Applying Atomic Habits to your finances
Atomic Habits by James Clear has become a phenomenal international bestseller. It's also a popular read among the Waymaker community.
The book centres on the stages of habits, the driving forces behind them and how to break bad habits and adopt good ones.
The big idea James unpacks is how minuscule changes can grow into such life-altering outcomes.
This is true for our finances. Our money habits, both good and bad, have a compounding effect over our lifetime. Changes that seem small and unimportant at first will compound into huge results, if you’re willing to stick with them over time.
Drawing from James insights, here's how you can apply Atomic Habits to your finances:
Track your money
If you can't measure it, you can't change it. Use tools to track your spending and allocations, so that you can keep on-track with your goals.
When you know where your money is going, you’ll discover ways to spend less as well as find motivation to stick with your habits.
eg. saving and investing goals.
“The mere act of tracking a behaviour can spark the urge to change it.” - JC
Make good habits easy
In the book, the '3rd Law of Behaviour Change' is make it easy. If a new habit is too big and difficult to start, you'll struggle to adopt it. Ultimately, change isn't easy… but it can be easier, by leveraging habits.
Reduce the friction associated with good behaviours and increase friction on the bad ones.
Overspending at shops? Leave your credit card at home (or put it in the freezer)
Instagram causing FOMO? Remove the app from your phone
This is where automation helps. If you want to become an investor, set up an auto-transfer at the start of each pay cycle to your investment account - whatever that may be. This removes the tension of spending the money that you can see in cash bank.
“Success is the product of daily habits—not once-in-a-lifetime transformations.” - JC
Focus on environment
James outlines how motivation isn’t as important as environment when it comes to success. Environment is the ‘invisible hand that shapes most human behaviour’.
You take your habit cue’s from your environment. It’s easier to form new habits in a new environment, because the old cues are gone.
eg. Switching banks can help your reset engrained habits that came with your old bank, like using a credit card or redrawing on your home loan.
Tips to cultivate your digital/physical environment:
Slim down your wallet (remove store cards, credit cards)
Unsubscribe from shopping newsletters and apps
Stick a written shopping list to your fridge
Adjust screen limits on your phones, TV and devices
Buy a gratitude journal to track the daily/weekly wins
Join the Waymaker Facebook Group
"Gradually, your habits become associated not with a single trigger but with the entire context surrounding the behaviour. The context becomes the cue.” - JC
Build systems
You don't rise to the level of your goals... you fall to the level of your systems.
“If you’re having trouble changing your habits, the problem isn’t you. The problem is your system. Bad habits repeat themselves again and again not because you don’t want to change, but because you have the wrong system for change." - JC
Habits are a component of a system. If you want to change your finances, create a financial system that enables the practice of daily habits that compound growth. Remember, it's not just about what you want to achieve, but on who you want to become.
Go slow, but never backwards
Learning comes from practice, not planning. To get motion, you have to focus on taking daily action.
"Habit formation is the process by which a behaviour becomes progressively more automatic through repetition" - JC
Focus on daily repetition. Too often we chase the big win or overnight success. But real growth doesn't work that way. It takes patience.
Little by little, your everyday actions will compound into remarkable results.
eg. Sticking to your budget, paying off debt, allocating money to investments and saving goals.
Wrapping up...
Habits are the 'compound interest' of self-improvement. Creating better habits is a process we can all start today. You don't need a degree, just self-awareness and support. Find a friend, speak to our Advocates and join a community to keep you encouraged along the way.
Remember that "minuscule changes can grow into such life-altering outcomes" when you expand them over a lifetime.
Keep moving forward, one atomic habit everyday.
