If you’re aiming to improve your finance this year, you’re not alone. According to a Fidelity survey of more than 2,000 Americans, 31 percent said they are making financial resolutions for 2015. The most popular ones include saving more, paying off debt and spending less.
The good news for goal-setters is that even just naming a resolution can help increase the chances you’ll achieve it. Fidelity reports that about half of those surveyed who said they set a financial resolution last year are now “better off financially.” By contrast, just 38 percent of those who did not set a resolution last year said the same.
If you’re looking to master your financial resolutions this year, you might want to consider the findings of Charles Duhigg, author of “The Power of Habit: Why We Do What We Do in Life and Business.” Duhigg, a New York Times reporter, found that shifting habits involves a neurological process.
“In the last 15 years, we’ve learned that every habit has three components. There’s a cue, or a trigger for the behavior to start, then the behavior itself, and then the reward. That’s how the neurology learns how to encode that behavior for the future,” he says. Changing a habit, then, involves focusing on that cue and reward.
If you want to establish a running habit, for example, you can add a “cue” to your day: Put on your running shoes before breakfast, for example, or keep your running clothes next to your bed. The point is to have some kind of trigger that your body connects with the new habit.
Then, you want to reward that habit, Duhigg explains. After your run, do something pleasurable, such as eating a piece of chocolate or taking a shower. “There has to be some kind of reward at the end,” he says. That reward doesn’t have to last forever, since exercise feels good in itself, but for the first few weeks, a tangible reward afterward can help cement the new habit.
“Within six weeks, the person will stop eating that chocolate and the brain will latch onto the internal rewards, but first you need some type of external reward to retrain your brain with the reward it enjoys,” Duhigg says.
Changing a bad habit also works the same way. “You need to diagnose the cue and reward, and then change the behavior. Once the habit is established in neurology, it is almost impossible to eradicate and takes huge willpower,” Duhigg explains. That means instead of simply saying, “I’m going to ignore the bad habit and come up with a new one,” you need to look for a new behavior that can be triggered by those old cues that gives you a new reward.
For example, if you want to stop smoking after meals, you have to do more than simply tell yourself to stop smoking. Instead of reaching for a cigarette after your morning bagel, have a large coffee. That way, you’ll receive a similar energy reward, which will make it easier to give up the smoking addiction. “You’re overriding an old habit,” Duhigg says.
Habits can take time to change — some deeply ingrained habits take longer than others, Duhigg says. “But the process is accretive; every single time you do it, the pathway associated with it becomes thicker and easier for the current to run down, so it’s easier as it goes on. At some point, it will feel automatic,” he adds.
And habits are incredibly important to our daily lives. Duhigg cites a Duke University study that found 40 to 45 percent of our daily activities are governed by habits. We all only have so much willpower, so shifting habits to make behavior automatic is the easier way to go. “Habits make these behaviors automatic and effortless,” Duhigg says.
Duhigg used his own techniques to give up his daily cookie addiction. He started exercising more, which he describes as a “keystone” habit that can make changing other habits easier, too. He soon stopped eating cookies and lost weight.
Anyone looking to change a bad financial habit can try a similar technique. Every time you bring your lunch to work instead of eating out, reward yourself with a favorite TV show or other low-cost indulgence. Soon, you might find the new habit sticks — and you’ll have more money left in your bank account.
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How to Change a Bad Money Habit originally appeared on usnews.com
