You may remember that earlier this year the recommended safe drinking limit for alcohol was lowered to 14 units a week for men and women. This got me thinking about my own alcohol consumption and whether I needed to change things.
When I thought back over the past 30 years, I struggled to remember a single week when I had gone without alcohol. Some weeks it might have only been a few glasses of wine, but most of the time it was more. I rarely drank from Monday to Thursday, but managed to make up for lost time at the weekend. The fact is, like most habits, this pattern had gradually become ingrained.
Habits are seldom formed in the pursuit of a goal, no matter how worthy or desirable, but in pursuit of your identity — who you think you are and what you stand for. As you go through life, this will constantly change to reflect your life experiences. What you value now may be very different from what you valued 10 or 20 years ago.
Are your current habits and routines conducive to living your desired lifestyle? Of course, I’m particularly interested in financial habits. Spending within your means and saving to build financial security for when you can no longer work are the foundations for high financial wellbeing.
But money issues can be abstract, complex and emotionally challenging to navigate, due to our primeval hard wiring that makes us favour immediate pleasure over deferred gratification. So if your earning, spending, saving and investing habits need improving and updating, here are some ideas that might help.
Habit 1: Avoid making financial decisions when emotional
In one study, researchers offered several groups of people the choice of some money now, or a larger sum in a few weeks. The choices were illustrated with pictures. The only group who failed to make the wiser choice of a future payment were men shown pictures of extremely attractive women alongside the option of an immediate payment.
Other studies have found that people who are sad will pay more for something or sell it for less, compared with those who are in a normal emotional state. Being highly stressed can lead to impulsive or irrational financial decisions. In these situations, the age-old advice of “sleeping on it” makes a lot of sense.
Habit 2: Tune out the noise
Avoid taking too much notice of investment forecasters, pundits and gurus who profess to know what will happen in investment markets. The future for investing is always uncertain and to think otherwise is naive and likely to lead to you making poor decisions.
According to behavioural finance psychologist Daniel Crosby, some years ago, the fund group Fidelity did an internal analysis of several thousand US investment platform clients. It found that, after adjusting for risk, those that achieved the highest returns were typically owned by people who had either forgotten about their accounts, or had died.
So avoid looking at your financial position too much. As a general rule, look at your cash position weekly and your investment portfolio yearly. If you’re investing for a 40 or 50 year time horizon, why worry about what is happening this week, month or year? As the legendary fund manager Peter Lynch put it: “Far more money has been lost by investors preparing for corrections or trying to anticipate corrections, than has been lost in corrections.”
Habit 3: Just say no
Whether it’s a meal deal instead of just a sandwich or paint protection with your expensive new car, developing the habit of saying no to add-ons, upgrades or special deals stops you spending more money than you planned.
Habit 4: All pounds are equal
Research shows we treat money differently depending on where it comes from. We are more likely to spend a rebate than we are a bonus.
Adopt the habit of treating all your inflows, whether salary and pension increases, tax rebates, bonuses or premium bond winnings the same as core income. That means directing it to the same spending priorities, including saving for your future self or reducing debt, as core income.
Habit 5: Forget Love Island
Watching a lot of reality TV or exposure to “lifestyle” social media has been found to increase people’s sense of inadequacy and insecurity, because they don’t conform to the unrealistic physical look or curated “perfect” lifestyles on show. This can lead to impulse and emotional spending to fill the void. If you can’t stop watching reality TV, at least be clear about what’s important to you in life and what matters.
Habit 6: Replace a bad habit with a good one
This year I decided I would no longer be a habitual drinker and decided to make alcohol a treat to be enjoyed on special occasions. Breaking a 30-year habit might sound daunting, but by making some simple environmental changes and leaving open the option of occasionally indulging made it easier.
I stocked up on non-alcoholic lager and wine so that when I felt like a cold beer or glass of wine at the end of the week, I could still have one, just now without the alcohol. It was as much the ritual as the consumption that I needed to assuage.
Since I changed my drinking habits, I’ve had a few glasses of alcoholic wine with friends or family at a restaurant and the occasional beer or two when out with work colleagues, but that is the exception, not the norm. Now I really enjoy and savour the occasional drink and feel crystal clear every morning. I’m using the money I’m saving from not buying booze, to go away on regular short holidays with my wife.
Your money habits may be highly ingrained and you might think you can’t change. But, as my alcohol experience shows, as long as you have a clear idea of what you stand for and what matters most in your life, you can then design your financial environment and routines so that it’s easier to develop habits that are conducive to your financial wellbeing.
Jason Butler is an expert on financial wellbeing and presenter of the “Real Money Stories” podcast. Twitter: @jbthewealthman