Speaker 1 00:00:08 What's up, everyone. Welcome to the finance for physicians podcast. I'm your host, Daniel Raimi. Join me as we dig into what it looks like for physicians to begin using their finances as a tool to live better lives. You can learn more about our
[email protected] let's. Jump into today's episode. What's up guys. Hope you're having a great day. Happy Monday. If you're listening to this live, it's Monday here where I am, but a happy whatever day it is when you're listening to this. So today I wanted to talk about a book that I recently read called atomic habits. I'm sure many
Speaker 2 00:00:43 Of you have maybe heard of this book, maybe somebody you haven't, but, uh, I, I'm excited to talk about this particular book, atomic habits by James clear. I recently read it and like I said, my wife's reading it right now. We're gonna talk about some of the big points that James makes in his book. I'm also going to share some examples of how you might be able to apply this to your life, because at the end of the day, I mean, that's, the key is like taking action on it. And so I think it's going to be a great topic because I know I've personally benefited from some of these tools that he shares in his book. I've also seen a lot of other people benefit from it. And so I know many of you would benefit from it as well. Uh, and the longterm benefits are, are, are substantial.
Speaker 2 00:01:29 So I think it'll be definitely a good subject. So let's knock this out. Okay. So this book is primarily about how to change your habits, but, uh, before we get into the how of changing your habits, I thought it would be helpful to talk about the why first, because I think that's extremely important as well. James covers this in the first few chapters of his book. So all of us really want to live, you know, like the good life, right? I mean, that's kind of what we're after is like, uh, we have this innate drive to seek out this ideal life. We want continual improvement, but what's interesting is we're also kind of lazy by nature. And so we're looking for, we kind of want the best of both worlds. And so we're really as humans, I think naturally after this, this shortcut to the, to the good life and James talks about some, like science behind this and how kind of that's been proven and been a part of humans for, you know, for forever basically.
Speaker 2 00:02:36 But at the end of the day, we're motivated to improve, but we tend to gravitate towards the shortcuts. So what happens is this makes us really susceptible to, like, I like to call them shiny objects or like get rich quick schemes or, you know, the overnight diet success, because that's, I mean, I just really our attention and there's a bajillion methods that you I'm sure know of or think of that are exactly along these lines, that on the surface it's like, oh yeah, that's basically, I want to see continual improvement. And this method is a quick way. So it seems to do this, or that's the promise, but if you've done many of these, you, you know, most of them don't work. And I think a big reason is they all seem to be like really results focus. And a lot of times they're not addressing the underlying root cause.
Speaker 2 00:03:39 And so I think habits are often that underlying root cause of your ultimate outcomes. So habits are kind of like sneaky they're they're like small, like on a day-to-day basis, they're just kind of intertwined in your daily activities. It's like, if you eat a candy bar, you know, today, not a big deal, right. Um, but maybe you eat two candy bars every single day for like your lifetime. That's potentially catastrophic decision, just like working out. I mean, it can be the reverse working out a day, no big deal, but working out every day for your lifetime, that's a game changer. So success is really, and James really hits us on his book. Successes is really a product of like daily good habits just compounded over time. And really failures is the reverse of that. His daily bad habits compounded over time. So these habits, they have like a strong hold on your daily behaviors and routine, and they it's like they're running in the background and you kind of just don't even think about them.
Speaker 2 00:04:47 It's just, you get in these routines or habits form, and you're just kind of on autopilot. So it really takes some intentional effort to change them. And I think, you know, I guess that's the bad news is it's not like a get rich quick. The ideas in this book are not overnight success type things. But as I said, those typically don't work. Uh, the good news is these ideas work, but they take a little time. But those, those long-term benefits of, of developing these good habits, uh, and avoiding these bad habits or really learning how to develop habits or how to change habits. That's a huge skillset. So I think just natural tendency for our minds is like, we go to like results. It's like, whoa, how quickly am I going to see results? Um, sure. I thought that question early on in the book, in fact, I know I did, I kind of started skimming through it.
Speaker 2 00:05:47 I'm like, what's the, what's the point? And how do we, how do we get there fast? So I'm sure you're thinking like what what's, what is, what's this gonna be? How's this going to benefit me? What are the results? Um, I think the problem with that is it, we get obsessed with those, that results focus, outcome focused, uh, thinking is part of the problem. It's kind of like the wrong word. We're leaning in the wrong direction there. And really you kind of have to stop focusing so much on those results, especially the short-term results, like the media gratification and like the outcomes and kind of just call time out and say, maybe we should be more concerned with the habits and like your current trajectory than your current results. And so James talks about this in his book, your outcomes, he says your outcomes are a lagging measure of your habits.
Speaker 2 00:06:42 So for example, your net worth is a lagging measure of your financial habits and time magnifies the margin between success and failure. So if you want to predict where you're, you're going to end up in life, all you gotta do is look at the, the trajectory of your, uh, daily habits and daily choices today and compound those over, you know, 10 years, 20 years. That's going to tell you what things are, how things are going to play out. Like when we're looking at other people who are like, um, man, they just like had an overnight success. I mean, it's like, so-and-so hit it big. Or a lot of times we kind of gravitate towards thinking, like there was this overnight breakthrough that occurs in people's lives and that's not actually really how it works. Now, there are exceptions. I'm sure you can. I mean, you can always find exceptions to everything, but for the most part, those people like put in the hard work, like they had, they developed the habits and put in the time and it built up to this, uh, ultimate major change.
