Investing Unit 3: Steps to Breaking Habits

Some of the items we buy are needs, items that are necessary for survival. Other purchases are wants, all the things we think we need, but could do without. Buying items to satisfy our wants can become a habit; before we know it, we are spending lots of money on these items. Find money to improve your financial situation by identifying some of your money habits. Then break those habits or at least reduce the number of times you enjoy the habit each day, week, or month. Review Table 2 for specific examples.

Table 2. Looking For Money
Cable/Satellite TV $40/month= $480/year
DVD rentals $9/weekend = $36/month= $432/year
Movie tickets 2@ $7/visit = $14/month= $168/year
Treats at movie 2@ $5/visit = $10/month= $120/year
Dry cleaning 4 garments @$7 ea/mo= $28/month= $336/year
Car wash $5/week = $20/month= $240/year

Going further, if your family drinks iced tea instead of a 2-liter soda for the evening meal, you can probably save at least $5 a week or $260 ($5×52=$260) a year. By drinking tap water instead of other beverages, you can save $7 a week or $364 ($7×52=$364) a year.

Let’s look at those who feed the soda machines at work. By bringing soda from home ($.30 each) instead of feeding the machine ($.75 each), a person who drinks two sodas per day could save $234 over the course of a year ($.75-$.30 = $.45 x 2/day = $.90 x 5 days/week = $4.50 x 52 weeks = $234). Changing or adjusting a few habits can result in big savings for you and your family. To see how easy this can be, use the following steps to help you identify and change habits.

Steps to Breaking Money Habits

  • Step 1. Identify the habit, determine frequency, and calculate total cost
  • Step 2. Make a decision to change
  • Step 3. Act immediately
  • Step 4. Share your plan
  • Step 5. Stick with your plan to change
  • Step 6. Celebrate your success

By following these six easy steps, you can gain better control of your financial resources and increase the money available for investing. Put this six-step plan to work for you and your family.

Step 1. Identify the habit, determine frequency, and calculate total cost

Using Worksheet 1, “So Where’s The Money?,” think of some habits you might be able to adjust. Select from the products or services listed or add your own choices to the list. Then determine how often you purchase the product or service. Next, calculate the total cost of enjoying the product or service for one year. Armed with this information, you are ready to advance to Step 2 in your quest to break habits and collect funds for investing.

Worksheet 1. So Where’s the Money?

Product or Service How Often Used Monthly Cost x 12 =Yearly Cost
Hair Care (example) 4 times/month $100.00 x 12 = $1200.00
Nail Care
Dry Cleaning
Eating Out
Cell Phones/Pagers
Vending Machines
Music CDs/Movie DVDs
Brand Name Clothes/Shoes
Video/DVD Rentals
Cable/Satellite Television
Movie Tickets/Snacks
Pay-Per-View Television
Bingo/Video Poker/Lottery
Video/DVD Purchases

Calculate your total monthly and yearly costs. Are you happy with where your money is going? If you aren’t, now is the time to learn about ways to break habits and begin a savings program for you and your family.

Step 2. Make a decision to change

The second step to breaking habits involves looking for alternatives and choosing a different way of spending your money. This action step demands that you take control of the situation. One way to do this is to review your money habits and where you spend money, then identify how you can make changes. For example, have you ever stopped to consider how much you and other family members are spending for hair care and premium television channels? If you spend $80.00 each month for hair care, that’s $960.00 per year. Add a premium channel bill of $25.00 per month or $300.00 per year. That is a lot of money.

What can you do? Let’s look at the example or hair care. It is important for you and other family members to look good and feel good about yourselves. You can take control and make changes that will help you capture some of the money going to personal care expenses and redirect its use toward other family goals and still be well-groomed. “How can I do that?” you ask. Learn how to do these tasks yourself, or barter with a friend or neighbor who has these skills. You do something for them that they can’t do, and they do your hair. Every once in awhile, treat yourself or other family members to a special makeover. Otherwise, save the money you would be spending on hair care, and put this money toward your family goals.

Once you get into the swing of breaking habits, you and your family can come up with ideas on how to change and adjust spending.

Ask yourself:

  • Am I getting the best buys?
  • Am I spending more than I need to?
  • How could I change my spending?

Be specific and honest as you review expenditures. Come up with creative ways to save money, and share these ideas with others. Here is an example from the clothing area to get you started.

  • First, do inventories of each person’s clothing: evaluate items—which are still useable, need replacing, or need to be added?
  • Once you know what needs to be purchased, check out sales at different stores and look for the best buys.
  • Avoid buying designer clothing, as it is usually very expensive. Ask yourself and family members if it is worth the extra cost. Consider what else you could buy if you bought items that cost less and had money left.
  • Check out second-hand outlets, flea markets, thrift stores, and manufacturers’ outlet stores.
  • Be a knowledgeable shopper; don’t think that the outlet stores are always cheaper than other stores.
  • Know the prices of what you plan to buy and comparison shop for the best deal.
  • Make simple repairs.
  • Swap clothing with family and friends.
  • Develop a positive attitude about recycled clothing and share that attitude with your children. Well-maintained clothing from relatives and friends can greatly enhance a wardrobe.
  • When shopping for clothes, read all care labels very carefully. Only buy washable items. Dry cleaning can become quite expensive over the life of a garment.

