Guys,
My head is full of financial know-how, but I'm finding the hardest thing about money is changing my behavior. There are a few things I know I should be doing every single month consistently. My question is:

What do you think is the best way to modify your behavior?

Is it very personalized, or do you think there's a best way? Possible behavior changing factors that I can think of are:

Experiencing painful consequences, working with a coach, being part of a close-knit community, reward/punishment system, taking 21 days to form a new habit, change in attitude

These are some of the common ones that came to me. Can you suggest any others, or share what's helped you build discipline to do the right money behaviors?

Thanks,

Jake

Do you have financial goals? Without a clear goal it's often hard to change your behavior.

Shock therapy!

I have a lot to learn about personal finance, but I definitely can relate to this topic. I think active participation within a community is the best approach for me. I have definitely learned a lot since joining this forum, but have also been reminded of things I already knew.

Do you have any examples of a behavior you are struggling with?

I personally think that which method is most effective depends on the person and the behavior that needs to be changed. Doing something every day for 21 days might build some habits, but not shooting up for 21 days isn't going to cure a longstanding heroin habit.

I'm no psychologist, and generally take a "grow up" attitude toward people overcoming mental habits, but we have learned a lot in the last few years about pleasure, addiction, and building/changing pathways in the brain. I suggest you read up on that kind of thing. Repeating a behavior and rewarding yourself effectively for it through genuine pleasure can be very effective.

In a personal finance environment you can think of it this way: If you just avoid doing something (like buying an expensive coffee drink) every day for a while but you hate doing it, you might last a while on willpower alone but you won't truly change your behavior. If you instead find some way to generally avoid a substitute (like buying a plain coffee and putting the extra few bucks in a piggy bank), then you might make better progress.

For me, I learned a long time ago that if I automate things and force myself to pay close attention then I do very well. For example, I have long had automatic investments made that were large enough that I have to keep a close watch on my bank balance to avoid overdrawing. Not only does that make it so that I invest a lot every year, it also makes me constantly think about the impact every time I buy something.

But, I'd have a very hard time recommending this to anyone because if you slip and overdraw, you could end up messing up your credit and incurring huge fees. But that system has worked well for me for something like 15 years.

I really like DH's automated approach, but I have only used it to make sure I pay additional principal on my mortgage each month. What I do instead is log into my brick & mortar checking account each payday, and redirect the majority of the funds to where they are needed or better suited. I don't like having a lot of cash in my wallet or readily available at the MAC.

One of my bad habits is walking over to 7-11 in the morning and grabbing a fountain drink and spending $2 or $3 on scratch off lottery tickets. I know I am better off bringing soda to work & avoiding the lottery tickets, but I find enjoyment making that morning trip.

Interesting. Sugar and the excitement of scratching off those tickets are two things that are documented to directly stimulate the pleasure center and reinforce the behavior. I'm not saying there is anything wrong with that, unless by "fountain drink" you mean "dose of heroin" and by "lottery tickets" you mean "hookers", just that understanding those kinds of behaviors at a deeper level is usually important for overcoming them. Other habits that just develop out of routine can be more easily beaten.

As far as I know there are no hookers at this 7-11, but it would be a great location for them. It is located in the lobby of a hotel.

Dave & DH,

You guys are hilarious!! Fortunately I don't have any real bad habits I'm trying to break, like doses of heroin or hookers. That could be expensive! For me it's more like blowing through my $15/week pocked money budget, which is easy to do at Starbucks.

DH- Thanks for the the really thoughtful reply. I've been a fan of automating things as well. Setting up some systems to generate consistency for you can definitely pay off. Last week though, I got caught on this one, as my phone company had a billing error and direct debited far too much from our bills account. What the! I cancelled the direct debit and decided I'm going to have to sit down and pay it myself (or schedule internet banking to send the payment) every month.

So, it's not really dealing with existing behaviors as much as trying to create new ones, like sitting down to pay the bills. I need consistency there. I'm sort of in the process of doing a checklist for myself that I'll sit down every weekend after I get paid and go through the motions. I agree, the reward system can be effective, so maybe I can pay myself if I've reached a certain level of consistency?

Thanks guys for your input and a good laugh or two. Would love to continue the convo.

I should note that I NEVER set things up so that anyone has direct access to my bank account. I pay bills by "pushing" payments or by having them paid onto a credit card. (If they make a mistake, there will be interest charged if I get charged any. I know my rights and have never lost a challenge!) The things I automate are investments. It works like this:

Paycheck goes into checking and a fixed amount is automatically sent from checking to money market every month. Mortgage and a couple of other fixed payments are also automatically sucked out of checking. Bills that can be paid by credit card are paid by AMEX and I manually pay that bill from checking every month. Bills that cannot be paid by credit card are manually paid from checking.

I got an electric bill for over $10,000 one time due to a meter reading error on their part. My system protected me. I simply called and pointed out the error and refused to pay until it was corrected. If it were automated I would have had a problem. You always have to think about the "what if the company screws up" situation.

That is exactly how I do it. I never allow direct access to my checking account. If it can't be autopaid to a credit card (which I pay manually), I pay it manually from my checking.

Since I switched banks, I no longer have my mortgage directly accessing my checking account. I really need to look into using my credit card to pay bills. Right now the only automatic charge is daycare.

Jake, as far as making new habits goes, here is the system that works for me. I try to pay my bill the day that it arrives. I leave my bills right next to my wallet so I don't forget about them. If I am unable to get to it the evening it arrives, I put it in my work bag and do it from work the following day. I handle a lot of my finance stuff from work since I am at the computer the entire time.

If you can have your paycheck split up into parts. For instance say you make $100 a month but only need $80 to live on (this is just an example), have $80 sent to checking where you can use it for expenses and $20 sent to a HARD TO GET AT savings or brokerage account. This works particularly well if you get a paycheck that varies. Have the $80 still go to checking but have everything else sent to the hard to get money out account.

It is a great method of forced savings and avoids that' "my account is full, lets splurge!" feeling.

Hey Jon,

Thanks for the tip! That's a pretty good trick. I haven't done this yet but have been plugging along pretty well scuttling away bites of my paycheck into little savings accounts for xmas, car repairs, etc. Seems to work so far.

By the way, very slick site over at http://www.lifepart2.com . How do you pronounce your location anyway? Xcalak?? Looks like you are living the dream and hopefully inspiring others to do the same.

Best,
Jake

Thanks Jake,

Xcalak is pronounced “ish’-ka-lak” although you hear many variations.

Thanks for the input on the site! Yours is great too.

Jon

To become more productive at work, we often require changing longstanding customs or behaviors. Sums up the five steps needed to complete any individual demeanor change: Awareness, Motivation, Identification, Substitution, and Habit Replacement.