Speaker 2 00:07:51 And then that's when you see it, you're like, man, that just happened overnight. It seems. Cause you don't really see those daily habits. So I'm sure I'm sure you set goals before I've set a million goals. It's just, that's what we do. Um, but um, James clarifies goals are a little bit different than what we're talking about. So James, James clarifies the difference in goals versus like systems. And so goals are like the results. That's what I was talking about. Like results focus, like what is the outcome and systems are, are the process processes that lead to those results, James and this book advocates that it's all about the systems. Uh, but we kinda, as humans tend to gravitate towards, like I said, these outcomes and the goals, but you got his theory and I've, I've kind of verified this with my own experiences that at the end of the day, your outcomes are gonna be based on your systems and your habits and what you're doing day to day.
Speaker 2 00:08:57 So, uh, James calls the habits, these daily habits, the compound interest of self-improvement. So if you've ever seen like a compound interest curve that it's like, you know, slow to increase, the line is slowly increasing and then it picks up steam and increase faster and faster. And then all of a sudden it's almost like going straight up. So that's kind of how these habits work. It's like when you start to change your habits, that's the challenge is like you don't, it doesn't really feel any different or seem any different. The outcomes are really don't change much, but there's this point in time where you kind of start to break through and the curve starts to gain steam and it really starts to shoot up. I think James calls it, um, the plateau of latent potential. Um, but that's kind of what he described is where you like breakthrough.
Speaker 2 00:09:48 But that's how these habits work is once you hit your kind of stride there, it's, you really start to see amped up results, but you have to put in, you have to get through kind of that early phase time where it's, you don't see those results or they're minimal. And that's, that's, that's a lot of what this is about, is how to get through through that initial, uh, tough stage of developing, you know, prior to the results. Once you start to see the results it's it's, uh, and you've developed a habits it's, it's, that's kinda the easy part, the cream of the crop ideal, uh, habit. So there's a few different ways you can set habits. But the ideal habit to form is, is this identity based habit. James talks about it in his book. So you can have like, you can change your habits and be focused on outcomes.
Speaker 2 00:10:45 That's one way to do it. That's he calls these outcome based habits, uh, and the focus is on what you want to achieve, but a James ad advocates for an identity based habit, which is focused on who you wish to become. That's like, you know, the ideal form of intrinsic motivation when you get that, that, um, when it involves your identity, that's really the true long-term motivator. And so James says, you got to think about it, like ask yourself who is the type of person that could get the outcome I want. And so you got to kind of start with who I think even before you get there, you gotta say, who do I want to become? And so this kind of loops in identity into this habit formation, uh, the tendency for people is to think, okay, what outcome do I want? And so what I'm saying is it's better to start with who do I want to become?
Speaker 2 00:11:45 Like what type of person do I want to want to become? So that's kind of sprinkled into this, this whole, uh, system, uh, James's atomic system. Okay. So that, that's a lot of the, that's kinda the, the why behind it. So let's get into the, how I think this is really where you start to, um, see, uh, practical ways of doing things. Um, I'm going to go through each of these is, um, James calls them the four laws of behavior change. You can use it to either break a bad habit or make a good habit, but I'm gonna talk through each of these. And then I'll circle back to some like real-world examples that you can use or think about. Uh, so for creating good habits, the four laws are, make it obvious, make it attractive, make it easy and make it satisfying. And then if you're trying to end bad habits, make it invisible, make it unattractive, make it difficult and make it unsatisfying.
Speaker 2 00:12:46 Okay. So let's start with, make it obvious. You're trying to build a good habit. You need to make it obvious. So, as I mentioned earlier, we're on, we tend to be on autopilot most of the day, we're just like rolling with our routines. So you kinda, you have to take, you have to take a time out and increase your awareness. You have to, you have to take, check your temperature and see, kind of see where you're at, so that you can increase your awareness. And that will help you start to be more aware of your existing habits. Because at the end of the day, most of us, we aren't even aware of our existing habits. Um, maybe some of them, but, but most of them are just kind of part of us. So, uh, in the book, there's a, uh, what they call habit scorecard.
Speaker 2 00:13:33 It's, it's kind of a simple system to kind of help you, uh, think through your existing habits. But basically what the exercise is, is you are gonna take a few minutes to think about brainstorm your existing habits. Good and bad. If you're having trouble thinking of them, or maybe this would be good either way, but ask your spouse. That's always a way to get like honest truth, but, uh, or ask a good buddy or for their opinion on some of your good and bad habits. But, um, you're going to write down all the habits that come to mind, you know, any of them that come to mind and then you're going to go through and mark each one, whether it's a good habit or a bad habit, or just kind of neutral. And once you've done all that, you've got it all out there. Then you want to start, um, identifying those that are like the highest priorities to potentially change.
