We often think of ourselves as natural born “spenders” or “savers,” as if the way we handle money is like our eye color, Zodiac sign or preference of dogs over cats. 

But according to Dr. Daniel Crosby, Chief Behavioral Officer at Orion Advisor Solutions, this framing is a way we limit our own freedom of choice. 

The flipside of freedom is responsibility — and that’s hard work,” Dr. Crosby says. “If we refer to ourselves as ‘savers’ or ‘spenders,’ we rob ourselves of accountability for our actions, and instead point to some vague idea of being ‘wired that way.’” 

The truth is that our financial choices are actually nothing more than habits — and habits are something we can change.

Here’s the deep dive on how you created those money habits — and how you can change them for the better:

Loop, swoop and pull your way into debt

Money habits form the same way that every kind of habit does: in a three part “habit loop.” It includes the trigger or signal, the behavior itself, and the reward. Dr. Crosby describes the loop like this:

“First, there’s some sort of signal to the brain to go into autopilot mode,” he says. “For example, a feeling of sadness could trigger some ‘retail therapy’ spending — the behavior. This is followed by the reward — in this case, an emotional boost from buying something — which keeps the habit coming back.”

The first time a trigger sets in motion a behavior that causes a reward, you have not yet created a habit. But because the reward feels good, you are more likely to repeat the behavior the next time you experience the same or a similar trigger. That’s how a one-time decision to engage in some retail therapy becomes a lifelong habit of spending money when you’re feeling low. 

According to financial planner Marissa Greco, “It becomes ingrained when you do the same thing over and over again. And then it’s very difficult to break that pattern.”

This is why it may feel like you have no choice over your spending decisions. The habit has become a pattern and you are responding to triggers on autopilot without even realizing it.

While we create many of our habits in response to our own experiences, Greco also warns that our parents may have passed their habits along to us, too. “A lot of money habits are learned from a young age. We watch what our parents do,” she explains. “If they held on tightly to their money, we hold on to our money as adults. If they spent every penny that came in, we feel like we have to spend like that, too.”

Like the habits we create ourselves, these learned behaviors also follow a loop. Let’s say you grew up in a family that spent lots of money on pay day but regularly had to search for loose change at the end of the month to buy groceries. Having what felt like plenty of money on pay day was your parents’ habit trigger. Buying steak and going shopping while feeling flush was the behavior. And then the pleasurable feeling of spending was the reward. 

If that habit loop has followed you into adulthood, it’s likely that you follow a similar pattern, even if you really hate the downside of it: the lean weeks while waiting for the next paycheck. Since you grew up thinking that kind of money behavior was normal, you’re likely to recreate it in your own life without even thinking about it.

Identifying Your Habits

Dr. Crosby recommends looking at your past decisions to identify your patterns and habits. “Many times the actual appraisal of the habit will occur in retrospect,” he says. “An impulsive tendency to spend may not be perceived as such in a period of emotional frenzy, but can be seen for what it is as you coolly consider your credit card bill at the end of the month.”

Unfortunately, it can be painful to think about past financial decisions if you feel ashamed or stressed about them — and you’re more likely to feel badly about habitual behavior than one-time financial mistakes. So how do you get to the point where you can examine your bills, account balance or ramen-only diet for the last week of every month?

Greco says the key is letting go of self judgment. “Accept where you are and be intentional,” she says. This is a central rule of mindfulness, which invites you to look at yourself and your decisions with curiosity and compassion. 

The goal of money mindfulness is to understand what happens when you are following a habitual pattern. While looking over your bills or thinking back on previous financial decisions, ask yourself the following questions:

  1. When did you make counterproductive decisions? 
  2. What was happening at the time? 
  3. How did you feel physically in the moment?
  4. Why did you feel that way?
  5. How did you feel emotionally and physically after you made the decisions?

Answering these questions can help you identify your habit loop triggers. When you know what they are, you’re in a better position to change these behaviors the next time the trigger occurs because you’re aware of the pattern.

Mindfulness over money matters

Dr. Jud Brewer, an addiction psychiatrist and neuroscientist specializing in anxiety and habit change, and associate professor at Brown University’s School of Public Health and Medical School, has found that mindfulness training can also help break bad habits by targeting the reward portion of the habit loop.

Specifically, Dr. Brewer guides his patients to pay attention to the actual sensations of the reward in the moment. For instance, if you regularly overspend at happy hour with your friends on Friday nights, notice how your next evening out feels. Do you really enjoy the drinks and greasy food? Are you having fun? What does your body feel like? Does happy hour still feel like the celebratory end of the work week you expected it to be when you first started the tradition?

The reward portion of your habit loop spurs future behavior, rather than current behavior, Dr. Brewer says. The reward for most habitual behaviors don’t feel nearly as good as they did initially. Mindfully taking stock of how the reward currently feels can help you to devalue that reward, helping to make the habit itself less appealing.

The Sum of Our Actions

Changing the financial habits you’ve built over a lifetime is not an easy process. Not only do you have to figure out which habits are obstructing your goals, but you also have to understand what triggers those habits in order to disable the habit loop. 

It takes a lot of effort, but paying mindful and non-judgmental attention to your past decisions and your current feelings in the midst of a habit loop can help you break the pattern and make more intentional decisions.

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