The Power of Habit: Getting Into The Financial Freedom Routine

In chapter 1 of his book entitled “The Power of Habit,” Charles Duhigg breaks down the concept of a “habit loop”. He describes a habit loop as set routines we get into each day on a subconscious level, some of which are good and others of which are bad. As I was watching this short trailer on his website, I thought of running.

I have a really tough time running in the afternoon, my body feels like a brick, my stomach is jostling with food and I just don’t feel good. Yet, just a few years ago, I struggled to run in the morning and always ran in the afternoon. So, why is that? I have developed a habit of running in the mornings now, so running in the afternoons is tougher for me. I would describe this habit as a positive one, but I also have negative habits too, like craving coffee in the afternoon. While I know this may not be the worst habit in the world, I crave coffee from Starbuck’s, which is across the street from me and the coffee that I crave costs about $3.50. If I were to do that 5 days a week, that would be $70 per month, yikes! Beyond running and coffee drinking habits, we also possess habits when it comes to money.

Just this morning Stephen and I were discussing what has changed in 4 years of marriage and since implementing the principals that we teach others …while we don’t feel like we have money trees popping out like the aspens in our front yard, we do feel like we have “structure” and “routine.” We have found that this routine or habits have provided for us the structure to move forward towards financial freedom in our life. If this structure were not there, we would not feel the freedom that we do now or be prepared for it in the future.

Here is a great example that a mentor of mine gave about this concept of freedom and how a budget can build freedom into our lives…

Pretend that you live in a beautiful house with a large backyard, overlooking the prairie that sits behind you, you have nothing but open space! Land that you don’t own, but that you can utilize…you send your kids out in the back yard and open space with no fears, they have a blast and you feel so joyful to be so blessed! Then, one day, you get a letter in the mail from the city…they are informing you that they are going to build a freeway in that open space behind your house. Suddenly your comfort level about your children playing in the backyard/open space dwindles knowing that you are going to have a busy freeway behind your house now. So, you decide to build a fence. Does that fence offer you more security or less security, according to your new circumstances? Probably more right? Because now you know that your children are protected from the busy freeway.

A budget is the same way, it is the fence that you build up around your finances to protect your family from losing they money that you’ve worked hard for. A budget actually builds in freedom for you and your family…while most of us would think it would cause restriction.

I know the thought of a budget can be a bit daunting, especially if you don’t have one now…but I promise you that if you stick with a budget for up to 4 months, it will start to get easier and you will be able to see the benefits of having one and the freedom that it provides. Budgeting is a habit, and every month that I slip and get out of the habit of updating my budget each week, I see our finances become a loose cannon…

While I know budgeting is not for everyone, please tell me then, what structure you have around your finances? To me it is like someone coming up to me and saying that they want to be an astronaut, me asking them how they’re going to get there and them saying working at Taco Bell. So, maybe budgeting isn’t your favorite, but what habit are you in each day that is building towards your financial freedom?

I ask you to develop 1 habit in the month of August and that is the habit of budgeting. I know it is a daunting task, but like Duhigg suggests in his book, you have the ability to break negative habits and turn them into positive ones – it all comes down to choice. You have the ability to choose!

Here are 3 simple steps to get started down the budget, habit track…in an effort to help you achieve financial freedom, while not the only piece, it is a great start!

1) Figure out your net monthly cash flow – this number is your net monthly income minus your monthly expenses. Download a FREE copy here .

2) If your cash flow is negative, figure out how to create positive cash flow each month by reducing or eliminating expenses or increasing income.

3) Perform weekly check ins…check in with your budget each week against what you have spent to make sure that you are sticking to the plan you designed for yourself.

I am confident by implementing this habit, you have the potential to turn your financial situation around!

I encourage you to like me on Facebook at Facebook.com/Money Savvy Kate or on Twitter at @MoneySavvyKate and I would be happy to answer your money questions on my website at www.moneysavvykate.com , click on the podcast link!

Talk to you next week!