Speaker 2 00:14:27 So maybe so if you're working, say we're talking finances, maybe you want to start tracking your finances regularly so that you know where your money's going. That's, uh, you know, solid habit. Um, or maybe you want to stop spending so much money, uh, just because you have it. Those are, those are good examples of habits. Or maybe you want to start, you know, non-financial maybe you wanna start working out. Maybe you want to start eating healthy. There's a million things. But I think, you know, getting up early in the morning, that's also another good one. But once you have your, when you want to come up with, you know, maybe just one, like at least one habit that you want to work on, that's, that's your starting point. And you, you kinda know what that is and we can start to kind of work through what the strategy is.
Speaker 2 00:15:12 Um, so that's, that's that awareness part. Yeah. One of the tricks James shares to help help you start to make small changes on that habit that you're working on. One of them is called an implementation intention. It's a strategy where you pair a new habit, like with a very specific time and location. So let's say you want to start tracking your finances regularly so that you know, where your money's going. Like I said, before, example would be you commit to reviewing your prior day spending or something like that, but you commit to reviewing your finances, uh, every morning at 6:00 AM in your home office or something super specific. So you're setting a very, uh, clear, uh, intention to, and you're, you're, you're pairing it with this very specific time and location. That's the key. Maybe you even put it on your calendar or whatever, but yeah, you're tying it to a very specific time and a very specific location.
Speaker 2 00:16:16 Another example, even better, I think, than that is he calls it habit stack, but it's kind of like amped up implementation intention. So the way this works is you take an existing habit that you already have, cause everybody has happens. So you take one of them that you already have and you pair it with, uh, the habit you're trying to form. So I've done this before with a few habits I've formed. So for example, in my business, I have to, um, I guess I choose to, um, update some of our key business metrics, uh, every single month on the first day of the month. And that's kind of like a longstanding habit I've had. And so what I did, oh, a while several years ago is I basically stacked on top of that, my personal finance numbers that I wanted to track or get in the habit of tracking on top of it.
Speaker 2 00:17:12 So now all I do is, so I already had the habit of tracking my business. Finances. All I did was commit to saying, I'm going to add to the agenda for that meeting update my personal finance numbers. So it was actually very, very easy, uh, to do that. Another example could be like, you get up in the morning and you ha I actually did this one too. My wife was telling me I need to wear, um, some face cream or something like that. I guess she thinks my son, my skin's getting wrinkled or something. But, uh, anyway, she was like, you gotta start doing, putting this cream on. And I'm like, I'm not, I just, it just never crossed my mind. And I'm like, all right, I'll I guess I'll, I gotta, if I'm going to do it, I gotta, I gotta get, make the habit happen.
Speaker 2 00:17:58 So I have this routine I do every single morning, as soon as I get out of the shower. And it's like five things that sounds OCD, doesn't it. But I mean, it's, it's like five normal, you know, your brush, your teeth, floss, your teeth and pretty standard stuff. But I, all I did was I just added that six thing on top of it. And it was easy as soon as I decided to do it that way, it was just like, it was very simple and it was just like off to the races. So that's what habits stacking is, is you can piggyback on an existing habit and it works extremely well. So overall though, um, I think James advocates just kind of designing your environment, um, have making sure you have good cues, uh, for the good habits, making them obvious, invisible. So, you know, having things on the calendar say having a very laid out obvious plan of action, not having any gray area, those are all gonna help kind of push you towards making the good habit.
Speaker 2 00:19:02 So on the flip side, if you have a bad habit, you want to get rid of, you got to make it invisible. So the what's the, what do you think is the secret to self control? Some people might be thinking like willpower. I would say that's, that's completely, completely not true. It seems like that from the outside, but it, at the end of the day, people were pretty terrible at resisting temptation. That's like right in front of your face, it's just human nature. Like you can't, when you have enough temptation, you're going to give into it, I think. And so it's more about creating an environment that allows you to spend less time interrupting situations. That's the key, because at the end of the day, it's, it's a lot easier to avoid temptation in those situations than it is to like resist it right in front of your face.
Speaker 2 00:19:59 So I think it's not, it's less about self-control and willpower and more about, uh, just having a plan for avoiding those, uh, tempting situations so that that's going to help to make that temptation or the bad habit, you know, invisible or less visible. So you can start to make a bad habit invisible by eliminating those cues, uh, that kind of trigger it. Uh, so some examples of what this looks like in making a bad habit, more invisible. So let's say, let's say you have a bad habit you've identified and you want to stop it. And maybe that's, maybe you spend a ton of money on Amazon, on your phone, especially which a lot of us do. And so you want to, you want to stop that. So maybe you start, um, and maybe, maybe you tend to do it at late night too, so that that's, that's, that's always, or early in the morning or whatever, but maybe you, as soon as you get home, plug in the phone in the charger and it's in the basement is, might be a little hard for some of you.
Speaker 2 00:21:09 I have not been able to do this. It's still in my bedroom. Maybe you, you put, you get your phone kind of out of your world more. If that's going to be difficult. Now, another couple of ideas, maybe you unsubscribed from all the, uh, the notifications that you get around, um, shopping, or maybe this is a kind of a cool idea. I've seen people use. Maybe you use a website blocker for Amazon. You can get like, like a service that will block all your, your, uh, access to a specific website. So you can block out. Um, Amazon, one of them is get cold turkey.com. That's one of these services. You can check it out, but, uh, you can plug in a few websites that you want to restrict yourself from ever going to, and then you can access it. So it becomes almost invisible. Or maybe you, uh, you don't want to spend as much in a brick and mortar stores.
