It quickly delivered. “Your habits are often a byproduct of convenience. Humans are wired to seek the path of least resistance, which means the most convenient option is often the one that wins.”
I take that to mean if I can make the desired outcome easy enough that even tired me, or unmotivated, busy, lazy me can stick to it – I have a better chance of achieving it.
It got me thinking about how I could add friction to the financial habits I don’t want to maintain and remove friction from those I want to embrace. Then perhaps the “new year, new me” mantra will last beyond January.
The list of possibilities was longer than I expected – and perhaps you have some to add to it.
Save by doing it once
Why pay a bill four times, or 12 times a year when you could pay it once? For some bills, like insurances, you have payment options. Doing something once appeals to lazy bones over here, but only if there’s a little carrot for parting with money before I need to. In many cases, there is, in the form of a discount. Obviously, it means you need to have the funds to pay upfront, and means you need to plan for next year.
Automate what can be automated
When something doesn’t rely on you finding the time/remembering to do it/bothering to do it, there’s a much greater chance it will happen! Finances offer lots of automation options:
Saving the difference
Like retailers who ask you to round up purchases and donate the difference to charity, you can do that for your savings. Some banks offer options here – ANZ calls it “Round Ups”, at ASB it’s “Save the Change” – but both allow you to round up by between $1 and $10. There are many apps that do it globally, but fewer that I could find in New Zealand – and they’re not registered banks so you need to know how they’re making their money, where they’re putting yours, and what sort of return you’ll get.
Zero-based budgeting
This is just treating your savings like a bill that must be factored into your overall budget, rather than just saving whatever’s leftover. So, you’d set up an automatic payment to your savings account right after each payday and live off what’s left. It’s the “pay yourself first” mentality – but it only works if you can live within what’s left!
Auto-investing
Similar to zero-based budgeting, but for investment rather than saving. After you’re paid, you automatically contribute a fixed amount to an index fund, managed fund or exchange-traded fund. It has the same psychological benefits of removing the money before you can spend it, and it’s useful for what’s called “dollar cost averaging” which just means rather than saving up your pennies and investing at a later date at whatever the price is that day, you buy smaller amounts frequently, allowing you to benefit from dips in the market. It’s akin to what happens with your KiwiSaver – but be careful to only invest money you won’t need in the short term and opt for low-fee options.
Then we get to the bit where you add friction to the habits you don’t want to keep repeating. Here’s some options.
Ring-fence regular costs
The cumulative bill for groceries, coffees, booze, takeaways etc almost always ends up blowing out – I see it with new clients all the time and over the course of the year can add up to thousands. One lazy hack to tackle it is to set aside in a separate account the weekly budget for everything you put in your gob, and only spend on those things from that account. If the funds run out before it’s topped up next week, it’s a clear sign you are about to overspend, so you can rein it before instead of lamenting it afterwards. Yes, that might mean you have to resort to creating something with what’s in the cupboard, rather than ordering takeaways!
Lean into laziness
If my credit card is stored in my internet browser, I can proceed to the checkout with two clicks. But if I have to get up off the couch to get it, laziness becomes my greatest ally in rethinking that impulse buy. The same is true when you’re out shopping. If the credit card is not in your wallet, you can’t swipe it, which helps you walk away from that “irresistible” deal. Of course, the strongest defence against buying things with debt is not having a credit card at all! Debit cards are a great lazy financial management hack.
Financial progress undoubtedly takes effort, but expending a little bit of that effort in setting up an environment that supports your success instead of enabling your self-sabotage can go a long way.
For more personal financial guidance, you can Nadine’s podcast, The Prosperity Project, at iHeartRadio, Apple Podcasts, Spotify, or wherever you get your podcasts. New episodes are released every Monday.
