The Power of Habits

One of the most powerful topics I’ve studied recently is Habits. I’ve read and listened to some great books, podcasts and blogposts on habits. Charles Duhigg wrote a fantastic book called The Power of Habit. I highly recommend reading that book. From Duhigg I learned about what he calls the habit loop.

The habit loop consists of a cue, the routine and a reward. Once a habit becomes ingrained our subconscious takes over and every time a certain event occurs it triggers the response without our realizing it. Our minds actually begin to anticipate the reward even before responding. Because this loop becomes such a part of our nature it takes incredible willpower to stop a habit. Sometimes it’s impossible.

What Duhigg advises instead of trying to stop habits is to redirect them. More a tweak than a complete replacement. The key is in understanding the three components of the loop and identifying each in a habit that you want to change. Then you only replace the routine. The cue and the reward stay in place.

  1. What triggers the habit? When do you do the thing you wish you didn’t?
  2. What response will you put in place of the undesired action?
  3. Prepare your mind to accept that reward coming from the new action.

This habit loop can work to alter any of the habits we want to replace in our lives or businesses.

Understanding more about habits has transformed how I think about goals. Instead of just putting a goal on paper and hoping to reach it and working at it inconsistently, I now identify the consistent actions necessary to achieve the goal and work to make those actions into habits.

For many years I’ve wanted to write a book. I have pages of topic ideas. I’ve even begun a few—but never got farther than a few thousand words. This year several of my friends at different times have encouraged me to go for it. So I’ve been thinking and planning. I’ve heard that when the student is ready the teacher will appear.

Teacher #1

I read a lot of bloggers and a ton of books. I also watch YouTube and listen to podcasts. One of my favorite blogger/author/podcasters is James Altucher. He wrote a great book called Choose Yourself. I’m currently reading his most recent called The Rich Employee. In his books and blogposts and podcasts he talks a lot about how writing 10 ideas per day is a habit that contributes to his life improving every six months. I started practicing the 10 ideas per day habit at the beginning of the year. I have to say, it’s been fun and very practical. If you’re interested in this, I recommend getting Claudia Altucher’s book, Become An Idea Machine. Claudia is James’ wife. She wrote a book that gives you a topic each day to write your 10 ideas on. I found this extremely helpful the first month or so that I was building my “idea muscle” and instilling the habit. I still come back to her books occasionally if I’m having a mental block and not sure of what to write my 10 ideas about.

Teacher #2

Last year James interviewed a guy named Steve Scott on his podcast. Steve is an author and specifically writes a lot of books on habits. http://developgoodhabits.com This year as I became more interested in habits and book writing I circled back around to that Altucher/Scott interview. I listened to it at least three or four times last month. Then I went to Steve’s podcast and listened to everything he had. I checked out his newest website, http://selfpublishingquestions.com. I bought some of his books. I emailed him a couple questions. I realized that the things he has done, I can do too. Steve is a regular guy. And a nice guy like me. All this gave me hope and a path for writing the book. And the path included some habits I need to implement.

Habit #1

Over the past month I adopted Steve’s habit of writing every day. This is a common theme among writers. At the same time every day, sit down and write. If you have nothing to say, write anyway. Some days, you write crap. Some days you write completely off topic. But write anyway. Writers write. So I’m a little over a month into writing every day. I aim for 1,000 words a day. Sometimes I write 2,000. Sometimes it’s all I can do to get 500. But I write daily.

Habit #2

Another big ah ha for me was that Steve has around forty books for sale now. He only started in 2012. Steve is publishing new content almost every month. Most of his books are fairly short, even mini-books. Most are priced under five bucks. But his total income from those forty books is a lot more than I make each month at my full-time job. Hmmmm. The idea that my books don’t have to be 40,000 words or $15.99 appeals to me. I can do this. New content each month.

So off I went. Writing daily on topics that fit together. I put together my first book over the past month. And last weekend figured out how to list it on Amazon. It’s called Ben Franklin’s Guide to Financial Freedom. I wrote a little over 12,000 words and added in a 3,000 word story from Ben Franklin called The Way To Wealth. So the whole book is only 15,000 words. It’s meant to be a quick daily read to think about finances and freedom and hopefully get your wheels turning each day. Check it out if it sounds interesting. Let me know what you think. Right now it’s only on Kindle. After I receive some feedback I plan to tweak and then make a paperback available to those who prefer paper.

In the meantime, I’ve written another small book called Ben Franklin’s Guide To Productivity. I’m cleaning it up and will make it available in October. I’ve also started writing a third book. So the habits of daily writing and monthly releasing content have enabled me (after years of just dabbling) to not just write a book but three very quickly!

Now my new habit for October is to build habits around publishing blog content. I’m thinking I might need to recruit help for this one. For some reason consistently blogging has tripped me up multiple times over the past seven years. That changes now (well, in October). Wish me luck!