Speaker 2 00:22:04 Maybe it's not on this, uh, internet on Amazon, but maybe you actually go into the stores. Um, and you tend to spend a lot, uh, and you want to spend less, uh, and it T so it tends to happen. Maybe when would you, when you're with a certain person. So like Jane DOE John DOE, let's say you spend money when you're hanging out with them. So maybe you are, you don't, you don't hang out with them. That's important. Uh, especially when you're shopping or maybe you tend to, um, stop in on this one particular store on your way home from work always. And, uh, that's where your weaknesses. And so you want to stop that habit. So you could just change the route home from work. So you're not driving by that same store over and over again. Maybe it's a little bit of a longer drive, but like it's worth it, especially once you get that habit formed it.
Speaker 2 00:22:56 So, you know, that's a different story, but for like, while you're trying to form this habit, you change the route, and then you're just not going to see the store, or maybe you just have a general, uh, habit you want to, um, stop spending so much money in general, and you use credit cards for most of your spending. So maybe you just cut up all the credit cards or, you know, stop using them. Totally. So there's a lot of different examples. One of the classic ones, you hear nonfinancial examples, you know, if you're having, if you have a bad habit, like, uh, you drink too much or whatnot. And one of the best ways to curb that is just not have alcohol in your house. I mean, if it's not in the house, it's, you're not going to see it. Okay. So that's make it invisible.
Speaker 2 00:23:39 So let's flip back to good habits. Uh, next one to make a good habit, make it attractive. Uh, I think our brains are like, um, what's the chemical that, uh, dopamine, um, I think it is it's the chemical. We were very, um, motivated when we have higher dopamine levels. And I think what drives up the mean is the anticipation of a reward. It's not actually the reward itself. It's like anticipating this reward, whatever it might be. And so you can kind of leverage that by making a good habit more attractive, even if it's not necessarily, even if you don't feel like it's maybe that attractive on the surface. So one way to kind of one strategy James uses or shares in his book is to use what's called temptation bundling. Basically what you do is you pair an action like that you, uh, want to do with something that you need to do.
Speaker 2 00:24:45 So, uh, you're kind of like leveraging that, I guess, dopamine drive and pairing it with a habit that's maybe not going to trigger that much stuff that a dopamine. So for example, uh, maybe you, uh, will you commit to only watching your favorite show when you are updating your spending numbers for the day, if you want to kind of start track, say your goals or your habits you want a form is to track your spending and spend less than, or at least be aware of your spending. So maybe you commit to only updating those numbers when you're watching your favorite show. So the favorite shows like the trigger, and then you're doing that less anticipated or less desirable activity or getting in the habit of it while you're watching the show. One that I've used personally is I will, uh, listen to like a favorite audio book or podcast only when all, when I work out.
Speaker 2 00:25:42 So I get, it gets to where I would like want to go work out, to listen to the podcast or something, which is kind of interesting. It's not like I necessarily want to go workout. I just want to go listen to it, but I've connected it with that activity. So you can leverage that on the flip side, if it's a bad habit, you've got to make it unattractive. So, you know, completely reverse mentality. You got to highlight the benefits of avoiding a bad habit to make it seem unattractive. James talks about this in his book. There's a lot of different examples. He gives. Um, one of my, one of the examples I kind of like is, and this is actually what happened to me as a kid is when, so I was a big, uh, thumb sucker until I think I was like five years old or something.
Speaker 2 00:26:28 Maybe it was, maybe it was longer than that. But my parents of course said, you know, try to get me to stop. And, but as soon as the dentist told me about how I was going to like Jack up my teeth, I like quit cold Turkey. And, um, I really, I just, I guess I connected it with the, I didn't want to have a deep, there were crooked and I'm like, I guess I'll stop. So you got to make those bad habits unattractive. So if we flip back to good habits, make it easy was another one. There's a lot of ways I think this can play into it. This goes back to our human nature of being lazy. Like we want to go to the, we gravitate towards the option. That's like less least amount of work possible. So ideally you create this, uh, you design your, your system or environment to make it as, as easy as possible.
Speaker 2 00:27:19 So I think what's important here. You have to remember that a habit. You have to form the habit first. So I always am guilty of this. I'm like, I'm gonna deck out this like system. So let's say I want to start tracking my finances better so that I feel more in control of my money. So that's the habit I want to develop is I want to start tracking my finances. Um, my temptation is to be like, I'm going to create this like awesome spreadsheet. That's going to track every single number and I'm on a budget and I'm going to, and it's like over the top, all the, all of a sudden, but you gotta remember, first step is you have to create the habit and it, you it's kinda like, uh, worthless if you don't ever form the habit. So the most important thing is, is getting in the habit itself.
