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In today’s episode, we’re talking about one of my favourite topics – Money Habits! We’ll dive into how our habits are linked to our identity, how they’re formed and how we can create more positive habits if we notice that the ones we have are not serving us, and how to make these new habits stick. So buckle up my friend because we’ve got alot to cover in a short time.

Habits at the identity level

First let’s kick things off by looking at how our habits are linked to our identity. The actions we take every day are often a reflection of who we believe that we are. If you see yourself as someone who is ‘bad with money,’ you’ll very likely make financial decisions that align with that identity—maybe you avoid looking at bank statements or maybe you tend to make impulsive purchases or pay your bills late. The way that we talk to ourselves about money and the emotions we associate with money and even the language we use is SO SO important here and honestly I might do a whole separate episode on that topic itself but for today we’ll keep it high level, just know that our language, emotions and self talk around money is VERY important!

On the flip side, if you identify as someone who is ‘good with money,’ your daily habits will reflect that belief.

You’ll probably track your cashflow regularly, save consistently, and make thoughtful spending and investing decisions. 

Here’s another example, if someone offered me a cigarette, my answer would be “no thanks I’m not a smoker”, because that is my identity. If I see myself as ‘not a smoker’ then you can bet your bottom dollar that I will always make that same decision to say “no thank you”. I will add, that for a little while, many many years ago I used to be a smoker and I had to change my identity from a smoker to that of a non-smoker. So that’s good news right there, we always have the capacity to change our identity and our habits.

Now if someone offered me a salad, my answer would probably be “yes please” because I identify as someone who loves salads, I really and truly love salad. Silly example but you get the point.

Science of habits

There is a science to habit formation and this is where I geek out a little. Before a habit becomes established at the identity level, the way that a habit is formed in our brain is through a cue, a routine and a reward.

The cue triggers the behaviour, the routine is the action we take, and the reward reinforces the habit, this creates a habit loop.

My friends know this well but I have a very serious morning coffee habit. It’s quite literally the first thing I do in the morning. The cue there is feeling tired on waking up which triggers the behaviour of making and drinking a cup of coffee. The reward is the increased alertness and energy I feel which reinforces the habit of drinking coffee every morning. And I’ve been pretty consistent in doing this over time. When we repeatedly do these behaviours in the same way over and over again it helps to solidify the habit. Repetition is the key here.

How to form new habits

Knowing this, we can form new positive habits in the same way. It can take anywhere from a few weeks to a few months, the key though is consistency! Consistency is far more important than perfection here. Consistency is what helps to form new neural pathways in our brain, new habit loops and behaviours that we actually want. Habits are the stepping stones to our goals.

So, if we have money habits that we want to change or new ones we want to create, how do we actually go about this? What are the steps we need to take? 

1. Awareness is key

We obviously need to know which habits are holding us back before we can do anything about them. Maybe it’s overspending or maybe we want to develop a new habit of saving or investing. Once we know what habits we want and don’t want, we can do something about them.

2. Start small

Don’t try to overhaul everything at once, focus on one little habit at a time. As cliche as it is, Rome wasn’t built in a day.

3. Set up your environment

Avoid the Cue

If you have a habit of online shopping just about every time you get an email from your favourite store and if this is something that is hurting your financial well being, then setting up your environment means hitting unsubscribe from that retailer or deleting shopping apps from your phone. You might also want to avoid the mall for a little while and avoid walking past that store.

Now I’m not saying at all that we shouldn’t shop or enjoy our money. I certainly don’t think that and I certainly enjoy the dopamine hit from shopping like the rest of us. What I am saying though is that if a habit is in direct opposition to your financial goals and if your money habits are preventing you from getting what you really and truly want more than a new pair of jeans, then we need to take a closer look at those habits and our identity around money.

Automate It

If you want to start a new habit of saving or investing, then setting up your environment means automate it. Make it as easy for yourself as possible, set up an automatic direct debit, no matter how small the amount, honestly I don’t care if it’s $5 per week or per month automate that money to go into savings or investments before you do anything else with it and before you know it you’ll be building that muscle and you’ll have a new saving or investing habit. Amen.

Habit Stacking

Next, habit stacking. Another strategy for making a new habit stick is habit stacking, where you link your new habit to an existing one. If you want to dive deeper into this I recommend adding the book Atomic Habits by James Clear to your reading list. If you want to start healing your relationship with money, each day you can saying or journalling positive affirmations to yourself right after brushing your teeth in the morning or before you go to bed at night. 

4. Affirm and visualise

Affirmations and visualizations can also be powerful tools to transform our identity around money. Start by affirming positive statements about your financial goals. For example, ‘I am becoming more financially savvy every day.’ Always make it ‘I am’ and in the present tense. Not ‘I will become more financially savvy’ but ‘I am becoming more financially savvy’.

One thing I’ll never forget when I was a serious gymnast in my teens is the power of visualisation. This tool has served me my entire life. Visualize yourself achieving your financial goals—whether thats visualising a certain number of bookings in your booking system, you can visualise a sales call going incredibly well, or a number in your bank account that you’re saving for a big purchase, or visualise yourself making that purchase, or building an investment portfolio. Whatever the goal, the more vividly you can see the outcome using all of your senses, the more likely you are to take actions that align with them. And again, do it daily, consistency is key.

Changing Our Identity Around Money

Changing our identity around money is a process. It involves consistently reinforcing new beliefs and behaviors until they become second nature. Replace negative cues with positive ones to reinforce the behaviours you want to be doing—that could be books, podcasts (including this one of course), or people who help to keep you on track and accountable.

Remember, it’s not just about getting more sales and making more money in our business; yes that’s one side of it but what’s the point if we can’t keep it.

Creating positive money habits that serve us is about learning to think like someone who manages money well.

This shift in our identity will naturally lead to better financial habits and decisions in our business and personal lives. So, what are some positive money habits – here are just a few:

1. Tracking income and expenses (a.k.a budgeting)
2. Automating saving
3. Investing
4. Paying off our credit card in full each month
5. Paying our suppliers on time
6. Building an emergency fund
7. Staying on top of our bookkeeping if we’re doing that ourselves
8. Consistently setting aside a percentage of our revenue for tax
9. Paying ourselves a profit from every single job
10. Living within our means
11. Continuously learning to improve our financial literacy

Changing our identity and habits around money really starts with changing our self-perception and the stories we tell ourselves about money. It’s about becoming aware of our thoughts about money and aligning our daily actions with the version of ourselves that we want to be!

Catch yourself in your thoughts and behaviours with money, become curious about them. Question where they came from. Decide on the identity you’d like to take on if your current one isn’t serving you. 

Resources Mentioned:

• Book Recommendation: Atomic Habits by James Clear
• My personal Wealth Dashboard