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How to become better with money? Control your environment.

Would it change the way you save and spend money if, for instance, you could see how it would impact your future self? Or if positive behaviours, such as investing, were easy, while negative behaviours, such as impulse spending, were hard? Here’s how to become better with money and take control of your environment.

“How can I make better money choices?”

“I’m no good with money.” I hear people say it all the time. They berate themselves for “dumb” financial decisions, debt, lack of savings, overspending or any other litany of money issues. (Sometimes they berate their partners, too.)

But here’s the thing: your ability to become better with money has nothing to do with how smart you are, how much you earn, what school you went to, or what job you do. How you use your money is determined by how much you are influenced by the environmental cues around you and thus, how you make better money choices.

To be clear, when I refer to “environmental cues,” I’m not talking about sitting in the forest versus walking along the beach and wondering whether you should buy an ice cream. I’m talking about a raft of big and small factors that combine to influence our day to day better money decisions.

Let me show you what I mean.

What? No chocolate?

Imagine you were trying to eat more healthily. In the first scenario, you open the fridge and are presented with a bevvy of healthy foods, as well as a bunch of your favourite unhealthy treats. In the second scenario, you open the fridge and all of the unhealthy treats have been removed. No chocolate, chips, biscuits, cake or pizza. Your only options are healthy and nutritious.

Which scenario is going to make it easier to eat better? The second scenario is where the unhealthy foods have been removed from the environment. Failure isn’t even an option.

Let’s look at a financial example to discover how to become better with money, because making better money choices is like making better dietary choices.

You want to buy a new outfit for a special occasion and set yourself a budget of $200. In the first scenario, you hit the shops and find a dress for $180. It’s within budget, but there’s a catchーyou have no bags or shoes in your wardrobe to match. You end up buying the dress ($180), plus a bag ($40) and matching shoes ($60) by charging them to your credit card. You’ve blown your budget by $80.

Credit card with speech bubbles around it with a mobile phone, dollar sign, computer monitor, shirt, percentage sign and a drink cup with a straw - tips on how to become better with money.

In the second scenario, knowing that you can be prone to impulse spending, you leave your credit card at home and take only $200 cash with you. You see the same $180 dress as in scenario one and again realise that you would need to buy a bag and shoes to match. This means you can’t afford it. You keep looking and find an alternative dress for $190 that goes with a bag and shoes you already own. Goal achieved!

One little, but impactful, environmental factor was changed (replacing your credit card with cash) and thus the risk of failure was virtually eliminated.

It’s time to make some better money decisions

What we often don’t realise is that environmental cues are influencing our money habits nearly every moment of every day. We don’t notice the cues, however, because our environment becomes just thatーpart of the landscape; the invisible backdrop of our lives. As a consequence, most of the triggers and influences that bear on us are subtle and subconscious.

Here are some examples of how to become better with money:

  • Retailers are masters at using environmental factors to their advantage. In supermarkets, for example, milk is one of the most frequently bought items and is always positioned at the back of the shop and never near the bread. Separating popular products means that shoppers have to wind through the supermarket past hundreds of temptations.
  • When you get to the checkout, cash and all its hurdles ー going to an ATM, carrying enough cash in your wallet, counting out the money ー have gradually been removed from the environment over time. No money? No worries! Paying is as easy as tapping your card or phone.
  • Sales and discounting are also a form of environmental manipulation. Presented with a short-term discount, shoppers are more likely to buy. According to PayPal, nearly 60% of Australians report making impulse purchases online only because the item was on sale. Nearly 20% of shoppers say they feel like they’re losing money if they don’t buy a discounted item!
  • Traditional banking uses the flow of information to influence money habits. Why, for instance, are credit card statements issued monthly? Why don’t customers have the option to request weekly, or even daily, reports texted to their smartphones? I think it’s fair to assume that it’s because people would use their cards less. It was only a few years ago that credit card companies were required to disclose how much interest you would incur by making only the minimum payment.

So how can we become better with money when we’re surrounded by all of this?

Look forward, not back

For anyone who has ever experienced credit card bill shock, you’ll know that it’s like stepping onto the scales and being told how many calories were in the meals you ate four weeks agoーinteresting information, but not much you can do about it.

At MyBudget, we take the opposite approach. We want people to be able to see all of their finances, all of the time. Add a new bill to your budget or make a change and you’ll instantly see your projections update.

MyBudget clients can, of course, pull up all of their historical transactions. This is important for good record keeping in order to create better money decisions. But it’s not hard to understand that relying on bank statements to manage your money is like trying to drive forward while looking in the rear-view mirror. This is what causes a lot of people to feel financially stuck or to form the opinion “I’m no good with money.”

In his TED Talk, psychologist Dr Daniel Gilbert explains that humans tend to give themselves self-limiting labels ー “I’m an introvert”, “I can’t use a computer”, “I’m no good with money.” These definitions, based on past experiences, form what Dr Gilbert calls “end of history illusion.” It’s where you imagine that the person you are now is the person you’ll be for the rest of your life.

He says that one way to transform yourself out of such a self-limiting rut is to stop focusing on the past and start focusing on the future. Stop remembering and start imagining. Who would you like to be? What sort of life do you want? How do I become better with money? What does success look like? What are your financial goals?