Speaker 2 00:28:08 And then once you have the habit, you can tweak it however you want and make it whatever you want to make it. But the key is the focus you have to remind yourself is that it's, um, you gotta make it easy because what happens is I make this monster financial spreadsheet that I have to update. And then it's like, takes me an hour to update. And I'm like, I don't even actually want to do this because I've lost interest in it. And it's, it's difficult. So you have to make it easy. He has like a two minute rule. He talks about in the book, uh, whenever you're starting a new habit, he says it should take two minutes or less to do whatever activity it is initially, at least. So you don't, over-complicate things make it really, really simple. So for example, with your finances, if you're trying to, uh, get in that habit of updating your finances regularly, maybe you just make it like one little tiny thing.
Speaker 2 00:28:57 Like maybe you're writing down your checking savings and credit card balances as of the first of the month, every single month. And that's it. That's a really good habit. I mean, that's, that's a very solid habit. If you did just that one small thing, you're going to start to feel more in control of your money or aware of where your money is going just from a high level standpoint. And it's easy. I mean, it should take a few minutes every month. So don't, don't overcome complicate things as tempting as that, that might be another point. James makes that's, I think important is along the lines of making it easy as automating and using like technology and tools out there for your benefit. So maybe your, you want to get in the habit of saving or paying off your mortgage. Uh, maybe you want to pay off debt, faster, paying down debt extra or whatever.
Speaker 2 00:29:52 Don't assume like you're going to make extra payments on debt. That's just the, I mean, it's also difficult. Like everybody always says, like, I'm going to get a 30 year mortgage. I'm going to make extra payments on it. But like, let's be honest. Like that's not easy. Maybe you're like awesome discipline. But like, even for the awesome discipline people, that's still pretty challenging. You got to, you have to make a million decisions you have to make, what is it, uh, you know, 300 payments. That's a lot of payments. Or I guess if you pay it off faster, it's less. But like you're forced to make a lot of extra, a lot of decisions to make an extra payment. And there's a lot of things that can knock you off your trajectory when you're doing it. That way. I would call that the hard way. The easy way would just be like, refinance your mortgage or set your term for a shorter term and line it up with how fast you want to pay it off.
Speaker 2 00:30:39 Or with savings. Like, don't assume you're going to like have money left over at the end of the month. Like, that's just, uh, maybe some people do, uh, but like maybe not every month. So a better way to do it is to like automate savings. So that's why 401k plans work really well. Nowadays is you can set up automated payroll deduction. It's like before you even see the money, it just comes out. So that's super easy. And that's partly why so many people have developed that solid habit on the flip side, if you want to stop a bad habit, you gotta make it difficult. So James talks about increasing friction, increasing the steps between you and the bad habit, um, making it, you know, painful almost to, uh, actually make it painful for the behaviors around that habit. So, uh, for example, your let's say your bad habit is you are, you're spending too much money.
Speaker 2 00:31:41 And so the credit, this is like one of the most common like issues, bad habits in our culture is spending too much money. Um, a lot of it is due to credit cards, by the way, like the credit card companies have completely figured all this stuff out. Like they know all this science. So this book is based on really good science, uh, the credit card companies and a lot of these big comfort companies and corporations in America, like they're monster companies. Now they put a lot of money into research and, and they understand these behavioral tendencies people have, and they structure all of their stuff to like leverage that to their benefit. So you have to be, I think it's helpful to be aware of that is, and you have to be intentional about kind of going against the grain. So for example, the credit cards, they make it ultra easy to spend money.
Speaker 2 00:32:33 It's just like wave the guard in front of something and boom, you've, you've bought something. So if you wanna, if you a bad habit there, you want to work on, you gotta, you gotta switch things and make it difficult. So maybe you commit to using cash instead for all your purchases. I mean, I know that's old school, Dave Ramsey would like that Dave Ramsey has the cash envelope system, but, um, or maybe you don't go quite that hardcore and you go, like you say, I'm going to only use debit card for my purchases because that's, that's easier than cash. Uh, but it's not, it's not quite as easy as a credit card. It's not quite as obvious as a credit, or it's not quite as, um, gives you a little more awareness than a credit card. But if you want to go all in on it, the best way to do it is you got to make it difficult.
Speaker 2 00:33:19 And cash is definitely more difficult to spend than credit cards. Another good example. Um, this is nonfinancial example, but, um, I saw this on, uh, one of James's, uh, maybe it was in his book or blog post or something, but it was from, um, one of his readers, but the person wanted to stop snacking at night and, um, and eating unhealthy drinking unhealthy at night. And so he started to brush his teeth like right when he puts the kids to bed, which is like right before he has that tempting period of snacking and eating and whatever. And so he brushed his teeth right before he gets, puts the kids to bed. And then, you know, it makes you not want to eat anything really or drink anything. Cause you're like, oh, I don't even, I don't want to have to brush my teeth again. So that habit worked for him.
Speaker 2 00:34:12 He just made it really difficult to do the bad habit is in by just doing something simple like that. Okay. So last couple of examples to make it satisfying. If you want to build a good habit and make it satisfying. So James talks about what he described as a Cardinal rule of behavior change. Uh, what is immediately rewarded is repeated and what is immediately punished as avoided. So you have to ideally come up with, um, making, um, your good habits, uh, immediately, uh, rewarded. So let's say you are, um, trying to work on your, um, your spending. You want to be spending less. So you say you had a solid, you, you are, uh, reviewing your finances in the morning from the day before, and you had a really good day, you hit all the targets. Um, and so maybe you reward yourself with something.
