If you do what you always do, you will get what you will always get. This is true for everything in life, equally for your financial situation. In order to reach financial freedom, changes are required. Changes in your financial habits. But how do you achieve sustainable change?
Changing your financial habits in order to reach your goals, is easier said than done. I recently attended a conference, where the behavioural model of Dr. BJ Fogg was used (Stanford University). The model was used for a very different topic, but applies the same for Financial habits: for change to happen, three things must be combined: you have to want it, you have to be able to change and you need a prompt, or trigger for action.
First of all, you must have a motivation to change your habits. If you ended up on this site, you have a motivation to improve your financial habits, or probably already have a clear financial freedom goal in mind, and you are looking for more information. In the Fogg model, three types of motivation are distinguished (each with a positive and negative side):
- Sensation: pleasure vs pain
- Anticipation: hope vs fear
- Belonging: social acceptance vs social rejection
Motivation goes up and down, which is a natural thing for all people. If motivation is high, we can do difficult things, but if motivation is down, we will only do the easy things. Motivation can’t be kept high at all times, that’s why you have to distinguish the right moments. When motivation is high you should plan activities that structures your future behaviour, or which makes it easier in the future to make the changes.
In order to change, you have to be able to change. On personal finance for instance, you need the knowledge and basic understanding of how it works. Fortunately this is not rocket science you just need to know about the two basic concepts of Savings Rate and Save Withdrawal Rate.
Another example is to learn a new skill which can help you later in saving money, or making money. Such as how to do your own home maintenance, bike maintenance or how to cook delicious and cheap meals.
Lastly, a trigger or prompt must be present, otherwise the change will not happen (even if you are motivated and able to make the change). The trigger for me to delve into personal finance was analysing my expenditures. This was a call to action and I started to look for ways to save costs (effectively increasing my savings rate). This then triggered me to delve deeper into the concepts of financial freedom and financial independence / early retirement (one trigger leading to another).
What was your trigger?
Photo by Javier Allegue Barros on Unsplash