Why Good Money Habits Are So Hard To Sustain

The path to financial freedom is so simple:

• Track expenses for at least 3 months
• Use the information to create a budget
• Automate your savings
• Review your budget constantly
• Invest in areas where you will earn a reasonable return
• Avoid unnecessary debt.

Anyone should be able to do that. Why is it that very few people are able to do it consistently? Why do we resolve to manage our money better every year but rarely do we get much done. We save for 2/3 months, then something happens and we abandon the habit. Or we track our expenses for a week, forget to do so one day and give up entirely.

The high failure rate of our personal finance plans suggests one thing:

Information is not enough.

It is not enough to know that you need to budget, to save, where to invest or which expenses you must reduce. You need something more…

You need a sense of purpose to your money. The reason why you are doing it all.

Why do you desire financial freedom, and what does financial freedom look like for you?

A relevant purpose

That reason must be desirable enough and relevant enough TODAY, for you to do the important things today. Saving for retirement is an obvious reason/purpose why we save, but for most readers of this blog, retirement is may be 30-40 years away and therefore is too far off for it to be a compelling enough purpose

When I say it must be desirable, it must get your blood flowing a little faster. If I told you to save Kshs 5,000 bob every month for a year to be able to visit a country you’ve always wanted to visit, or to be able to drive the car you always wanted, chances are it will not be very hard to save.

Not every purpose is exciting. Purpose can be unexciting but meaningful. For example a meaningful saving goal for me has been my daughter’s school fees.  She joins school in September, and I do not want to be the kind of parent who stresses about fees every term, so my goal and purpose is to pay her fees annually at least a month before school. This means I have till August to have her fees saved up and paid. It will feel good to pay it early, I will get  a discount from her school, and it is relevant to my finances because I’ll have another 12 months to save up for the next term. It is deeply meaningful because her education means a lot to me.

An ambitious enough purpose

Your attitude and action will be shaped to a large extent by how ambitious your purpose is. Let us say two people are thinking about things to do with their money:

Person A wants to skip lunch for a week so he can attend a drink up on Friday.

Person B has always desired to build his home and is therefore saving some money to buy a plot of land.

Person As goal is exciting and easy to attain, but because it is a small goal, it is easy for him to abandon it and use alternative funds for the drink up without a visible, significant debt in his finances.

B on the other hand has a huge goal, and every time he pays rent, it acts as a push to keep saving for that house. It is not a goal he can easily substitute for like the drink up goal. The accomplishment of goals won’t feel the same for both A and B, B will obviously be more fulfilled.  While it is ok for you to plan for fun stuff, set ambitious, more serious goals for your money too.

An end in mind

At  beginning of this post I asked this question:  what does financial freedom look like to you?  I read many opinions about financial freedom and it seems for many, their view of financial freedom is influenced by “the rich”. This is in quotes because our view of who is rich and who is not is dictated by what we can see:  many cars, huge house, fancy 5-star holidays , basically a high standard of living. I will not debate if this view is right or wrong, but  what I know is your definition of financial freedom should come within you.

The basic view is:

A financially free person is one who does not need a paycheck/work to pay his/her bills.

Financial freedom isn’t about what your bills look like, but it is about how you pay those bills. 

Clarifying that gives you a sense of purpose that keeps you going even when circumstances change, or the habits of saving/investing/tracking/budgeting become a bore.