Habits. They’re both good and bad.
Habits are tough because for the most part they occur subconsciously. You’re not really in control. You may not even realize it’s a habit. You think you’re making the decision but really it’s just habit driving your actions.
When you have a habit, good or bad, you’ve been wired through repetition and rewards to make the same actions over and over. Truthfully you have very little control.
Habits form when a behaviour is repeated often enough to become automatic. There are typically three phases to creating a habit, the cue, the routine, and the reward.
For example, a regular exercise routine is an extremely beneficial habit. Regular exercise can greatly improve your overall health and wellbeing. Getting 75 minutes of exercise each week can extend your lifespan by as much as 4.5 years! (Not to mention you feel so much better!)
Unfortunately, habits can work against you too. Bad habits can form just as easily as good habits.
Bad habits usually form during stressful times, during big life changes, and when you’re bored.
Bad spending habits are super easy to form because there is an immediate reward for spending money. Bad spending habits are also easily formed because there are spending cues all over the place in the form of advertisements.
Bad spending habits can be really detrimental to your financial health. Even a few bad spending habits can cost you $50-$100 per week. Over the course of your lifetime those habits can cost you hundreds of thousands of dollars.
If you think you may have some bad spending habits I’ve got a challenge for you!
Try doing a “no spend challenge” this month. For the next 30 days you shouldn’t spend any money at all. NOTHING!
Doing a no spend month is a great way to reset your spending habits.
Setting a goal can have amazing results.
Even just thinking about your goals will give you a higher chance of achieving them. Writing down your goals will improve your chances again. Revisit your goals regularly and your chances get even better!
The chance of hitting your goals will improve by 80% when you write them down and create a plan.
I love goals, especially financial goals.
One of our previous financial goals was to pay off our mortgage early. We did this in exactly five years! At the end of the post I’ll share with you our original plan and how it actually went down (because things never go according to plan).
There was a great personal finance question from a user on Reddit the other day that basically asked if it was even worth saving money in your 20s. The user asked r/PersonalFinanceCanada “is it even worth saving money while you’re young?”
This is a GREAT question. The quick answer is YES!
There were few good responses that covered the three main reasons why saving now, even on a lower income, is still the right thing to do.
Let’s review the three reasons why saving while you’re young is so important…
Banks are biased. That’s obvious. Banks are public companies in the business of making money and therefore are biased towards activities that produce a profit. This isn’t necessarily a bad thing but when making personal finance decisions it’s good to keep this top of mind.
This bias is especially apparent when banks advertise their mutual funds. They use a few different forms of bias to make their products look extra appealing.
Everyone has probably seen a mutual fund advertisement. It’s the one with the line that keeps growing towards the sky. It usually says how $10,000 invested 10 years ago could have grown into $xxx,xxx today.
There are a couple of problems with this advertisement.