What habits are you working on?

Should I cut up my credit cards?

My brother and I were talking this week about the virtues vs. vices of credit cards. Banks are in the business of getting us to open new cards and use cards more. But are banks to blame for our poor spending habits? Are credit cards the enemy?

Some financial gurus advise cutting up your credit cards so you won’t be tempted to use them. Or freezing your cards in a block of ice and keeping them in your freezer. The theory behind the freezer strategy is that you’ll have time to reconsider the necessity of a purchase if you have to wait for the block of ice to thaw before you can use the card. Maybe these extreme measures are necessary if you have an extreme case.

Maybe these methods work to prevent some people from overspending. My viewpoint is that these are band-aid approaches. They will work temporarily. Hopefully you get used to not spending money unwisely. Without addressing the real underlying issues though, you risk backsliding. More than likely, you’ll go back to old habits when you hit a rough patch in life.

Spending is often a habit. To break a habit you need to figure out what sparks the negative action. You need to examine the trigger, the response and the reward. Maybe your spending habit is triggered by a hard week at the office. At the end of a hard week you go out and buy new shoes and a purse. And probably dinner out. I’m not judging…merely observing. The reward you receive by taking action(buying stuff) is a feeling of wealth. The new shoes and purse may give a feeling of being more attractive. These purchases are all fine if they were conscious decisions and goals you had. HOWEVER, if your goal was to build wealth but you headed to the mall out of habit at the end of the week then you need to shift.

Knowing your trigger is a hard week at work, go ahead and schedule a Friday night/Saturday routine. That is, rewire the actions that will take place when the trigger hits. You want the actions to give you the rewards of feeling wealthy and attractive. An alternative routine could be a financial update and a physical activity that you enjoy. The financial update (looking at your new balance in Quicken or Mint after your paycheck is deposited) will remind you that you are wealthier. Pick a physical activity you enjoy like taking a walk with a friend or working out at the gym. You’ll feel more attractive than eating a big meal at Texas Roadhouse after a long week.

Again, find your trigger, replace the unwanted action and still receive the reward. You can’t actually quit most habits. Only replace them. For more on habits, check out Charles Duhigg’s excellent book The Power Of Habit. He describes habit loops in much more detail and includes case studies of successful habit changes.

After kicking your bad spending habits you’ll be able to enjoy the positive benefits of credit cards with complete peace of mind. I use credit cards for every expense I can. Credit cards are very convenient. A lot of times I don’t even carry cash.

Convenience isn’t the only reason I prefer credit cards. Probably not even the primary reason. The big one for me is the points. I use a Discover card and a Mastercard that earn points for each purchase. One point for each dollar in purchases. At times they run different promotions. For example, this month every dollar in online purchases using the Discover card earns five points. Yay!! Amazon gets a lot of my dollars every month. I devour books. And now I get my vitamins, pens, protein powder, all sorts of things from Amazon. Anyway, the points work out to 1%– 5% discount that you can apply back to your card.

I know you’re thinking 1% isn’t worth messing with. Here’s how it works for me. We spend around $1,700 per month on the credit cards. We put utilities, insurance, everything we can on the cards. That works out to $17 at 1%. ($17 x 12 months = $204.) $204 refund from purchases we are going to make anyway. Maybe $204 doesn’t matter to you. If so, you’re probably spending more than $1,700 and would get more than $17 a month. =)

Another tactic with the credit card points is to purchase gift cards. A few years ago, LL Bean was one of the vendors that Discover offered gift cards for. The way it worked was that you could use $40 worth of points for a $50 gift card. That is 20% off. LL Bean had a kayak that I wanted. So I saved up points and bought enough gift cards with points to get the kayak. It was a great kayak. I used it so much that I wore a hole in the bottom. Every time I used it, I was reminded of how I got it essentially free. Discover, Amex, Citi and others have many vendors that participate in the discounted gift cards in exchange for points program.

The overarching key to credit cards (and life) is that I’ve learned to not spend more than I can pay for each month. Whether I pay by credit card or cash, I limit my spending.

Having mastered my spending habits, I’ve found that credit cards can be a tool to actually save money. I am able to be even more frugal thanks to credit card reward points. For me, credit cards are my friends, not the enemy. I challenge you to let them out of the freezer and take responsibility for your habits.

5 Tips for Becoming Debt-Free

Ben Franklin QuoteLast week I had a conversation with someone that included this question: “You and your wife are in your forties and are debt-free. My spouse and I are in our thirties and are not on course to be debt-free that soon. How did you do that?”

Maybe this is something you’d like to achieve. If so, I hope these simple tips help.