Speaker 2 00:35:04 I don't know. Um, even if you spend a little money, it's more of just that positive reinforcement of that habit of, you know, keeping an eye on your finances, uh, rewarding yourself will help encourage that habit, whatever it might be, another way to do that is involving, you know, your spouse or a friend or whatnot to share in on the winds. Like, especially, I mean, oh, well really only if they're going to give you positive reinforcement, like they have to be on board and be like, yeah, great job. Like that was a win. Um, but you gotta, you gotta feel immediately successful. Uh, even if it's like real small, he talks about, um, using, uh, what's, he called, he calls it a habit tracker to track, you know, simple way to track your progress towards a given habit that you're developing. And that in itself is a satisfying way to, to, uh, satisfying, uh, exercise.
Speaker 2 00:35:56 So habit trackers, um, they're just a very simple, it's like a spreadsheet really. So say you're trying to track your finances daily. You, you just have each day and it's just an X you just exit. And so you put an X, if you do the activity and then you put like a, you leave a blank if you miss it or something like that. So, but when you're in that early stage of building the habit, the key, you gotta, like, you gotta stick with it. And if you miss a day, like that's okay, but don't miss two. Like he really pushes this, this idea of like never miss two days. Um, but if you do miss a day, you gotta get back on track as quickly as possible to keep that, especially in the early days of the habit. So make it satisfying. And then on the flip side, if it's a bad habit and make it unsatisfying.
Speaker 2 00:36:42 So if it's painful, we don't want to, if, if we're, if we're not satisfied, uh, if we don't feel good about it, we're not going to want to do it. So if you have a bad habit, ideally you, uh, kind of start to equate that with something that's not satisfying. So one financial example, uh, I think we, I seem to play this role all the time. I'm a financial planner by day that's we, uh, we help people with their money. And so a lot of our clients kind of use us as like a accountability partner and they have these things that they know are probably not a good financial decision. That's definitely in conflict with their value, values, and goals, but they kind of still want to do it. So maybe it's like, I don't want to buy a fancy new car and finance all of it.
Speaker 2 00:37:28 And so if they talk to like their peer group, they're all gonna kind of like probably encourage it or at minimum, be like, oh, okay, cool. That sounds all right. But, um, if they come to us with that, like we're gonna really like remind them of what their values and goals are and, and, and tell them what, how it's in conflict with it, if it is. But if it's in conflict with their values and goals, we're going to tell them. And so that's going to make it less satisfying. So ideally, you know, you can have any accountability partner, ideally you kind of tie it to, you know, that, that habit of you're trying to break, tie it to an unsatisfying thing. So those are the, the, the four laws, um, or strategies you can use to either make or break a habit kind of underlying all that.
Speaker 2 00:38:14 Uh, James talks about environment, how critical that is. It's like just huge what your environment is. So that's, I think that's important to also mention is environment is like that underlying sneaky driver of how people, what they turn into or how people, um, their behaviors that they develop. So be really, it's important to be aware of your environment. And part of that is just like things around you. Uh, like I talked about having, you know, having design your environment, like your calendar, uh, with a reminder to prompt you to, uh, do whatever happened. So part of it is your, the things around you, but also I think a really big part of that is the people around you, because you tend to kind of become who you are associated with. So I've, there's a quote a, I think Jim Roan, uh, you're the average of your five best friends.
Speaker 2 00:39:10 And so I think that's totally true for better or worse. So I think you should think about that as you're thinking about habits, uh, you know, if you have people that you are spending a lot of time with that had a lot of bad habits, maybe you are careful about how much time you're spending with them. Not that you like drop your friends, but like they're going to have an influence on you. So it's just important to be aware of that on the flip side, if you want to build good habits, maybe you, uh, spend more time with certain people that, uh, have those habits already. Also the people around you can provide lots of good accountability. That is a powerful influence, as well as just having someone involved in developing a habit. Like, for example, if you're trying to start getting in the routine of running or, you know, working out like having a person to work out with, and James talks about this in his book, um, having a person to work out with is huge.
Speaker 2 00:40:09 It makes it, and if you let them down, it's very unsatisfying, but that accountability partner is a key part of that environment around you. So just to kind of summarize all this, uh, habits are definitely, I think, a huge key to success. Long-term success. Ideally use identity-based habits instead of outcome focused habits. You gotta start by increasing your awareness of what your current habits are. Uh, the tool James uses is the habit scorecard. So the four laws, four laws of behavior change, James talks about in this book. So for making a good habit, make it obvious, make it attractive, make it easy, make it satisfying. And for breaking bad habits, make it invisible, make it unattractive, make it difficult, make it unsatisfying. And also remember your environment is key. Okay. So to close this out today, I was gonna, I was planning to throw out a few specific examples and just talk through those.
