There are habits you don't want to kick

Without going all zen, the true path to savings enlightenment is the path of habit.

Habits are a powerful way to help us get to where we want to be. For example, to a sense of financial wellbeing. Or in the case of bad habits, to exactly where we don’t want to have to be, like rehab.

A big chunk of what we do every day is governed by our habits. In fact, researchers at Duke University found that about 45 percent of the actions people performed each day weren’t actual decisions, but habits.

While many of our habits are formed unknowingly, we all have the capacity to consciously develop the habits that will get us ahead in life.  They impact our health, happiness and financial security. Deep.

So, it pays to know how to form good habits, especially when it comes to money. The good news is we have the inside scoop on how to get this done.

The path of habit

Like all cults preaching enlightenment, we’re going to start with some science. Or at least some behavioural psychology (because we like big words).

 “If you want to create new habits, use habit loops.”

According to a guru on the subject, Charles Duhigg, (who wrote The Power of Habit) every habit is made up of three essential parts:

  • The cue - a trigger for your brain telling it which habit to use.
  • The routine - the way a habit influences what you do, think or feel. If can be physical, mental or emotional.
  • The reward - a way to determine how valuable the habit is and whether it’s worth remembering or not.

Together, these parts are known as a ‘habit loop’. Knowing about these loops can help you to create the habits that will help you to be better off, like saving. Here’s how:

How to “loop” like a pro

Let’s look at savings as an example. If you want to start saving every month, it helps to pick a cue (for example, a calendar reminder on pay day to transfer money to your savings account) and a clear reward (a sense of accomplishment, a rush of excitement when you see your savings balance increase, or whatever gets you going). The idea is for the cue to trigger your savings routine, which is to transfer money to your savings account every month, which leads to the reward.

With repetition your brain will start to actually crave the reward – that rush of endorphins and sense of accomplishment– and before you know it your healthy money habit will be formed.