• Eve Arnold

4 Micro-Finance-Habits To Transform Your Financial Future

A habit. Everyday life will sweep you away if you let it. You’ll get caught up in emails, letters and a decent film after a hectic day. The blueprint for life is pretty standard and pretty clear to everyone.

  1. Get a job

  2. Get a mortgage

  3. Get a dog

  4. Have kids

The end.

Now whilst that might be some people’s dream and it’s a brilliant dream to have if it’s actually your dream. For some people, it’s the complete opposite but they don’t know what to do about it. They can’t see any other way than the path drawn out.

The first place to start is with money. Money buys the things you want and gives you the life you aspire to have. The more money you have the more stuff you can buy and in theory, the happier you’ll be.

Now whilst we know that equation isn’t reliable we do know that having enough money makes life easier. An easier life leads to less stress which leaves more room for happiness.

So let’s dig in.

Micro-Habit 1: Question the Need for the Item

You can want to buy something for many reasons, most of the time those reasons aren’t out of need, they are out of want. Which is fine by the way, but it perhaps isn’t the best reason to buy things if you are trying to operate within a budget.

This need to constantly buy things come from an internal feeling, perhaps it’s the need to:

  1. Validate yourself.

  2. Impress other people.

  3. Tell the world you are doing well.

The way of the world, unfortunately, is that you buy things to then tell the social media world how well you are doing in life. Which just seems like a backwards way to operate. It’s not necessarily healthy or wise considering your personal goals.

Holding off on purchasing is good for many reasons, first off, if you want for less, you don’t need to slave away for a hefty chunk of your life if you don’t want to. The global problem of working for 55 years, in a job you hate, to keep up a lifestyle for other people is a thing of the past if you don’t purchase things excessively.

There are many words for this:

  1. Essentialism

  2. Minimalism

  3. Living below your means

Whatever you call it, it doesn’t matter, it’s what it gives you is more important. That, by the way, is a level of freedom. Before you choose to purchase that thing, just question why you want it in the first place. Even if you question it and buy it anyway, it gets you in the habit of questioning your purchases, which is the first micro-habit to adopt.

The takeaways:

  1. If you are buying something for the sole reason of putting it on social media, consider not buying that thing.

  2. Ask yourself if it’s a need or a want. It’s not to say you can’t have things that are a want (it’s your life) but it just means it’s a trade-off.

Micro-Habit 2: Convince Yourself Over a 6-Week Period

Rewind 6 months ago, I’d convinced myself that I desperately needed a new camera. Escaping the fact that I’d bought a camera 2 years ago and never used it, that was irrelevant. I needed a new camera so then I could start a YouTube channel.

I’d spent a lifetime online looking at all the different options for cameras. I’d created spreadsheets, cost-benefit plans, worked out what equipment I needed and where to get it from. I’d made a habit of Googling the best kit.

But in actual fact, I didn’t need a new camera. I would have never used a new camera. A new camera is the last thing I needed. In reality, the best bet would be to think about selling my old camera.

Some facts are inescapable:

  1. If you don’t use something now, it’s unlikely you’ll use an upgrade.

  2. If you don’t spend your time doing something now, it’s unlikely that something new will spur you on.

  3. If it isn’t broke, it doesn’t need fixing.

What tends to happen though is that you make a habit of convincing yourself you need something. You need a new bike to finally start cycling, you need a new laptop to finally start writing, you need a new coffee machine to finally start drinking espressos.

The reality though is the opposite.

If you have a bike in the garage and you don’t cycle, it’s unlikely that you are going to start cycling with a new bike. If you haven’t started writing yet with the current set up you have, a new computer isn’t going to help. If you don’t drink coffee now, it’s unlikely that a new coffee machine is going to change the fact that you don’t actually like coffee.

Sometimes you just need to face the facts.

If you’re not doing something right now because you don’t want to, can’t be bothered or have no inclination to, then it’s unlikely that the solution is something new, shiny and expensive.

Instead, try holding off on the purchase for six weeks. If you are still desperate to buy that thing after 6 weeks then you can allow yourself to have it. This isn’t meant to starve yourself of the things you want. If you need a new pair of socks because all yours have holes in, that’s cool, go buy the socks.

But if you’re contemplating a $1000 purchase, you might want to hold off for a while to make sure you definitely want it.

You might find that in 6 weeks you’ve forgotten all about the thing you desperately wanted.

The takeaways:

  1. Realise you can end up making a habit out of wanting the thing rather than actually having a high likelihood of using it.

  2. Give it 6 weeks, if you still want the thing after 6 weeks, you’re allowed to have it.

Micro-Habit 3: Standing Orders are Your New Best Friend

You’ve heard this one before. Of course. Pay yourself first. By that, I mean before anything goes out the bank on payday, make sure you are paying something towards your future.

$100 in an investment account, $200 into a savings account, $50 into another account for that thing you’re saving up for.

Set it up as a standing order and forget all about it.

