The Habitual Millionaire: Many of our successes and failures in life can be attributed to our habits. I have experienced my share of both due to my own habits, and I have personally witnessed many others whose habits have destroyed or enhanced their own lives.
Some of our habits are those which we’ve learned in childhood from family members, friends or other influences, and some we have formed through repeated behaviors resulting from our beliefs or choices. Good or bad, our habits will have positive and negative affects on our health, our relationships, our careers, our spirituality and our finances.
As one wise sage once put it:
I am your constant companion,
I am your greatest helper or your heaviest burden.
I will push you onward or drag you down to failure.
I am at your command.
Half of the tasks that you do you might just as well turn over to me and I will do them quickly and correctly.
I am easily managed,
you must merely be firm with me.
Show me exactly how you want something done;
after a few lessons I will do it automatically.
I am the servant of all great people and
alas of all failures as well.
Those who are great I have made great,
those who are failures, I have made failures.
I am not a machine, but I work with all the precision
of a machine, plus the intelligence of a person.
Now you may run me for profit or
you may run me for ruin.
It makes no difference to me.
Take me, train me, be firm with me,
and I will lay the world at your feet.
Be easy with me and I will destroy you.
Who am I? I am called Habit.
I don’t really need to tell you this, but obviously we have to learn to acknowlege and control our bad habits. Myself included, we all do things that harm us more than they help us. There are usually those that are painfully obvious, and then there are others that are not as easy for us to see. There are even some habits that we CHOOSE not to see and rationalize away. Be honest with yourself and ask for constructive criticism. Those closest to us can usually help us identify them, so ask their opinions and receive them with an open mind.
Since this is a personal finance blog after all, we’ll focus on the financial side of good and bad habits. Do you want the good or the bad first? Let’s go with the bad first, and we’ll end on a positive note!
BAD financial habits would include things like:
Making excuses – Do you find yourself making excuses for not furthering your education, or advancing in your career? Do you procrastinate, or even avoid, seeking out new opportunities? What about making excuses for not planning, budgeting, or investing?
Spending more than you earn – Do you use credit cards to pay for purchases without using any kind of expense tracking system? If you do, how many times do you find that the balance due on your credit card is more than what you have available in your checking account? Probably more often than you’d like, right?
Even if you don’t use a credit card, if you are not tracking your expenses, it is easy to repeatedly spend more than you earn. Not only does that leave you with unpaid bills and unnecessary stress, but you’ll get a few late fees and overdraft charges as a cherry on top.
Making impulse purchases – How many times have you gone to Target, not intending to buy any clothing or home decor, and walked out with a ‘little’ more than what you went in for? Mrs. BSM wanted me to ask that first question… ladies. How many times have you gone to the grocery store because you needed a few things for the rest of the week, only to come out with a cart full? Ever been to Ikea, or Hobby Lobby?
Guys, how many times do you walk by the sporting goods section in the big box stores while your wife is ‘picking up a few things’ and walk out with new gear or equipment? How about your trips to Dick’s Sporting Goods, or REI? What about Lowe’s or Home Depot?
And my least favorite of all, because it is 100% impulse purchasing at it’s finest… how many of you have said “I’m going shopping”? You don’t ‘go shopping’… just for shopping’s sake, for F’s sake! If you didn’t plan on buying it, now or in the immediate future, by budgeting for it, it was an impulse purchase.
Just Plain Laziness – See the three bad habits mentioned above and re-read them please!
GOOD financial habits would include things like:
Thinking long-term, rather than short-term – financially savvy folks look at long-term costs vs. long-term benefits. Ask yourself, especially for major purchases, “Is this thing that I am about to buy an appreciating asset or a depreciating asset? Will it go up in value or down? How quickly?”
Monthly costs and minor purchases are not just incremental. Collectively they add up, and long-term, they come with opportunity costs:
If I spend more money on X,
1. I will have less money to spend on Y
2. I will also have less money to invest or save, thus…
3. If I invest less, it will decrease the amount of compound interest I will earn, and
4. Push my retirement, or path to financial independence back further
It’s not always about saving money, though. Just because you can save a few bucks, doesn’t automatically mean it’s a better choice. For example, there are plenty of DIY projects that you can take on, learn a lot from, and save a lot from by putting in your own sweat equity. But there are certain things that you should probably hire a professional to do instead of trying to do them yourself. In those cases, the long-term benefit of having something that is done right, or that will last longer, outweighs the cost. And, it might even save you money in the long run anyway.
Organizing & planning – This includes being proactive instead of reactive. Instead of making impulse purchases, make lists when you go to the grocery store, or to shop for your household items. I can tell you from plenty of personal experiences, that if we do not make a list ahead of time, we overspend. Think about what meals you’ll have each week, make a menu, then make a list of items/ingredients you’ll need. Buy in bulk when it makes sense. Don’t window shop, spend as little time in the store as you need to. Use your list, get in and get the hell out!
If you’re running low on something: toilet paper, paper towels, toothpaste, whatever, write it down. Use a whiteboard, a note on the refrigerator, or keep a note on your phone. My wife and I have iPhones and we create shared notes – you can also do this in Google Docs or Google Sheets. At any given time, we know what things are on our list because we each have the most up-to-date list on both of our phones. If either of us are at or passing the store, we can stop and grab those things while we’re out. Easy.
To avoid spending more than you earn, create a calendar of your bills with due dates, use a budget, or at the very least just track your expenses so you have information about where you are spending your resources (money)… I won’t hash all that out again here, but you can read How to Budget Like a Boss if you need help getting started.
Setup automatic payroll deductions for your investments and/or savings. Plan your trips to town and consolidate errands – that translates to less fuel used, less of your time used, and less wear and tear on your vehicle. Adjust the thermostat when you leave, or buy a programmable one. Small things make a difference, just make them habitual; they really do not take much time at all.
Improving your mind and body – It’s no secret that when you exercise and eat well, you feel better about yourself. Improved self-esteem (not to be confused with ego), gives you that ‘high on life feeling’ and a better outlook on the world you live in. As a result, you do better in physical activities, you have more energy, your mind is sharper, and you are more productive. You get the idea.
Make it a goal to read a book each month, or every couple of months. Not just fiction or novels, but books that teach you something. What profession are you in? I’ve worked in educational technology (EdTech) sales for over 15 years, and I still read books that are related to my profession. I read financial books, and I read books about other topics that I find interesting that help me learn more. Sharpen your mind, I’ve heard it’s a terrible thing to waste!
Spend time relaxing. Decompress in a hammock, go for a walk in the woods, around the block, or in the park. Take a vacation (that you can afford). What kind of hobbies do you enjoy; do you have a creative outlet? Art, fitness, crafts, refinishing furniture, woodworking, do something. This blog is a hobby of mine… it’s a creative outlet. I don’t have to spend hours writing stuff (I don’t even know if anyone will read it except for my wife), but I enjoy it and I hope that it might help a person or two along the way, so i do it!
So, there you have it. Those are a few habits that might make or break you on your quest for financial independence. Acknowledge and control the bad ones, and encourage and adopt the good ones.
There are too many to list, so what are some other habits that come to mind? Let us know in the comments section below.