Few have escaped the devastating loss of lives and livelihoods wrought by the COVID-19 pandemic, but many have also made positive changes, particularly to their financial habits. The question is, how can we entrench these new habits?
Setting goals, and even capturing them in a plan, is one thing, but sticking to them is notoriously difficult. Psychologists suggest that a key reason for this is that changing a behaviour is tough if the routines around that behaviour remain the same.
Well, COVID-19 has turned our routines on their heads. Habits and schedules as deep-rooted as age-old trees have been ripped up, in somewhat of a global hurricane. So, with regular routines thrown out the window, how likely is it that our lives have permanently changed and that our newly adopted behaviours will persist?
The Economist magazine quotes a survey of nearly 70 000 people in Britain, carried out in August 2020, noting that 25% of people said their lives had changed completely or a lot since the onset of COVID-19. But, naturally, people’s lives have not all changed in the same way. Data and market measurement firm Nielsen’s “COVID-19 behavioural reset report” identifies two distinct types of consumers: “constrained consumers”, who are stretched financially due to factors such as job losses and compressed income, and “insulated spenders”, who have managed to retain their jobs and therefore sustain their income. One would expect big changes in spending behaviour from constrained consumers; but their insulated spending counterparts have also altered their patterns.
A behaviour change experiment
Worldwide, many consumers seem to be staying away from the shops and restaurants, even as economies open up, continuing the behaviours initiated during their lockdowns: A browse through social media feeds reveals intimate outdoor gatherings, “Masterchefing” at home, and beauty treatments and haircuts happening “in-house”. Some are wisely still adopting high levels of caution; others have perhaps reflected on their previous spending patterns and made adjustments. Behavioural scientists note it takes 66 days to form a habit… we have had a lot longer to entrench these new ways over the past year. There is definitely a sense, on the one hand, that we are leaning towards being more frugal and more responsible; on the other, there is a simmering edge to the energy, a desire to shrug off the confinement and anxiety, and break free into the new century’s roaring ‘20s.
A series of interviews run by BBC Worklife aptly notes that we have just undergone the largest behaviour change experiment in the history of humanity. The question is, which new habits will stick? Opinions are divided, with some experts saying that we will never return to our former ways, and others disagreeing, saying new behaviours are temporary. Why is this?
The detractors claim that for change to take hold, it must be rooted in positive thinking – a factor that has been quite absent over the past year. In an analysis of 129 studies of behaviour change strategies, a British research group found that the least effective approaches were those that encouraged a sense of fear or regret. Most of the changes we have made as a result of the pandemic have been thrust upon us, and the general mood has been rather sombre. But how can we transform them from incidental to entrenched, particularly when it comes to our finances?
Five ways to get new habits to stick
There are countless recommendations from psychologists and life coaches on how to get a new habit to stick. Here are five that may resonate – along with a few suggestions on how to apply them when it comes to your finances:
- Focus on entrenching one change at a time: COVID-19 has forced many changes upon us; some may be easier to maintain than others. Pick one that is most important to you. If you plan to save spare cash made available as a result of a more contained lifestyle, make this your key focus. While lockdown level 5 may have enforced an extreme spending detox (yes, remember when only essential service providers were allowed to trade and we could buy very little more than the basics?), it also exposed our spending habits and taught us to differentiate between our needs and wants. Before slipping back into prodigal ways, now is a great time to bed down a proper budget – and focus on sticking to it.
- Identify your cue: A cue triggers your brain to initiate a behaviour. Pre-COVID-19, getting paid may have been your cue to go out and spend. COVID-19 may have broken this cycle and given you the opportunity to refocus this cue, making this your trigger to save. Commit to spending what you have after saving, and not the other way around. After a month or two of making your contribution to your savings or investment account before dealing with your other monthly expenses, you won’t even notice the dent in your disposable income. Even better, automate this response in the form of debit order.
- Identify the reward: The reward is the end goal of your habit. Focus on what you are adding to your life, not what you are giving up. If you have eliminated wasteful spend and made space in your budget for saving, this will result in long-term gain, even if you miss the frivolity. Creating financial security and building long-term wealth takes dedication; but your commitment to these goals will ultimately pay off. Start with the end in mind: Perhaps you are saving for your child’s education or a deposit on a home – keeping this “reward” in sight will make this activity feel less like a sacrifice. Consider contributing to a unit trust or tax-free investment account; small contributions compound and grow over time.
- Have a plan for when you get derailed: The unpredictability of life is one of the factors that make sticking to our goals difficult. Author-psychologist James Clear suggests that we need to plan for chaos; this will help us stick to new behaviours even when things don’t go according to plan. Clear advocates using the “if-then” technique. This entails planning ahead for what we will do if we hit a snag. When it comes to your investments, for example, having an emergency fund in place will prevent you from having to dip into your retirement savings if you lose your job. As we have all seen over the past year, we cannot predict what life has in store for us, and we need to expect the unexpected.
- Be accountable: Tell someone about the habit you are working to adopt; this will make it real and they will hold you to account. Talk your family through the new budget and get them on board or tell a friend or colleague about your goals so that they can call you out if they notice you straying off the path. Alternatively, consult with an independent financial adviser. Not only will they hold you to account, but they can also help you put a financial plan in place that is tailored to your specific needs, and encourage you to stick to it in order to achieve your long-term objectives.