• Steve Coker, CFP

Manage Money Better – Lose Weight!

We would all like to develop better habits, wouldn’t we? We could exercise more, lose weight, save for retirement, pay down credit card debt – I don’t know, maybe our dogs would be better behaved - if we could simply develop better habits. Well, according to the book “The Power of Habit” by Charles Duhigg the power to manage money better and lose weight are surprisingly connected. It turns out that discipline in one area of life, such as budgeting our money, spills over into other areas of our lives, such as eating right. So, if you are successful in your New Year’s resolution to budget better, don’t be surprised if you also find the power to lose a few pounds!

Now I don’t want this to sound like a dieting commercial and there are no money back guarantees. It turns out that actual change is hard. We have all experienced the discouraging failure of starting strong with an exercise routine, getting up at 5AM on January 2nd, only to hit snooze on the alarm by the January 15th, ending the routine for the rest of the year. How do we overcome this cycle? In one of Duhigg’s research studies he required participants to track every dollar that they spent for a period of a few weeks. At the end of the period, participants answered a questionnaire about the impact on their lives. Surprisingly, many reported that tracking the spending helped them achieve other life goals like eating better. In another study Duhigg required participants to track their diet, writing down everything they ate. Similarly, those tracking their diet also reported increased success in their budgeting. It appears that the common denominator is discipline. Duhigg’s book gives a few tips that are helpful, but I think one of the most interesting was his take on building discipline.

Duhigg compares creating discipline in our lives to building muscle. The point of exercise is to stress a muscle. The more we stress a muscle the more it strengthens. However, we can’t build that strength all at once, it must be built over time. If we stress a muscle to exhaustion, then the muscle collapses and needs to rest. According to Duhigg, discipline is similar. We must begin to exercise the muscle of discipline, and the more we discipline ourselves the better we become. However, we can’t build discipline all at once, we need to build it over time, giving ourselves a periodic ‘rest’ as we build toward our goal. Many people fail in their goals because they become ‘exhausted’ by the discipline. This exhaustion is why so many diets end with a binge or savings strategies end with a splurge. The discipline muscle becomes exhausted.

So, how could we apply this principle in a financial setting? Consider beginning your savings goals by simply tracking your spending. This is an achievable goal that starts to exercise discipline. Once you can see the spending, set reasonable savings goals, leaving room for something you enjoy. For example, allow yourself a reward of a dinner out or vacation to help keep you on track. You may find that you actually enjoy the feeling of control over your finances. If so, ratchet up the targets and dig deeper into the budget, building momentum to make those savings goals a reality. As noble as it sounds, the ‘I’m going to stop spending’ approach is rarely successful and hardly realistic.

The ultimate goal is real change, the discipline to achieve the spending, saving, and whatever goals we set for ourselves. Who knows, we might even lose a little weight.

Join our mailing list and

never miss an update