Building good financial health is a bit like building any other good habit – easy in theory but surprisingly hard to carry out.
Eating a healthier diet, exercising more and managing your money better; working out what you need to do is the simple bit. Actually doing it can mean changing the habits of a lifetime and that is often quite a challenge.
But it is possible and, given the current economic uncertainty, essential to change bad financial habits for good.
Paying down debt, building a savings buffer, drawing up a budget so you know how much you have to spend, understanding where your money goes and saving into a pension – those are five essential elements of good financial health.
So how can you change your habits and restore order to your bank balance? Here are some tips:
Outline your motivation
Elena Touroni, co-founder of the Chelsea Psychology Clinic, says it’s important to look towards why you want to make changes.
“Whenever you want to break a habit and create long-lasting change, you always have to start with motivation,” she explains.
Ask yourself, why do you want to cut down on your spending? Maybe it’s because you want more disposable income or you’re saving up for a deposit. Whatever it is, get clear on your reasons.”
Think about your feelings
Jane Evans, known as the “lasting life change coach”, says it is important to consider what emotions you feel when spending money, especially if you struggle with impulse purchases.
Start to get curious about the emotional relationship you have with money,” she recommends. “Notice three feelings you have as soon as you think about buying [something new].
“We make all our purchases based on our emotions so start tracking your habits. What had happened in your day before you got the urge to spend. Is there a trend and connection with your stress, unhappiness, frustration or something else?”
Dr Touroni adds: “If you’re still struggling to cut back, it might be worth digging deeper to explore whether your spending is serving any kind of psychological function.
“Are you using shopping as a coping strategy? What emotions precede the spending sprees? Boredom? Sadness? Loneliness? Therapy is a great place to get to the root of the issue to give yourself the best chance of following through.”
Set a spending firebreak
Impulse spending happens in the moment, so if you set a firm rule to pause before purchase then that could help you.
Evans recommends a self-imposed gap between seeing and buying: “Before you click ‘buy’ on anything take three deep breaths, put some weight into your feet to ground yourself, go make a cup of tea or stand in the garden. Then check how you feel now about spending the money.”
Sometimes a bit of distance can be the difference between making an unnecessary purchase and not.
Recognise your potential pitfalls
Lucy Mullins, co-founder and head of memberships at StepLadder, a rotating credit and savings association for first-time buyers, says to think about how you might slip up in advance.
When it comes to discipline, a hard conversation with yourself is often needed to establish where your weaknesses are, and what things are likely to stand in your way,” she says.
“By doing so, you can start to put solutions in place to help you through when temptation arises. For instance, if you think you spend too much time on social media, you can install apps to help monitor and reduce your usage
If you can’t resist buying a coffee and bagel from that nice little bakery on the way to work, plan to go a different way and avoid walking past altogether.”
Make use of technology
It’s actually never been easier to manage your finances more effectively because there is a range of clever apps and other fintech available to make it easier.
From budgeting apps to credit dashboards, there’s a wide range of technology that can remove the barriers to good financial habits by making it simpler to see your finances in real-time.
Anne Boden, founder of Starling Bank and author of The Money Revolution, says financial habits are shaped by our childhood but new technology can be the catalyst for better financial habits.
“The money revolution presents an opportunity to rethink our own individual attitudes to money and to unshackle ourselves from any previous negative connections in order to get the best from what is happening right now,” she argues.
Just as we have to adapt to an entirely new way of spending and saving, we can also completely reconsider our emotional connections to money that have been handed down from generation to generation.”
New technology creates a far more open relationship with money, Boden adds: “There is no limbo-land of payments going in and disappearing for three days into the ether: everything is properly accounted for, so there are no surprises. Upcoming payments are even flagged in advance so account holders can make sure they have adequate funds ready.
By getting rid of the unknowns and providing certainty for the longer term, the fears that fuel historic emotional connections will be vanquished.”
So, just like a fitness watch might help keep someone working towards fitness, choosing fintech that supports your goals could be what finally transforms your relationship with your finances.
Keep your goals in mind
A runner might carry a reminder of the race they are training for, someone on a diet might pin up a picture of an outfit they want to wear.
Mullins suggests that if it’s hard to stay motivated then surrounding yourself with reminders of why you are working to build good money habits is important.
All through the process, remind yourself why you are doing it,” she says. “In a moment of weakness, build self-discipline by picturing what it is you want to achieve.
“You could keep a picture on your phone, create a mood board or simply keep the image in your mind, but the constant reminder of why you are doing it should help see you through the more difficult moments.”