By adopting these strategies, you will see your clothing budget shrink. Add the money you no longer spend on clothing to your investment plan. With these budget reduction ideas for clothing in mind, brainstorm ways to save money in other budget categories with family, friends, neighbors, and co-workers. Develop money saving lists for:

  • Using utilities
  • Buying home furnishings
  • Purchasing health and beauty aids
  • Shopping in the grocery store
  • Buying a car (new and/or used)
  • Selecting telephone and cable/satellite television features
  • Buying toys and other gift items
  • Selecting insurance coverage
  • Financing large ticket items and other purchases

For more information on saving money, access a copy of 66 Ways to Save Money from the Internet at

Some habits are very hard to break even when they are dangerous to our health and physical well-being as well as financial well-being. Examples that quickly come to mind are smoking, overeating, drinking alcohol, and gambling. These activities can be life threatening and/or result in financial ruin. If you smoke a pack of cigarettes a day, what is the cost for a year? A pack-a-day habit adds up fast:

$6.00/pack/day = $42.00/week = a whopping $2,184.00/year.

Remember, if you believe in yourself, you can kick any habit. Once you get into the swing of breaking habits, you and your family can come up with numerous ideas on how to change and adjust spending. Perhaps together the family could turn the task of saving into a friendly competition for the “Saver of the Year Award.” The winner would be the person who saved the most dollars or the largest percentage of their income in a given period of time. By making the decision to change, you are ready to advance to Step 3 in breaking habits and finding money to invest.

Step 3. Act immediately

Now that you have all these great ideas to keep more of your money, how will you keep yourself motivated? Writing down your new desired behavior is one strategy. By recording the change, you are committing yourself to a new behavior. It is necessary to start your new behavior immediately. For best results, begin within 24 hours after making the decision to change or adjust spending. The sooner you begin a new behavior, the sooner the new behavior will become a habit. Step 4 will further assist you in adopting new behaviors.

Step 4. Share your plan

To further establish a new behavior, share your plan with others. Tell family, friends, and co-workers about your plan. By giving others the opportunity to support you, you boost your determination to succeed. If your behavior change involves the entire family, all family members must work together for the family to succeed. Refer back to the worksheet, “So Where’s The Money?” Go over the chart with the entire family. Together, decide ways the family can break habits and develop a savings plan. Now is also a good time to make a family “piggy bank.” The “bank” can be an empty jar or a small box. Once the family decides on their family financial goal, they can put a picture identifying the goal on the “bank.”

Examples of goals include paying off a bill, buying something for the house, visiting family members in another state, or accumulating money for school shoes. The “bank” needs to be kept where all can see it and all can help by adding money. After accumulating a sum of money, the family might want to open a savings account at a local bank or credit union. Once this account has grown to cover emergencies, additional savings may then be invested so the family will realize a larger return on their money.

Even with the best of intentions, sometimes staying focused on your savings plan is hard. The next step of the action plan will help you move forward.

Step 5. Stick with your plan to change

Step 5 is a critical step toward breaking habits and increasing family savings. You and family members must always look for new ways to reduce spending and increase savings. It is important to reinforce the fact that you can change your attitudes and break habits. Stay focused on your goal. It takes about 30 days for a new behavior to become a habit. Here are some specific activities for you and your family that will help you gain control of your finances, but still have fun as a family. By engaging in activities such as these, we are changing our attitudes and choosing activities that are more “money friendly.” Changing attitudes and lifelong habits will serve you well immediately and over a lifetime and set an example for your children by instilling the value of saving.

  • Plan a family outing. Choose activities that are free or inexpensive, such as attending a free concert in the park, visiting a museum, borrowing videos from the library, or attending story hour at the library.
  • Plan a family night. Have a special treat, ask family members to share a talent, remind family members how much you appreciate everyone working together to cut back spending. Together, count the money that the family has saved, talk about the goal toward which the family is saving, and how soon you think you will reach the goal.
  • Have a “make your own pizza” night. Instead of going out for pizza, put the difference of the cost of food prepared at home and the cost of eating out in the family “bank.”
  • Pack lunches instead of eating out.
  • Look for food specials at fast food restaurants. Bring home the food as a surprise instead of taking the kids out. Not only is this a money saver but a time saver and stress reducer (no arguments over where to go and what to eat).
  • Video/DVD rental might be less costly than going to the movies. Swapping weeks to rent movies with neighbors might be less costly than going each weekend yourself. Borrow videos/DVDs from the public library.

Yes, you can do it — you can change your attitude. You can break habits and save for things that are really important to you and your family. You just have to stick with your plan. If you are successful, you will reach Step 6 of our action plan.

Step 6. Celebrate your success

The last step to breaking habits is to celebrate your success. Once you have reached your initial goals, let others know of your success. Enjoy the fruits of your savings. Then continue with your new behaviors that are now habits. You have the tools necessary to be successful. Remember to trim all unnecessary expenses and keep your needs and wants in perspective. Watch the pennies you save grow into dollars which can be used to fund your saving and investment programs.