We are creatures of habit. If something isn’t able to be completed because the habit is no longer accessible, then your habits will change. The habits you have to exist in the environment you create. If your hungry and there are chocolate bars in the cupboard there is a chance you’ll go for the chocolate. If there is no chocolate in the cupboard you are left with 3 choices:

  1. Eat nothing.

  2. Eat something else (hopefully healthier).

  3. Go to the shop and get some chocolate.

Now, depending on how desperate you are, it’s likely that you will end up in option number 2. Too hungry not to eat and too lazy to go all the way to the shop just for some chocolate.

The environment made you choose an alternative, preferable decision.

The same goes for your spending habits. If you get paid on Monday and by Monday evening you are searching every clothing website in site for your 9th pair of shoes or 17th jumper, it’s likely you’ll end up buying something. You’ve got money in your account and you’re currently online, looking at things to buy.

However, if on the day you get paid, you have a standing order that goes out the door that day to a savings account, you’ve now got a new environment and some new choices:

  1. Log on to your internet banking, transfer some funds across and then buy that jumper.

  2. Close the window and do something else with your time.

If you are anything like me, the pain of logging onto your bank creates so much friction that you’d rather avoid at all costs. Passwords after passwords to get onto a system that is depressing at the best of times.

I’d rather just not. And because I know I’d rather not, if I can empty my debit account as quickly as possible into other accounts that are harder to get into, I know my likelihood of saving and not buying crap I don’t need is exponentially higher.

The takeaways

  1. Create an environment that suits your wants, if you don’t want to eat chocolate, step one is taking it out of the house

  2. Part of that environment is making sure that the money you want to spend is allocated to the right places

Micro-Habit 4: Spending Time Reducing Your Outgoings

Income is a funny thing. You spend your life trying to increase your bank balance, month after month it tops up, it falls down and back around the cycle you go. You buy things. You don’t use those things. Yet because like is a roundabout of constant activities, you feel like you need a present to break the cycle.

You feel like you need to make this month different. You need to make the daily commutes, the office hours and the frustrating boss all worth it, so you buy crap you don’t need to fill a hole.

A hole created by elements of your life that you’re not totally happy with. Yet by constantly filling this hole up with buying things you don’t need, you’re not really filling the hole, you’re making it bigger.

Let me explain.

You will be at work for a long time. I mean a long time. It’s likely that you will be grinding away at work for the next 40 years. That’s a conservative estimate if the retirement age keeps going the way it is, it’s likely that if you are in your twenties now, you’ll be working for the next 50 years.

50 years at a job you don’t like is a wasted life.

I say that with compassion and honesty. It’s not that I don’t understand the pressures of life, the frustrations and the setbacks. It’s that you have a duty to yourself to live a life that you enjoy. If you get little to no enjoyment from your job, it’s likely that something is going to need to change if you want to find some fulfillment.

The first and easiest thing to change is your outgoings.

Don’t buy things because you are covering up how much you are not enjoying what you are doing. If you hate your 9–5 but justify it because it allows you to buy a new Xbox game every week and that takes your mind off how much you hate your job, it feels like that is a never-ending cycle.

A cycle that you are feeding that has no end goal.

If you are constantly paying out for a lifestyle that justifies your hatred of your job there is an issue. Mostly because if you continue to do it, that will be your life for the next 50 years. Not a life that’s totally fulfilling you’d perhaps agree.

Instead, start with reducing what you are paying out. A lot of the time your salary matches and covers the money going out your account. You need enough to not be in a deficit every month. Otherwise, you’ll be on a winding road to a lot of debt to pay off. So that leaves you with two ways to have more money:

  1. Earn more.

  2. Spend less.

Spending less is quite an easy thing to achieve. The first place to start is to understand how much you spend each month and more importantly, where you spend it. By just looking it can be eye-opening, it’s quite normal for the case to be that you spend, spend, spend and only look at the damage done well after the spending spree. Consequently, it’s not uncommon for people to have little to no idea of where most of their money goes each month.

Areas that are easy to reduce:

  1. Food — stick to the weekly shop

  2. Alcohol — stick the weekly shop

  3. Subscriptions — what are you signed up to that you don’t use?

  4. Clothes — how many clothes do you have that you don’t wear?

  5. Footwear — how many shoes can you really wear at once?

  6. Night outs — well COVID pretty much spoilt that

  7. Nick Nacks — how many photos and candles do you really need?

The takeaways

  1. Start by looking at where you spend your money, understand what’s going out the door every month

  2. Understand that if you can reduce your living costs you can change careers much quicker

Final Thoughts

Money is a means to something else. A house, car, bike whatever. Now there is always going to be a baseline amount you need to earn every month in order to pay your way but that doesn’t have to be a humungous amount. That amount is completely dictated by you.

You can choose to be more frugal with your money which then means you can choose work that suits you rather than the job that pays the highest.

With some micro-habits that take no time at all, you can transform your financial future and live a life of considerable happiness.

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