triggers the routine and what reward you’re trying to seek. You may find that the reward is just instant gratification, but if it’s something else, consider other ways to address that reward without spending money.

2. Organize your environment
Triggers are often in our environment. I exercise regularly because I see my workout clothes next to my bed that I laid out the night before. When I see those workout clothes, I know I will work out that day. If you have junk food in the house, you’re more likely to eat it. If you find yourself spending mindlessly on your credit card, try freezing it in a bowl of water. That way, you can’t use it for impulse spending.


Social Norms

We often replicate the behavior of our peers in an attempt to “belong”. Sometimes dubbed “keeping up with the Joneses,” we are persuaded to buy a bigger house when our friends buy a big house.

Example: Purchasing a sports car to impress our friends. Spending more than we can afford to keep up an air of wealth.

How to overcome social norms:

1. Ask yourself whether you’d buy this if you couldn’t tell anyone about it
A lot of our purchases allow us to show others what we can afford, even if we’re paying for those items on credit. If you had to keep big expenses like a new car or big house a secret, would you still be as keen to purchase it, knowing that none of your friends would see it?

2. Join groups where saving is the norm
Forum members on the UK site, MoneySavingExpert.com, share their savings goals and progress with each other. For them, the norm is to save more and more, instead of spending more and more.


Recommended book

“The Paradox of Choice: Why More Is Less” by Barry Schwartz


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