Make a game out of finances

I recently read The Power of Habit by Charles Duhigg. It talks about how habits are built through a cycle of cue and reward. The anticipation of the reward is what creates a routine.

He used many diverse accounts of habits, good and bad, how they can be accidentally or deliberately formed or broken. How one good habit can spiral out into other good habits, and the same with bad.

I found myself nodding along, because I’ve become a much more good-habit habitual person over the past few years and have knocked out a lot of bad habits (although I know I still have quite a few).

One method for creating good habits he mentions is creating a game of sorts, with periodic rewards for good behavior. This especially resonated with me because I think the main saving grace for me sticking to my personal-finance habits has been the creation of various challenges along the way. The reward is a flood of endorphins when I reach the goal. And the satisfaction of completing a routine. Because as the book lays out, you know you’ve successfully created a habit when you’d feel off or restless if you tried to NOT do the activity.

I think making a game of it, with benchmarks that signify victory, is particularly effective for finances vs. other habits you want to form, because when you look at what personal finance is, it’s not exactly a tactile, sensory thing. It’s numbers on a statement, or paycheck, or spreadsheet. Now maybe if our currency was buckets of gold nuggets instead of credit cards, checks and automated transactions, I wouldn’t need to add a game element to make it exciting!

Since June 2007 (holy cow! That’s over six years ago!), I have created a monthly debt-reduction goal. I’ve never missed a month (in terms of setting a goal; I have fallen short of the goal about five times). I base it on my budget projections, so it’s not exactly something I have to work too hard at. If I follow my budget closely enough, I will reach my debt repayment goal.

But somehow I have fooled myself that paying the amount of debt I expect to pay in a month is a huge personal triumph. And in a way it is. Because I hardly ever pay just the minimums; I also put as much extra money toward it as I can come up with. If I didn’t have my goals, I think it would be easy enough to say “Nah, all my bills are paid; let’s go buy new iPods with this extra money!” (I know because I sometimes do that, if even more money comes in than I thought we’d get that month. Though not often, because the thrill of far exceeding my monthly goal is also very rewarding.)

At first, the high I got from paying down debt was so good that I was reluctant to start funneling the money to other positive goals, such as savings. I started tracking my household’s net worth, but since debt reduction contributes to net worth, it wasn’t much motivation to save vs. paying things off. I now have a goal to save up for a new home, and that’s very exciting, and I’ve set other financial goals that weren’t just about paying off debt, so I know it can work for other areas of my financial life.

Unfortunately, saving for retirement still doesn’t give me a big thrill. (One of my biggest triumphs has been when I got a surprise cash gift from my dad, I immediately opened up some Roth IRAs with the bulk of it, and only used about 10% for debt reduction. I was REALLY tempted to just pay off more debt with it, but I wisely surmised that since retirement doesn’t excite me, I should put the windfall there. I’d find the drive to  pay off the debts using other methods.)

I’ve found the best way to save for retirement for now is put it on autopilot and ignore the deposits into the accounts, except once a month when I check our net worth. Maybe once the debt-repayment game has been won, I’ll create a retirement-savings game that gives me the same rush

Since I’ve found that debt reduction is its own reward, in a way, and retirement savings is not, I might have to add a completely extraneous reward when it comes time to boost retirement savings. For instance, I could treat us to a fancy dinner out every time we max out one of our Roth IRAs for the year. We’ll have to see what works when the time comes, because I’m nowhere near that level of retirement money contributions yet.

Do you have any interesting strategies to create habits or make yourself feel more engaged with personal finance?


Image courtesy of Salvatore Vuono /

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