Speaker 2 00:41:10 And, um, maybe this will help to start paint the picture for at the end of the day, it needs to be your habits and base it on the identity you want to develop. But hopefully this will help you start to see what this might look like. So let's say you've gone through habit exercise, and you want to, you feel like you want to get in the good habit of saving. You want to be a better saver, you know, or, or maybe you want to pay off debt, the key to this kind of habit. And this is a common thing. People's I want to say more. I need to say more, or I want to pay off debt. I need to pay off debt. I think the key to this habit is you have to have like pretty solid control of your finances already. So what happens with a lot of these habits is you kind of have to peel back the layers a little bit sometimes.
Speaker 2 00:41:58 So with this one, if you don't already have control of your finances, then you might ought to start with getting in the habit of being in more control of your finances. I'll talk about that in a second, but let's assume you do already have control of your finances. So you want to be a good saver or you want to pay off debt set like a re maybe you set like a really, really specific goal. Maybe you, uh, consider your, like your, your, uh, ideal vision of what retirement looks like, um, how long you have towards it back into, you know, how much you need to start saving for, for whatever goal it is. Maybe it's retirement, maybe it's something else, but so you ideally, you have a very specific dollar amount per month that is going to get you on that trajectory towards that, uh, ideal future that you've mapped out.
Speaker 2 00:42:49 And this is really what a financial plan is, is like going through the exercise of identifying where you want to go in life, like who you want to become and backing into what you need to do today to get on track. So ideally you get specific on the dollars for each given goal, like how much each needs to be, or if it's a debt hump, you say you want to pay it off in five years, how much do you need to pay to pay it off in five years? So get the dollar amount, maybe you automate it. So if it's a debt, you know, set the payment automatically for that amount or refinance it to that term so that the payment is that amount so that, you know, you're going to pay it off in that period of time or set up the electronic, uh, transfer to your investment account, automating it, it just gets you kind of on that easy route to doing it.
Speaker 2 00:43:35 And then I think it's healthy to track your, um, net worth, or maybe just the balance of the account, kind of keep an eye on it. And it's, it's nice to, or satisfying, I guess this is just kind of falls under, make it satisfying, but it's nice to see as that balance grows, that's going to kind of reinforce that a habit that you've formed and, um, and then maybe you, maybe you reward yourself. So maybe you're on track for a goal or you've hit a target and you're doing a good job with it. Just give yourself a pat on the back. Maybe you have a really nice dinner out or whatever, buy a nice bottle of wine and whatever you do, make sure you give yourself kind of a little reward, uh, when you hit a, when you make positive strides or develop a solid habit like this.
Speaker 2 00:44:23 So let's say instead, maybe you were, when, when we talked about good saver, maybe you're not quite in control of your money. So maybe instead you want to gain control of your money first, so that you feel like you can kind of start to make strides with it. So maybe that's that habit you want to start with. So for this habit and getting in control of your money, uh, maybe the, maybe you commit to updating your balances monthly. So I like, like our grandparents balance their checkbook. I like a, a, that seems a little complicated to me or, uh, not easy, I guess. Um, so going back to the, what James talks about, like, ideally we make it easier. So maybe you, instead of balancing your checkbook, you, um, write down the balances for your accounts in that monthly exercise where you're reviewing your finances.
Speaker 2 00:45:17 So let's say on the first of every month, you write down the balance of your checking, your savings and your amount owed on the credit card as of that date. So just by writing down those numbers, that's a good kind of metric, or it will give you a good indication of what is happening with your money because you know, what's coming in and that's easy. And so if the balances are going up, that means you're saving some, if they're going down, that means you're spending too much, but that's, that's always a good starting point is getting into that habit of updating your balances monthly. And maybe you, maybe you start with that. Cause that's like a two minute thing. I think that's easy. And maybe you build on that. Like maybe you start to do a little more based on what you're seeing and you can kind of adjust the habit, uh, based on, uh, kind of where you want it to go.
Speaker 2 00:46:07 And ideally you, um, have a solid, like simple spreadsheet or tool to make it easy. I have a, I'll share a tool for like updating your net worth. You can use like a net worth tracker to do this. Cause it's just like a simple spreadsheet where everything's already laid out and it's already month stamped and make it pretty, make it one page. Maybe even print it out and write it in by hand, especially if you're all electronic. I think printing it is nice because it's like the only piece of paper you have. That's how I am. It's like the thing that I had, the paper that I have, I'm like, I'm going to see it. So maybe you print out the one page and it's really organized and pretty, and it's like, you keep it, use a pencil so you can erase. So it doesn't get nasty and take it with you.
Speaker 2 00:46:53 Another kind of trick is like, take it with you. When you go to see your, if you have financial people you work with like your accountant or financial planner tell you whether you give them a copy, like I promise that's going to make you feel really good about this habit, because they're gonna be like, dang, that's impressive. And it's, it is a, it's an impressive habit, but it's really not that difficult to get in that habit and it's, but it will make a huge impact on being or feeling in control of your money. Plus it helps those advisors. You work with kind of have a better picture of where your finances are. And then as you talk to your spouse, uh, share it with them and money conversations, it'll help to kind of have examples of how things are going. So let's say as a part of doing that exercise, you realize that you're spending too much money.
