Know how habits are formed

In his book The Power of Habit, Charles Duhigg explains that habits go through a cue-routine-reward loop. First, something cues or triggers us to take an action. We go through the routine of that action, and we get a reward.

To use an example from Financially Fearless, let’s say you have a habit of spending $5 on a snack every day at 4:00 p.m. You have to take a step back and understand what your cue is. Are you hungry at that time? In need of a break from work?

If the real reward is getting some fresh air, maybe you create a new routine of taking a walk around the block instead. Breaking or maintaining any habit starts with understanding this simple psychology.

Creating a new habit starts with identifying a cue. What will your trigger be? You might choose a time (every Friday morning) or link it to another activity (every time you get your paycheck). Next, choose a reward that you’ll get after achieving the behavior. This could be everything from treating yourself to a coffee, to sleeping in an extra hour on the weekend. Last, create a plan to put these steps together.

Schedule regular checkups

Recognize that taking care of your money is not a one-and-done game. It requires active maintenance throughout the year.

Forming or revisiting your financial plan is just like going to the doctor for a checkup. It can be a hassle, but as they say, an ounce of prevention is worth a pound of cure. So be proactive and set yourself on a good path for the year ahead! I currently talk to our financial planner at least once a month. Oftentimes it’s hard to fit in, but we make it a priority.

In addition to using calendar reminders and a separate email account, make sure to turn on notifications for the money apps you regularly use. Many of them are designed to help you form better money habits, so their product features include helpful nudges reminding you to take actions or useful flags to alert you when something out of the ordinary happens.

Aim to check in on your finances (that is, assets, debts, expenses, and credit score) actively, just as you would if you ran a business. At the bare minimum, check all of your financial statements monthly. For those type A overachievers out there, I recommend taking a “money minute” every single day. It’s a quick daily gut check that will keep you on track and give you the peace of mind of knowing that everything is under control. Use this time to do a quick scan of whatever personal financial management app you’re using. Make sure there are no fraudulent transactions, that any auto-payments or contributions have gone through, that transaction amounts are correct, and that your account balances are where they should be.

Create anti-goals

The behavioral economist Dan Ariely has talked about the idea of setting anti-goals. When you spend on something, you need to understand the trade-off you’re making. Daniel Schreiber, CEO of the insurance start-up Lemonade, explains, “When thinking ‘Should I spend $100 on this gizmo?’ it’s important to have something tangible—an anti-goal—that you will not get as a result. Then you can feel the emotional pull in a healthy way and truly calculate the value to you of what you’re about to spend.”

Ride the dopamine high

You know how it’s easier to motivate yourself to get on the treadmill when it’s in the next room than it is to schlep to the gym? Countless studies show that even the smallest tweaks in our environment can have a huge impact on our behavior. So try making your money setup so easy to access you don’t even have to think about it. A simple trick: keep your personal finance apps right next to the social media apps you know you’ll check on a regular basis.

Get that dopamine high from Instagram, and then use it to power you through your money minute.

Enlist calendar alerts

In order to stay on track throughout the year, it’s time to automate those reminders. Put key to-dos on your digital calendar and set alerts to nudge you when the time comes. It may take a few minutes to set up, but it’s a time investment sure to pay off. Think about it this way, would you rather store all these various dates in your brain or in the cloud?

PRO TIP: Set the alerts for a time of day when you’re likely to see them right away and have the time and bandwidth to take care of them, like during your lunch hour, or whenever you usually sit down to check personal emails.