Simplicity is the ultimate sophistication – a quote by Leonardo da Vincci which I posted last week. I’m all for simplicity; whether it’s my finances; my work. However, simple and easy are not the same thing. In today’s culture, we sometimes get these two words mixed up.
Simplicity refers to something that is simple to understand and free from complexity. Ease refers to the execution of it and that’s probably where many of us trip up. When it comes to personal finance, the concept really is not complex ie spend what you can afford, set a budget, invest. And even when it comes to investing, there is the simple advice by Warren Buffett which is to invest in the S&P 500 index fund.
Or maybe look at another example; trying to lose weight which we have probably encountered before at some point in our life. Conceptually simple. Burn more calories than you consume by controlling your diet and exercise. But look at how many people sign up for the weight loss programmes, join a fitness programme every new year and give up through the year.
Where do we trip up then?
To be simple, means we apply our logic and rationality. We all know what’s right to do but forming good habits around is always a challenge. Bad habits no problem.
So how can we then convert simple to easy and make it a habit, at least when it comes to money matters?
The book Atomic Habit gives good insights to this which I’m going to borrow, and I’m going to combine it with my own experience to give it my own twist to this
1. Get started, even if it’s one step at a time
As simple as it sounds, this can be the biggest step for most of us in so many things. Whether it’s a perfectionist nature or just pure procrastination, getting started can be the most challenging thing. I knew how long I took before even started creating this blog because of all the many reasons I had. No time, can’t write, needed to figure out right colours for my site.
It starts with that motivation to change and to make that decision to start today. What I discover is this, often a stronger motivation to start is not the benefit of the habit but rather the pain of not starting it.
For me, it was not the work optional dream that got me started – it was the pain of the job I was in that made me realised I had to make some changes in my which of course included building my financial freedom.
2. Focus on systems, not goals
This is one of the things that Atomic Habit touched on which I found to be very true. It says that goals are about the results you want to achieve while systems are the processes that lead to those results. And the processes need to have certain rules and guidelines to it.
So many times when we set goals, it would be lose XX kg or achieve XX in wealth which is great because the goals sets a destination. However, without the right system in place – it will remain as just a destination without a direction to get there.
One of the things the book mentions about starting a new habit is the implementation intention which is a plan you make on when and where to act. So it will look like this “ I will do this XXX on XXX at XXX”.
A good example of that to build good money habits would be:
· I will transfer RMXX into my investment account/ will transfer XX into my emergency fund on the XX date of every month when I receive my salary in my study room
· I will review my budget on the last day every month at 9pm in my living room
Where possible, automation really helps. For example, I have direct debit functions for my investments so I make the process as seamless as possible to give myself no excuse for not doing it.
There are other rules that can be implemented as well such as:
· When I want to buy something over RMXX, I will wait for 3 days before making a decision
· Before I purchase any stock, I will ensure I read through the annual report and ensure the valuation before a certain threshold before purchasing
3. Out of sight out of mind
There is truth to this. In the book, it mentions that disciplined people do not necessarily have more self-control but they structure their lives in a way where they spend less time in tempting situations.
For me this is true when it comes to my diet behaviour. How I killed unhealthy snacking habit was to not make sure I don’t have them at home. So there was no chance of me ever reaching it out to any snacks when I’m bored.
Anyone who finds themselves ending up with purchases that they were not really looking to purchase at first, then unsubscribing from newsletters, unfollowing brands and disabling notifications should help
Those seemingly harmless pop ups can actually result in endless scrolling and then before you know it, you see something on sales and it feels like you are saving money because it’s cheaper. Well it’s good if you needed it, but more than not, it ends up as more clutter.
4. Add some friction to unhealthy habits
While ease can help in creating a habit, the opposite is also true. This is why any platform that wants to ensure high user adoption would know that the customer journey needs to be as easy as possible. Look at Amazon 1 click – it’s literally one click to make your purchase.
If you find yourself lacking self control when it comes to purchases, do not save your credit card details on any payment app or any other platform. That way you will not be able to top up as easily. Just allocate a fixed amount each amount and that’s all you can spend.
Same when you are spending out, don’t bring the credit card. Have a debit card that only has your monthly budget so there’s no way you can spend more than you can afford.
5. Be patient with yourself
Habits take time to build and results take time to show. Whether you are trying to lose weight, teach a child something or investing, most things will take time, with some more than others. We often overestimate what we can do in a year but underestimate what we can do in a life time. Hence, we set too lofty goals in a short term without realising anything lasting will take time to build.
And we can give up too easily along the journey. It’s better to take two step forward and one step back then to be too harsh on yourself when you fail at times and then give up.
6. The journey is always easier with company
And with this, I mean an accountability partner. When you start off something on your own without anyone knowing about it, it’s easier to give up. Deep down, most of it don’t want to fail someone. Atomic Habits say that knowing that someone is watching can be a powerful motivator.
If you want to take it a step further, tell a bigger group of friends of your plan. Imagine you tell the whole world you want to embark on this goal and you don’t do it. Someone is bound to ask and most of us do not like to admit that we are quitters. I remember the time when a group of friends were trying to lose weight for a friend’s wedding. We were keeping each other accountable by sharing the exercise we did or ate. Sounds trivial but it worked.