How to Build Better Financial Habits | Part 1
Meet your habits expert, Nir Eyal, Wall Street Journal bestselling author of
Next, learn how to master your internal triggers:
Pouring that perfect cuppa didn’t happen in a day. Nor did that perfect downward dog. But the right habits can get you there – in life and your finances.
What does your financial life look like? Do you want to buy a house? Have weekly dinners with close friends? Take your family on a holiday once a year?
Building the right habits can go a long way to getting you there. But first, you’ll want to start by understanding the psychology on why we don’t follow through. That’s the key to unlocking the financial life you want.
In this episode, learn:
- The 5 rules to financial freedom
- How to understand distraction, and how it detracts from your life and financial goals
- How to save money with intent and manage external triggers
Or read it in 5 minutes:
There are five rules to financial freedom, and most financial adviser will tell you the same five tips:
- Pay off your high interest credit card debt
- Build a nest egg
- Insure yourself against disaster
- Save consistently
- Don't let your emotions get the best of you.
Those five rules pretty much guarantee financial freedom. So the question is, if we all know these five rules, why don't we follow them? Why is it that despite knowing what we should do, we sometimes don't follow through?
This is, in fact, an ancient question. 2500 years ago, the Greek philosopher, Plato, asked himself: Why is it that despite our best interests, we don't always do what we know we should?
He called this in the Greek, akrasia, which is the tendency that we have to do things against our better judgment.
“The best way to understand what distraction is, is to understand what distraction is not.”
What's the opposite of distraction? Most people will say the opposite of distraction is focus. But it’s not exactly.
If you look at the origin of the word, both traction and distraction come from the same Latin root, trahere, which means to pull. And you'll notice that both words end in the same six letters: A-C-T-I-O-N. That spells “action”, reminding us that distraction is not something that happens to us, but rather it is an action that we take.
So traction, by definition, is any action that pulls you towards what you said you were going to do. Things you do with intent, things that move you closer to your values and help you become the kind of person you want to become. The opposite of traction is distraction.
Distraction is everything that pulls you further away from what you said you were going to do, further away from your goals and your values, further away from becoming the kind of person you want to become. This is an absolutely critical distinction, because anything can be an act of traction or distraction based on one word: intent.
But I'm not here to moralise and tell you that you should only be spending your money on some things and not others. Whatever you want to spend your money on is up to you. The important thing is to spend that money and save that money with intent - in a way that moves you closer to traction and steers you away from distraction.
So now that we know the difference between traction and distraction, we need to ask ourselves, what prompts us to take these actions in the first place?
Here, we have two kinds of triggers:
- External triggers: These are all the things in our outside environment that prompt our behaviours.
- Internal triggers: These are the uncomfortable emotional states that we seek to escape from, and they’re the leading cause of financial distractions.
So now, we have the four parts of our course that will serve as the first step to helping you reach your financial goals and becoming financially indistractable:
- Mastering internal triggers
- Planning for traction
- Managing external triggers
- Prevent distraction with pacts
Your money should work for your financial goals. Make it Possible with StashAway Academy.
Like this series? Learn more about financial planning and investing with our courses and events with StashAway Academy. We’ve got you covered.