  1. Both spouses need to agree on a target.

This may not come naturally. Take some time individually to write up your ideal life/lifestyle. Get back together and see where you agree and where you differ. Compromise on the differences then set up goals.

If you can make this a project you both can work on together, it can be a big plus for your marriage. Often one spouse is a saver and one is a spender. This creates tension. Agreeing on priorities that you both see as important can lesson the tension as you both work toward a common goal.

  1. Learn to live on a lot less than you earn.

This may require some lifestyle changes. If you really want to be debt-free you’ll find these tweaks are not really sacrifices. Don’t eat out as much. Brown bag your lunches. Don’t pay for cable(at least not premium channels). Spend less time shopping. Take a walk outside instead.

This really is the key. Spend less than you earn. The more creative you get with saving, the faster you’ll be out of debt. Then if you want to get rich, keep up those frugal lifestyle adjustments. You’ll find you’re just as happy. This is really about consciously spending money and time on the things that bring you long-term happiness rather than the mindless consumerism most people practice.

  1. Aggressively attack the debt.

Now that you’re spending less than you earn, use the difference to attack the debts. Focus on one at a time (usually the one with the highest interest rate). Make it a game to see how fast you can pay it off. After the first one is paid off, you have even more money each month to pay on the next one. You’ll pick up speed with each one.

  1. Keep at it even when you get pushed off course.

It can be discouraging when an unexpected expense occurs–like a car breaking down or an appliance dies. But don’t let that surprise stop you. It’s only a slight delay, maybe a month or two of extra expense instead of extra debt payments.

You’ve probably heard that commercial airplanes do not go in a straight course from point A to point B. They are not able to keep a simple arc for even a short flight. Airflows push them one way or the other. They have to go around or over storms. They need to avoid flight paths of other planes. Pilots must keep their destination in front of them and continually make little adjustments to bring the plane back on course.

Life is just like that. If you keep your goal in front of you, and make continual little adjustments(and sometimes big ones), eventually you’ll pilot your finances to your destination.

Which brings me to the last tip…

  1. Have another goal.

My experience with paying off debt was bitter-sweet. While I was elated that we did it, and proud of our hard work and persistence, I also went through a bit of a funk after sending the last payment. Working so hard for so long at a big project like that becomes part of your identity. Without that activity to focus on each month, somehow part of me was missing. When the monster is finally dead, it’s important to celebrate. Then quickly move on to the next quest.

The good news is that ANYONE can do this. The person I was speaking with last week has a higher household income than I’ve ever had. I’m sure they have nowhere near as much debt as we had at various points. If they choose to make financial freedom a goal and stay focused on that goal, they WILL arrive quickly.

Are Coupons Worth the Trouble?

We subscribe to our local Sunday newspaper for one reason. The coupons.

Some people say that taking the time to match up manufacturer coupons with local coupons and sales saves too little money to be worth while. For some that may be true. For example, maybe you and your spouse both work 60 hours a week at your six-figure jobs, then come home to take care of your three kids each night and visit your aging parents on the weekends. In that case the dollars saved probably aren’t worth your valuable time.

I’m going to share another scenario though. This is our experience with coupons:

For us, the practice of couponing is one of the activities that has allowed Becky to be a full-time mom and homemaker for our two kids and me for the past 10 years.

Each week, Becky cuts coupons from the Sunday paper and magazines or other places she finds coupons. Then she matches them up with circulars from local grocery stores. Those circulars often have store coupons and other sales. By stacking manufacturer coupons onto store coupons, she sometimes gets things for free or very nearly free. Only buying things we actually use.

This coupon clipping and matching process takes an hour or so a week. It actually saves time in the store when she goes in knowing exactly what items she is purchasing.

Becky saves $50 – $100 per week for our family of four by taking the effort to match up coupons. Not bad for an hour of work. Especially since that hour of work was at home while sitting on the couch.

This practice over the years has contributed to arriving at our forties completely debt-free.

Ben Franklin (Poor Richard) said, “The Art of getting Riches consists very much in THRIFT.” He went on to say that not all of us are equally gifted at making big bucks, but ALL of us can practice THRIFT.

In addition to coupons, we practice frugality by shopping at:

  • local produce stands
  • bent ‘n’ dents
  • mennonite shops for meats, cheese and bread
  • coupons at mall stores and office supply stores
  • thrift shops
  • yard sales

Do you use coupons? Why or why not?

 

 

Frugal Friday – The Ultimate Discount

CVSThis week’s example goes beyond frugal. Imagine being paid to take merchandise out of the store. That’s what I watched happen this week. My wife, Becky–as I’ve mentioned before–is an amazing bargain shopper.

Wednesday I walked into a local pharmacy with her. She pulled out her coupons and went straight to the items that were on sale at the store and that she had coupons for.

A $7.99 bottle of Listerine mouthwash.

