Habits play such an important role in every aspect of your life. And those habits, good or bad, are reflected in your finances.
Some of our habits are small, almost insignificant. Over time, though, they have a large effect. There are little things that I've done over many years that have had outsized results. Individually, they don't move the needle. But they're like little course corrections on the cruise ship of life. A little change early on, repeated and compounded over many years, can have a significant impact.
When you add them together, they can help you achieve things you never thought possible.
Small Habits Lead to Big Results
A prime example for me was gaining strength. I made a decision to build muscle but I didn't want to be one of those guys who spent hours in the gym. I learned that there are workout regimens that don't require a ton of time, but which still improve strength with just 20-30 minutes a session. These routines target several muscle groups at once. (The deadlift is a good example.)
Because these sessions only took 20-30 minutes, it was easy to make time for them. As a result, I started going to the gym more regularly. And once I was there, something funny happened. On some days, I did the workout and left. On others, I felt like I could do more. So, I incorporated other exercises that targeted smaller muscle groups. The promise of a short session got me in the habit of going to the gym. That was the hard part. Once I was there, I often did more than I had planned.
At first, I saw my strength increase until I hit a plateau. I talked with some folks and realized I had two non-obvious weaknesses: insufficient protein intake and grip strength.
- For the protein, I added a bit of unflavored protein into my coffee each morning.
- For grip strength, I started doing more dumbbell exercises in lieu of barbell exercises. The simple act of carrying the heavy weights to a bench helped increase my grip strength.
Both were small changes that became daily habits, which eventually had a big impact on my exercise regimen. Neither was difficult, I just had to discover them. And today, I'm stronger than I've ever been thanks to these seemingly minor changes.
But you're not here for fitness tips from me. You're here for money tips, right? Here are some simple habits I've developed that might not seem like much at first, but which have had a huge impact on my finances. Maybe they'll help you too.
Keep a Budget
When I started working, I kept a budget. This was before the days of You Need a Budget or Personal Capital, so I used a spreadsheet to keep track of everything. It was cumbersome but it showed me where my money went. Every day after I got home, I'd enter in any spending during the day into my spreadsheet.
Budgeting is valuable because without it you don't know where your money is going. That's something you always need to have a good handle on because it's what you have the greatest control over. Most people can't turn a knob and earn more money. But you can put away the credit card and reduce your spending, which means you keep more of what you spend.
According to The Millionaire Next Door, most wealthy people keep budgets.
With tools like YNAB, Personal Capital, and Mint, you can do it pretty easily now (almost too easy!) and that visibility can teach you a lot. Eventually, as you understand your spending, you look at it less and less. But to get there, you need to start.
The point of budgeting isn't about restricting yourself and not having fun. It's about knowing where your money goes so you can spend responsibly and without guilt. If you know you've saved enough for retirement and for other savings goals, then you can buy whatever you want!
Simplify Your Finances
Whether you know it or not, you have a financial system.
You may not have mapped it out ahead of time (seriously, who does?) but you have something in place right now. And like the stuff on the shelves in your house, sometimes it's an accumulation of your life's experiences.
Before I simplified my finances, I had a dozen bank accounts. Some I opened to snatch up some free money from banks. Some I had just from where I lived, like an account at PNC Bank in Pittsburgh, a credit union account from my childhood in New York, and several others.
It was more like a junk drawer and less like a curated set of tchotchkes.
But it's hard to make decisions when there are a lot of things to remember. It's time-consuming to do your taxes if you have a stack of 1099-INTs from all these accounts.
So, I worked towards simplifying my financial network map. A financial network map is a drawing that shows you all of your accounts and their relationships. It's a simple visual representation of your bank accounts, credit cards, insurances, and more. I drew one so I could get the map out of my head and onto paper. Once you do that, you can move towards simplifying it.
A map of Jim's financial network (circa 2008)
Keeping things simple is not easy. You have to train yourself, so don't feel bad if you haven't yet worked this muscle.
Automate Everything
It's been said that the best performing investment portfolios are the ones that are forgotten. (This is supposedly based on an internal Fidelity report that was never published.)
They do well because people stop messing with them. And when they stop messing with it, they get out of their own way.
I take this principle to its logical conclusion and automate as much as possible. Everything from saving to spending to investing, it's automated because that allows me to get out of my own way. You can't forget something if a computer will remember it for you. I haven't manually paid a regularly scheduled bill in over a decade.
The best guide I know about automating your finances is by my friend Ramit Sethi at I Will Teach You To Be Rich. It will change the way you manage your money, in a good way.
Keep contributing to your investment accounts, then let the money grow.
Use Credit Cards — Wisely
If you use cash, you're paying for my credit card.
The credit card company charges the merchant a fee to process the transaction. As a user of cashback and rewards cards, I get some of that in points and rewards.
You could argue that merchants bake this fee into their prices, and you'd be right, but by using a credit card I am able to get some of it back. Cash users don't get anything back.
There are plenty of reasons why you might not want to use a credit card. I'm not here to tell you those reasons are dumb or bad or anything like that. If you have a good reason to avoid credit cards, I salute you. I have many friends who have gotten themselves out of credit card debt and their punitive interest rates and want nothing to do with credit cards ever again. I think that's smart.
If you have no reason to avoid credit cards, though, you should be using them. They have so many benefits and perks over cash. There's cash back, there are extended warranties and price protections, and many cards also offer types of travel insurance. If you don't have a strong reason to avoid them, you must have a credit card in your wallet.
If you're looking for a new card, check out the Get Rich Slowly travel card finder. It's a handy tool.
Track Your Net Worth
I've been tracking my net worth since 2003. It's been with me through the Great Recession and the more recent pullback in the fourth quarter of 2018.
During the Great Recession, I had several months where our net worth fell five figures. During the fourth quarter of 2018, there was a month where our net worth fell six figures.
Tracking my net worth helps me avoid panicking during periods of extreme market volatility. I can see these periodic pullbacks, as well as the periodic increases, but everything rights itself over time. It helps me maintain a long-term view.
When you're invested in the market, it's not always going to be going up every single month. It's volatile. It's lumpy. But over the long term, U.S. stock market returns have always been positive.
A history of our net worth just helps me avoid falling for the hype and the despair that is investing.
One of the best habits you can build is talking with your partner about money.
Check with Your Spouse
Periodically, my wife and I check in with one another. We have three kids, two busy professional lives, and it's very easy to fall into the natural cycles of everyday life.
In the past, our conversations were scheduled close to when I would update our net worth spreadsheet. When I updated the sheet, I'd want to talk to her about things shortly thereafter.
Nowadays, we check in more often but in less formal situations and without much of a set agenda. Much like budgeting, this check-in has evolved.
If it helps, think of it like a board meeting where you talk about how and why of what you're doing rather than the what and when. It's like a business talking mission, direction, and strategy and not necessarily logistics or marketing.
It's also nice to have these chats over a glass of wine. And without kids. 