The next step is to take those financial goals and reverse-engineer a path to achieve them. That’s what we do at MyBudget. We create customised budgets that lay down a clear path to our clients’ financial goals. Then we automate the process. In essence, it’s a method of environmental engineering that helps people fast-track their financial future; an answer to the age-old question “how to become better with money”.

Game the system

You may not be in a position to recreate MyBudget’s systems, but you can apply the same principles in your own life. Next time you’re shoppingーonline or in-storeーtake a look around you and become aware of any environmental cues.

Notice the merchandising, discounts, language and how information is being presented to you. As you become more aware of these environmental cues, you’ll begin to see it as a game and start making better money choices.

The good news is that you don’t need to create an entire game plan all at once. The key, according to ‘Atomic Habits’ author, James Clear, is to get just 1% better every day. How? Little by little, by making good habits easy and bad habits hard.

For example, would you like to spend less money on, say, takeaway food? James Clear would tell you that the first step is to make eating at home easy:

  • Stock your freezer with meals that can be taken for lunch or reheated quickly
  • Always cook extra so you have leftovers for the next day
  • Include work and school lunches in your meal planning
  • Invest in a bento style lunch box, thermos or cooler bag to make your lunches more interesting

The next step is to make eating out harder. This might involve setting yourself limits, such as having a dedicated debit card for takeaway food. It would have a set amount of money on it that has to last until your next payday. Another alternative would be to create a rule around how many times you can buy takeaway food in a given period.

Red shopping basket with bananas, pineapple, juice, potatoes on the floor of an isle in a grocery store - tips on how to become better with money.

Behavioural scientist Wendy De La Rosa says that the human brain is not very good at keeping track of money, but it is very good at counting how many times we do things. If you’re wondering how to become better with money, De La Rosa advises to err towards metrics such as “I go to work drinks once a month” or “I buy takeaway food twice a week.”

Automation is another powerful tool at your disposal. Systems that require constant touching or mental effort are more likely to break. Automated money systems, on the other hand, are a powerful way to achieve your goals on “set and forget.” In the investing space, one example is Raiz, an app that automatically invests your spare change ー and I’ve already mentioned MyBudget in terms of payment, saving and goal automation.

Engineer your own environment to make better money decisions

I hope what you take from this article is that to become better with money, you don’t need an economics degree or a natural affinity for numbers. It isn’t about how smart you are. It’s about creating environmental conditions to support your financial goals, whether that’s spending less, saving more, or whatever!

I’ve created a sample list of potential money problems below and proposed environmental changes to help solve them. Of course, every person is different and you’re the best person to know what sort of cues you will respond to.

As you’re thinking about creating positive environmental cues for yourself, focus on these four factors:

  • Make good habits easy and bad habits hard
  • Formulate simple rules
  • Look towards the future, not the past
  • Automate, where possible
ProblemEnvironmental changes
Good bills keep blowing outCreate a weekly meal plan based on catalogue specials; go to the supermarket, armed with a shopping list just once a week; create a list of ‘go to’ cheap and healthy recipes.
Overspending on impulse purchases at the supermarket.Swap from in-store grocery shopping to online. Even with the delivery fee, online shopping can save money by reducing impulse purchases and helping you stick to a budget.
Bill shock when your debit or credit card statement arrives at the end of the monthSet a reminder on your phone to check your account and card balances once a week; take your credit card out of your purse/wallet and disconnect pay services on your phone; replace your credit card with a debit card with a set amount of weekly/monthly spending on it.
Kids keep asking for moneyYounger kids will need to be taught about the value of money; older kids can be given an allowance to manage their own spending (tuck shop, hobbies etc.).
Paying bills late because there isn’t enough money set asideCreate a 12-month budget, work out all your expenses for the coming year, then divide the total by your number of pays; automate a pay disbursement of this figure into a ‘bills’ account ー or MyBudget can create a free customised budget for you.
Can’t save or maintain an emergency fundSet up an automatic transfer every payday from your transaction account to a dedicated savings account (keep your spending money and savings separate and avoid an account that comes with ATM access); start small ー even just $5 per pay ー to prove to yourself you can do it; set yourself rules around what constitutes an emergency or rainy day.
Overspending on online shopping promotionsUnsubscribe from shopping emails; create a dedicated address for retail emails to keep sales messages out of your inbox; set yourself affordable spending rules, such as ‘three online purchases a month.’
Bickering with your partner over each other’s spending habitsGet clear about your financial goals (individual and shared); create an amicable budget that supports your goals and includes an affordable amount of spending money for each partner; automatically transfer money into your individual debit accounts on payday; talk about and set agreeable rules around joint purchases.
Don’t know how to invest or how to get startedAutomate your investment with an app like Raiz that can invest your spare change automatically from everyday purchases; other ‘robo-advisor’ apps include Six Park, Stockpot and more.

Do you already have environmental controls for how to become better with money? How have you managed to make better money choices and decisions? Have you created rules around your spending or saving habits? What money automations or apps have you tried?

Ready to find out more?

Call 1300 300 922 or get started today

This article has been prepared for information purposes only, and does not constitute personal financial advice. The information has been prepared without taking into account your personal objectives, financial situation or needs. Before acting on any information in this article you should consider the appropriateness of the information having regard to your objectives, financial situation and needs.

All customised budgets and consultations with money experts are subject to MyBudget’s qualification criteria. We recommend that you read and consider our Product Disclosure Statement.

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