A $9.99 battery-powered Oral B toothbrush.

Two minutes later we were at the checkout counter with her items and coupons. After store discounts and manufacturers coupons were deducted the total came to $2.07. She handed the cashier two one-dollar bills, a nickel and two pennies… And he handed her back the receipt with three store bucks good on any future purchase from that store.

So the grand total spent for the mouthwash and battery-powered toothbrush… -$.93

Talk about frugal! Free stuff AND enough money for something else free next trip.

Do you have a tip for us? Please share in the comments below.

How to be Indispensable in Your Role

Woody Allen quoteThere’s a popular saying, “It’s tough to find good help.” The reason people use that phrase so often is that it’s so true.

The irony is that being “good help” is fairly simple. The bar is set rather low.

Show up. Come to work everyday. Come on time. Be present physically and mentally. That’s huge…because most people aren’t fully present.

Work hard. Just do your best each day. Don’t phone it in. Don’t watch the clock. Be proactive and productive. Find ways to help beyond your job description.

Think. Don’t mindlessly go through your checklist. Always be thinking of better ways to do things. Don’t wait for your supervisor to show you how to do each step. If you aren’t sure about something or need to learn something new…Google it!!! There is a massive amount knowledge available for free on the world wide web. Use it! Your boss will think you’re a genius. At the very least she’ll be impressed by your initiative. Like I said, the bar is set LOW.

The cool thing about being indispensable is that your value goes up. You will learn a lot that makes you more valuable in any job. But specifically to your current organization if you continue to grow, learn and take on new roles your value swells.

You may need to point these facts out to your supervisor. Often, especially in small organizations, your boss is so busy she’s not thinking about whether you are earning as much as you should. One way to grow your pay is negotiate a percentage commission or bonus based on output. Try to tie your pay to a scalable component. In other words, you want a percent of sales that you can ramp up. Leverage by using systems, subcontractors or internet.

Of course it’s possible that you show up, work hard and think for yourself without getting a raise. If you do these things for six months to a year and your current employer doesn’t agree that your value has risen, find a new employer or strike out on your own. Your skills, work ethic and value will transfer with you.

Frugal Friday – Statue of Liberty

NY FerryLast week I attended a two-day conference in Connecticut. Since it was less than a half day drive, my family rode along. They enjoyed the sights in Connecticut while I was in meetings.

On the way home we stopped by Staten Island and rode the ferry over to Manhattan. The ferry traveled right by the Statue of Liberty–something our first grader has been wanting to see.

I had also driven through Times Square, NYC on our way up to Connecticut the first night. So they got to see all the city lights.

Total cost of our NYC sights…$2.50 parking at the free ferry plus several meals (couldn’t go past IHOP without getting pancakes!)

Thank you to Bec’s Facebook friends for the frugal tips to see NYC on a dime.

 

Saving up for…

Save infographicMany years ago I worked as a tax preparer in Easley, SC. In the course of interviewing clients about their income and expenses, I would often learn that they had no bank accounts. No checking. No savings. If it were only one or two people I might be surprised. Nope. I heard the same thing from dozens each month I worked there. Close to one out of every three people that came in didn’t have ANY bank accounts!

These were people of all ages. Didn’t they know the advantages of banks? This was back when bank accounts paid good interest rates.

These days banks pay very low interest rates. But there are a couple other reasons to use them:

Safety—most accounts are protected up to $250,000. FDIC insured means the government will make sure you get your money back even if the bank goes out of business. That makes them a safer place to keep your money than your mattress if your house burns down.

Protection—if your money is accumulating in a jar on the dresser, it can be tempting to grab a twenty on your way out the door to the mall. Protect your money from YOU!

Now hopefully you have a bank for your checking and savings accounts.  But are you ACTIVELY using them?

I’m sure you can think of many things to store money for, here are a few to get you started:

  • Emergency fund—you’ve started one, right? CLICK HERE for a recent post on Emergency Funds.
  • Saving for a car—begin setting aside money each month for your next car. Don’t borrow money for a car.
  • Vacation fund—ditto for your next vacation. It’s important to make memories with your friends and family. But if you don’t have money saved to go to Disney find other alternatives. There are a ton of cool things to do and explore in your local area without spending a bunch of money. The big trips are special. Save up and do them right.

How do you get started?

Find $10 a month to get started. One less pizza night a month. Once you get in the habit of saving, you’ll be surprised at the ways you can save in your daily, weekly, monthly lifestyle. Read the Frugal Friday posts for more ideas.  😉

I’ve heard it said that what you focus on, increases. As you begin to focus on adding money to your savings account, you’ll be aware of more ways to add money to your savings account. Make it a game to add one more dollar than you added the previous month.

Don’t be like those lovely people I worked with in the South who just never got around to saving money for a rainy day. What are you saving for?