Whether you realize it or not, most of your spending is done out of habit. This is not good, bad, right, nor wrong, but the more that I have studied habits, the more I have been able to bring to light my own “way of doing things”.  As the definition states, habits are HARD to break, and because “budgeting” in the traditional sense is about managing or changing our habits, it is almost impossible for people to follow and actually stick with. Throughout our lives, we have been conditioned to do things a certain way and we have developed neuropathways in our brains that create these habits. This happens subconsciously, so it takes true consciousness and recognition for us to see that they are, in fact, habits.

Little Things Have Big Effects

A few years ago, a friend of mine gave me a book called The Compound Effect by Darren Hardy.  Since then, my consciousness around ALL of my habits has been awakened. (If you haven’t read it, I would highly encourage you to pick it up). The basic principle of the book is that much of what we do on a day to day basis is out of habit, and these habits can be either positive or negative.  For instance, exercise is positive, but watching hours of TV per day is negative. It’s really simple. However, when we are doing anything habitual, it doesn’t seem inherently positive or negative at THAT very moment or even right after. It’s a slow progression, but if you continue doing those things for days, weeks, months or even years, you start to notice a HUGE difference. Either for the better, or sometimes for the worse.

Pay Attention to Spending Habits

These habitual patterns come out in our spending as well. First and foremost, it’s important to acknowledge that our brains will help us rationalize ANYTHING. We can talk ourselves into thinking that almost everything we do is OK. Again, that can be good, or it can be very detrimental to our overall progress as human begins. You may have heard of this theory called the Latte Effect. The theory states that, sure, the $4 on one latte doesn’t seem like a lot of money TODAY, but if you do it every day, it adds up to bajillions of dollars down the line. Got it!

Don’t Beat Yourself Up

However, it is important to remember not to judge yourself in this exercise. Money is just a thing, but we have a tendency to tie it to our value as people. So, if you do go through this exercise, make sure it’s not to just beat yourself up for spending “so much money”. Your spending is what it is and it absolutely means nothing about you as a human being.

Money Adds Up Quickly

Let’s say you go through this activity and you notice that you’re spending, on average, $200 per month at coffee shops when you thought you were only spending $50. This might seem crazy to you, like, “how in the world am I spending so much at Starbucks!?” Well, that’s the power of habit.  You get up in the morning, get ready, get in the car, and your body just drives you to Starbucks on the way to work. Your brain does it for you and you don’t even get a moment to think about it! Your habits might not necessarily include frequenting coffee shops, but from what I’ve noticed, we all have some tendencies (myself included, believe me). It could be drinks after work, eating out every day for lunch, buying items on Amazon, etc. What does that $150 per month MEAN to you though?

Make Your Money Grow

If you spend just $150 more per month than you think you do, over the course of a year that will total $1,800.  Let’s say you were to put that in some sort of retirement account like a Roth IRA (we will get into this deeper in weeks to come), and that account were to average a reasonable rate of return of 7% per year for the next 10 years. That would mean in 10 years you would have close to $26k in that account, in 20 years it would be about $78k, and in 30 years you would have approximately $183k! Just by saving that extra $150 per month on coffee (or whatever your spending vice might be). What seems nominal today can add up to HUGE amounts down the road! That is why saving money is important, but it is our approach to saving money that makes the largest impact on our lives.

Take Control Of Your Situation

Like I said before, money is just a thing. So why does it matter if we are making conscious decisions about our money when it doesn’t mean anything about us? Because if we choose not to bring awareness to our spending habits, we may be missing a lot of opportunities.  If you have no idea that you are even spending $200 per month at coffee shops, that means that bigger purchases will also be made without awareness.  This is where more detrimental financial decisions are made (ie credit card debt)!  “How you do anything is how you do everything.”  And if you spend $4 on your latte without thought or consciousness, that same awareness will be carried over into decisions about larger purchases.

Give Yourself Time To Change 

Where traditional “budgeting” fails is when you are told that you immediately need to cut out that $150 NOW. You get $50 per month for coffee and that is IT. If you’re used to spending $200 per month, that is a HUGE lifestyle and habit change. Your body and mind has become accustomed to going to Starbucks every morning, so when you try to go from 5 days per week to 1 day per week at Starbucks, it’s going to be tough. So, give yourself some grace because it doesn’t need to happen right this instant. If you want to create long, sustainable habits, try to ease into it.

Using the coffee example, start by just cutting out one day per week at Starbucks and instead make coffee at home that day. Do that for a few weeks. Then cut out another day and do that for a few weeks.  Slowly carve it down and recreate the neuropathways in your brain. Eventually you’ll come to the point where it’s more of a habit to make coffee at home in the morning and you probably won’t even notice a difference.  Or maybe it’s not even cutting out GOING to Starbucks, perhaps you are getting a $4 special latte instead of a $2 coffee. All I’m saying is – baby steps are key.

“Change might not be fast and it isn’t always easy. But with time and effort, almost any habit can be reshaped.” Charles Duhigg, The Power of Habit.

Liked this blog? It was written by WalletGyde’s new financial mindset coach, Jordan Youngblade! Her philosophy is it’s not always about having MORE money – it’s about how you view and use your money. She will completely transform your money and LIFE through her process! Stay tuned, she will be sharing her expertise all month!

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