Learning to Behave, Financially

Personal finance bloggers give a lot of advice on what to do to save money or how to set up a budget, but it is a well-known fact that personal finance success is mostly reliant on your behaviors and patterns.  We all know that we should be saving some money for retirement and that a “rainy day” is coming sooner or later, but how can we put mind over matter?

Start small.  You may be gung-ho on getting your financial life turned around, but it often isn’t realistic to implement your plan in one day, one week, or even one month.  Instead of planning to do it all from the start, incrementally work your way towards success.  For example, if you eat out for lunch every day, start bringing your lunch one or two days a week.  If you spend substantially less than when you eat out, such as bringing a $3.00 frozen meal instead of spending $10.00, transfer $7.00 to your savings, or allocate that amount to your debts.  If you equate your behavior to actual money in the bank, you are likely to keep it up as you see your progress. 

Track your progress.  How many times have you made a perfect budget only to get so busy that you don’t track what you spent money on?  Let’s face it; not all of us are accountants with a love to tracking every cent that comes in and out.  Automate by using Mint or Everydollar, which sync bank and card accounts using a phone app and a web login.  Couples can stay in sync on income and spending by merging finances.  If a couple can get on the same page with money, you likely can conquer most other marital spats that come up over the years. 

Personally, I love tracking changes in my net worth over time.  If you have software that lets you download your finances, you can do this in Excel or run a report.  I use Quicken, but I am a dinosaur and now have to pay for Quicken, and I will give a crash course in a post later this month!  An alternative is to list all your assets on the top of a page or spreadsheet and list all your debts below.  Add up both assets and liabilities, and then take the difference of the two.  This is your net worth. Hopefully your assets are more than your liabilities, but I too once had a negative net worth.  It takes time and focus, so don’t let this number stop you before you start.

Net worth Report from Quicken Desktop 2020

Set attainable goals.  Instead of only making one big, fat, hairy goal, break it down into baby steps.  We all want to have a net worth of one million dollars when we are just getting started, but it takes years of good behaviors.  If you set out to save a million dollars for retirement, work backwards to figure out how much you will need to contribute at a historical rate of return that matches your investment risk levels.  Most retirement fund websites have calculators that you can plug in the number of years you have to work and the amount you want to retire with.  If you are paying off debt, list them out and make a game plan.  When you pay one off, celebrate a little and look forward to the next win!

Reward thy self.  If you set savings or debt reduction goals, and you meet them, be sure to splurge a little on one night out or a new clothing item.  You should set a limit for yourself, say $50, for a monthly treat, or maybe as much as a few thousand when you meet a major goal such as saving up three months of expenses or paying off all your consumer debt.  Of course, don’t go into debt or reduce your emergency fund to have fun, make sure you earmark new cash for this purpose.  Just as you sacrifice to complete a degree or get your kids through school, changing money behaviors is just as much of an accomplishment.  Change your behaviors slowly and they will become habit, which will show in the long run.

What’s your worst money habit?  Leave me a comment on my blog page!  

Author: wvance3

William is a corporate Accountant by day and a lover of Great Danes, gardening, personal finance, and home projects at night and on the weekend.

4 thoughts on “Learning to Behave, Financially”

  1. Such sound advice! Speaking from another accountant, I completely agree with your suggestions when it comes to savings or paying off debt. It is all about our behaviors! Even though I am a pretty good saver, I am terrible about remembering to treat myself. After reading your post, I finally bought a set of bookshelves that have been sitting in my Amazon Cart since Christmas. Thank you for your constant stream of valuable content, I look forward to reading more.

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  2. I love this post! I find myself constantly going against a lot of the advice on this post. My goal is to buy a house within the next two years. I created a budget in Excel for myself to try and become better about saving but it is way too unrealistic. When I don’t meet my budget in a given month, I get disappointed and give up on trying to meet it. I definitely need to start smaller and set more realistic expectations for myself. Super useful advice, thank you!

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  3. Excellent post William! I think this topic is important for everyone, but especially for younger people that are trying to figure out how to get ahead. It took me a long time to realize how quickly things like eating out, grabbing drinks, etc add up – and ultimately cost you in the long run, if left unabated. My worst spending habit for a long time was going out for food and drinks frequently. It’s especially easy to get carried away with that in Reno. Conversely, it’s amazing how quickly your savings can compound once you mitigate spending habits and start reallocating money to paying off debts or establishing a savings. It’ll be interesting to see how Covid impacts future spending habits, since it’s more or less forced everyone to adopt a more frugal approach.

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