“I never ask my clients to give up the things that bring them the most joy in life; instead, we try to find ways to keep the things that are important to them, and cut back in places that are less important.”

Financial habits are just as difficult for some people to make and break as any addiction or other bad habit. Yet others can change their habits quite quickly and effectively.

Do those people just have more willpower?  Are they smarter?  Are they somehow better than the rest of us?

I suspect not.  I’ve been reading Gretchen Rubin’s book, Better Than Before, which is all about habits, and she points out that there are really only a few ways that people change their habits:

  1. They have an epiphany — a lightning strike moment that changes everything.
  2. They change their environment so that the habit is no longer possible.
  3. They take baby steps toward change.

The first is hard to manufacture. It’s the kind of thing that happens pretty rarely, and usually as the result of a big life event. So that’s usually out.

The second can be difficult when it comes to finances. Some people do things like freeze their credit cards to curb spending, but for the most part, we can’t go cold turkey with money.

So that leaves the third one.

Rubin argues that one great way to make baby steps towards change is to recognize when we’re making excuses.  She calls these excuses loopholes, because like loopholes in a contract, they give us a way to get out of living up to our new habits.

False choice loophole – “I can’t do this, because I’m so busy doing that”

This is the loophole you invoke when you think you can’t have two things; I see a lot of people thinking they can’t make lots of money AND have lots of freedom.  Or you can’t pay down debt AND have fun.  Or that you can’t get organized with money because you’re too busy with a new baby, new job, etc.

Instead, ask yourself: “Can I have this and that?” or “Can I do this AT SOME LEVEL while maintaining my focus on my short-term priority?”  It’s surprising how often that’s possible.

This is the key tenant in my conscious spending plans. I never ask my clients to give up the things that bring them the most joy in life; instead, we try to find ways to keep the things that are important to them, and cut back in places that are less important.

One-coin loophole –“What difference does it make if I break my habit this one time?”

One of the most insidious of loopholes is the “one-coin loophole”— because it’s absolutely true. This loophole gets its name from “the argument of the growing heap,” in Erasmus’s Praise of Folly.  To summarize, this story highlights a paradox that’s very significant: Often, when we consider our actions, it’s clear that any one instance of an action is almost meaningless, yet at the same time, a sum of those actions is very meaningful.  Whether we focus on the single coin, or the growing heap, that focus will shape our behavior. True, any one visit to the gym is inconsequential, but the habit of going to the gym is invaluable.

Pointing to the “one coin” is a way to deny a conflict between our values: we’re not choosing between our desire for French fries and for healthy eating habits, because eating one bag of fries is an insignificant act. But when we consider the accumulated cost of the French fries, the conflict looks different.

People often use this against you!  My dad is aware that I recommitted to daily exercise and eating healthy at the start of the year, yet even when I asked him NOT to send his usual round of Valentine’s Day treats, he did anyway and excused himself by saying, “You have such great discipline, I know you won’t go crazy and eat them all at once.”

I find people often hear this in their heads when they’re looking at savings. They think that the $50, $100, or even $500 they’re putting into savings each month isn’t that big of a deal, so they use the excuse to spend it “just this once.” They are ignoring the compounding effect of saving over time (not to mention compound interest!).

“This doesn’t count” loophole – “I’m on vacation” or “It’s the weekend” or “It’s for my kids”

We tell ourselves that for some reason, this particular circumstance doesn’t “count” — but in fact, while we can always mindfully choose to make an exception to our habits, there are no magical freebies.

I often see this come up with clients when they’re trying to break a bad spending habit.  Say, for example, they have a habit of buying lunch out every day, or a big stack of books at the end of the week, or a pair of expensive shoes every time they’re feeling down.  Even if their intention is to give up these spending habits, they’ll rationalize a slip up by saying it doesn’t count for some reason.

Unfortunately, everything counts, and it’s the same money being spent whether you’ve had a bad day, did something good and “deserve” a treat, or your kids are begging for it.

How knowing your loopholes can help you close them.

Once you know which loophole your subconscious brain is likely to use to try to rationalize an old habit or poor choice, you become instantly more aware of them.

I found, in reading about the loopholes, I became more aware when I was using them in my own life. It disrupts the automatic nature of the habit, and allows you that moment to question — is that really true?

That momentary disruption is all you need to start breaking those habits that aren’t helpful, and replacing them with new, better ones.

If you want more information on this, I highly recommend checking out Rubin’s book, or joining us inside Money Boss, where we examine our habits and attitudes towards money in a safe, supportive group space.  We are re-launching Money Boss soon…Interested?  Click reply to let me know and you’ll be among the first to know when we launch!