When people talk about smart money management, the conversation usually revolves around making and sticking to a budget or setting funds aside in retirement or college accounts.
However, some people say there may be more to having stable finances. “Life consists of more than one domain,” says Michael Hyatt, co-author of “Living Forward: A Proven Plan to Stop Drifting and Get the Life You Want.” “It’s not that you can just compartmentalize your life.”
By gaining control of one area of life — whether that be through weight loss, decluttering or downsizing — it may be possible to use that as a catalyst to master money as well.
[See: 10 Painless Ways to Save More for Retirement.]
Getting organized from the outside in. Gretchen Rubin, author of “Better Than Before: Mastering the Habits of Our Everyday Lives,” says one of the secrets of adulthood is that “outer order contributes to inner calm.” In other words, once a person has cleared his desk or closet, he may find it easier to tackle other projects, including finances. “If they clean up their environment, it clears up their mind to deal with more complex tasks,” Rubin says.
Rubin isn’t alone in making this argument. Sarah Fallaw, founder and president of Data Points, agrees that seemingly unrelated factors can play into financial success. Fallaw’s company uses analytics to help clients create wealth and builds off the research of her father, who published the influential book, “The Millionaire Next Door.” “Someone who has successfully lost weight, for example, might be able to take some of those same skills, such as monitoring progress, impulse restraint and focusing on long-term outcomes, and apply them to financial management,” Fallaw says.
From a practical standpoint, mastering non-financial areas of life may have a direct impact on your money. For example, when a desk is cleared of clutter, it becomes easier to keep track of paperwork and bills, which can, in turn, can mean fewer late fees or other costly mistakes. Those who lose weight may find their health bills shrink as well. “At the very least, our mindset is critically important,” Hyatt says. “When we’re getting adequate rest and nutrition, we’re going to be in a much better place to take care of our finances.”
Personality type a factor. It may not be a coincidence that those who do well in one area of life also have their finances under control. Daniel Crosby, a psychologist and author of “The Laws of Wealth: Psychology and the Secret to Investing Success,” says a person’s personality type is key.
People have traits that cross five dimensions — extroversion, openness to experience, neuroticism, agreeableness and conscientiousness — according to one popular model of personality. Of these, conscientiousness may be most linked to having a balanced bank account.
“Not surprisingly, people who are the most thorough and careful in other parts of their life bring that to their financial lives as well,” Crosby says. However, that doesn’t mean those with low levels of conscientiousness are destined to have messy finances.
Using automated systems for bill-paying and savings is one way people who aren’t naturally diligent with their money can adopt healthy spending and saving habits. Enlisting the help of a financial planner is another way to build wealth. “Most people think that this is because the financial advisors are picking great stocks, but that is not the case,” Crosby says. “The reason has everything to do with hand-holding and behavioral coaching and almost nothing to do with stock picking.”
[Read: The Cost of Dieting.]
Reduce decision fatigue for better finances. Losing weight or cleaning house can help with finances for another reason as well. Linda Matthew, owner of MoneyMindful Personal Finance Coaching, says people often feel energized by success in any area. “Once problem one is handled, I’m ready to move on to problem number two,” she says.
Plus, having a handle on where your items are stored or what you’ll be eating each day can reduce decision fatigue. “Decision-making is so hard,” Rubin says. “Every time we make the most minor decision, it taxes us.” That’s another reason automatic savings and bill pay services are so effective. They allow a person to make a single decision rather having to take action time and time again.
Different strategies for different people. There is no single cause of financial instability. Some people may be overwhelmed by life while others may lack conscientiousness. Still others may find their problems stem simply from poor money habits.
Just as there is no one cause of money problems, there is also no universal solution. “Determine what you can do well on your own,” Fallaw says. “And then build skills in your challenge areas or outsource those tasks to great technology or a financial advisor.”
[See: 10 Ways to Get Ready for Retirement After Age 50.]
At the same time, Matthew cautions against putting too much stock into thinking you simply need to lose weight or declutter your house to make your money problems disappear. “You don’t want to say you have an emotional block when all you need is to get a budgeting spreadsheet,” Matthew says.
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