Speaker 2 00:47:39 So you've started update balances monthly and you start to see, well, uh, maybe things are not going the right direction. I'm not the net worth. Like my balances are not really going up. I'm just kind of flat or I'm not on target for my goals or I'm not able to save enough. So your habit that you need to form, or I guess habit you need to stop is you need to stop spending so much money so that you can save more. So oftentimes it's, um, due to the lack of awareness. So I've heard it like a bajillion times. People say it and I've, I've said it before myself. It's like, I don't feel like we're spending this much money yet. You're spending more than you're making or spending what you make or you're not saving enough. So if you're not saving enough, you're spending too much.
Speaker 2 00:48:22 It's, it's kind of simple. Um, so if you're not saving enough, you're spending too much. Um, and so you need to figure out, all you have to do is just figure out how, uh, first of all, what you're spending, so, and then how to cut it. So maybe, um, so for example, credit cards I mentioned before credit cards are easy. They're attractive, they're satisfying. I mean, they, they like totally work our behavioral tendencies and, um, we're, we're all in the habit of using them. But if you need to S to reduce spinning, you gotta make it. You gotta kind of nip that credit cards are a great way to, uh, to change that, uh, spending habit. Um, and so maybe you just stop using credit cards completely. Like you cut them up or, you know, just, uh, get rid of them or close them out or whatever.
Speaker 2 00:49:13 I mean, it's, a lot of people are like, you know, I don't want to give up the points. Uh, I don't want to, um, it's going to be too hard, but like not saving enough money or spending too much over a lifetime is far worse than not getting credit card points. So just remember that part. So you got to put these into perspective, not using credit cards is long-term going to be far more beneficial to you if it allows you to spend less and maybe instead you use cash and don't, you know, maybe it's not a permanent, it's a temporary thing. Maybe you just use cash for a little while. Um, or maybe you just use cash on the variable things or the categories where you're struggling, or maybe you use the website blocker. Or like I mentioned before, that's a great tool. Or you use a system to monitor progress.
Speaker 2 00:50:00 Like why NAB? You need a budget is a great system. And you commit to logging in every morning at 7:00 AM. After you drinking your coffee, that's, that's a kind of a good habit stacker. You can kind of stack it on top of your existing habit. You log in there because all these financial systems that are out there, like, they're great, but like, you still have to get into the habit of using the system. So you need a budget is a great system. There's a lot of systems out there help you get a better handle on what you're spending and how you're doing. And then maybe as you go through it over time, you start to see some results. If you're under budget, say you celebrate with something nice. You go out to do, even if it's been money. I mean, that's, as long as you're not taking it too far, like you're celebrating, you're giving yourself positive reinforcement about that new habit.
Speaker 2 00:50:48 I think there's all kinds of examples. Um, I can go on for hours, but, um, one thing, one thing I'll share real quick, uh, you can even use it with other people, um, like with your, your kids, my wife set up like a chore list recently, um, for our kids, it's like a one page, uh, daily chore list. And it's, it's easy. Maybe you write it down and maybe you draw a picture next to it. If, if your, one of your children can't read and their list is not that complicated, it's pretty simple. It's like easy concrete chores that you, you know, they need to be doing and they don't get to watch any TV have any TV time until they complete their entire chore list. And you have, it's, she's posted in three different places. So it's super obvious and they have all the things they need to do them are kind of ready.
Speaker 2 00:51:35 So like a vacuum cleaner is warm. It's easy to, they, they know where it is. They pop it out and they do it. And then we try to give them positive reinforcement and we can kind of, and the reward is really to the TV time. So I they've totally taken to that habit. And it's been pretty cool to see. Um, so you can really, but the key is like personalize, personalizing it to whatever you're trying to accomplish. And, um, and then over time, like tweaking it and it's, it's, um, it's kind of a lifelong thing that you're working on, but I promise, I think the key is though getting in kind of taking some action on this. So I promise, like if you take a little bit of action on this, like if you commit to one, you know, trying to improve one habit, um, and you start to see those results, you'll start to realize why I, you know, why really James is the wrote this book and why he's so high on habits. And you'll start to, I think really it's a huge deal when you can figure out that you can actually take control of your habits. So I hope all this has been helpful. Uh, please let me know. Um, I'd love to hear like examples of habits. I that's. My favorite thing is to kinda
Speaker 1 00:52:46 Hear about people and how they're doing with
Speaker 2 00:52:49 All this and what you're. Maybe you have ideas you've come up with because at the end of the day, there's unlimited ideas. So I'd love to hear how you're doing with, uh, these, or if you have ideas for new habits, but
Speaker 1 00:53:00 I'm hope it's all been helpful. And we'll look forward to talking next time as always, thank you so much for joining us today. If you found this valuable, please give us a review on iTunes and share with a friend. Also check out our website at finance, for physicians.co for all sorts of additional content. See you next time. Finance for physicians is not an investment tax legal or financial advisor. All content included in this is for informational purposes only and should not be considered financial tax or legal advice. Material presented. It is believed to be from reliable sources and no representations are made by finance for physicians as to another party's informational accuracy or completeness, all information or ideas. It should be discussed in detail with an advisor accountant or legal counsel prior to the implementation. You don't have an advisor or like a second opinion. Feel free to check out our website for recommended advisors.
