The Secrets of Habit Formation: A Three-Part Series Inspired by "Atomic Habits" by James Clear

Part 1: Using the Power of Small Habits for Financial Success

I’m probably late to the game, but I only managed to recently read Atomic Habits by James Clear and found it very useful in my own life. I decided that I just MUST write a three-part series inspired by this amazing book. Let’s discover how the habits we develop can shape our financial futures (Clear, 2018). By understanding how habits form, we can use them to help us do better financially.

Why are small habits important?

"Habits are the compound interest of self-improvement. The same way that money multiplies through compound interest, the effects of your habits multiply as you repeat them." (Clear, 2018:18).

Small habits are more important than they seem. Even though they may not seem like a big deal in our daily lives, they can have a huge impact over time. It's only when you look back after a few years that you realise how good habits helped you and how bad ones held you back.

Think about it like planting seeds in a garden. At first, the seeds are tiny and easy to miss. But with care and time, they grow into something big and fruitful. Small actions, done regularly, can lead to significant results. Good habits, like saving a little money each month or exercising regularly, may not show immediate benefits. But over time, they can improve your finances, health, and mindset. On the other hand, bad habits, like spending too much or procrastinating, may not seem harmful at first. But in the long run, they can cause problems in your life.

That's why small habits matter. By building good habits and breaking bad ones, you can shape and change your future in a positive way. It's all about making small changes consistently, which can lead to big improvements over time.

Forget about goals

Forget about goals, focus on systems instead - (Clear,2018:23) - This statement by James Clear highlights the distinction between focusing solely on outcomes (goals) and paying attention to the actions and routines (systems) that drive those outcomes.

For example, let's consider the goal of saving N$10,000.00 within a year for an emergency fund. This is a clear and specific financial goal. However, simply setting this goal without implementing a system or plan to achieve it may lead to challenges or failure. Even more, you need to introduce a system that consists of regular habits and actions to support its objective. This system could include:

1. Automated Savings: Set up automatic transfers from your main account to your designated savings account each month. This will ensure that a portion of your income is consistently allocated towards your savings goal.
2. Budgeting and Expense Tracking: Implement a budgeting system in order to monitor your expenses and identify areas where you can cut back to reassign money towards your savings goal. This system will help you stay accountable and at the same time adjust your spending habits as needed.
3. Side Hustle or Additional Income: Think about how you can generate extra income, such as freelancing, part-time work, or selling unused items from your house. By incorporating additional streams of income into your system, you will be able to reach your N$10,000.00 target even faster.
4. Regular Reviews and Adjustments: Implement a routine, a habit if you will, to review your financial progress on a weekly and monthly basis. Assess your progress, identify obstacles and areas of improvement, and make the necessary adjustments to stay on track.

“Goals are good for setting a direction, but systems are best for making progress” (Clear, 2018:24).

Next Practical Steps to incorporate great habits in your daily routine:

A typical day routine for someone starting with small habits towards financial success might look like this:

Morning:

• Wake up early to start the day with a clear mind.
• Begin the day with a healthy breakfast at home to avoid unnecessary spending on takeaway food during lunch.
• Spend 10-15 minutes reviewing your financial goals and affirmations to set the tone for the day.
• Do a brief exercise routine or meditation session to boost energy and focus.

During the Day:

• Pack a homemade lunch and snacks to avoid spending money on eating out.
• Use breaks to track expenses and review your budget on a budgeting app or notebook.
• Look for opportunities to increase income, such as checking job listings or brainstorming side hustle ideas during lunch breaks.
• Practice mindful spending by questioning whether purchases align with your financial goals before making them.
• Incorporate small savings habits, such as setting aside loose change or opting for generic brands instead of name brands at the store.
• Stay accountable by journaling about your financial journey and reflecting on progress and setbacks regularly.

Evening:

• Cook dinner at home using ingredients from the grocery store, rather than ordering takeout. (If you are in a relationship, why not use this time to spend quality time with your partner).
• Set aside some time for personal finance tasks, such as paying bills, reviewing accounts, or updating your budget.
• Wind down by reading a financial book or listening to a podcast on money management before bed instead of just mindless scrolling.

By integrating these small habits into your daily routine, you can gradually build a solid foundation for financial success over time.

Stay tuned for Part 2, where I'll discuss why changing how you see yourself is vital for financial success and how James Clear connects this idea of reshaping your identity with habits. We will further explore how adopting a new self-image can help you reach your money goals.

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