Doug meets James Clear, entrepreneur and expert on personal habits. How easy is it to change your behavior to achieve your goals? And how can you improve your financial habits if they are deeply ingrained? Listen to your favorite personal finance show for the answers to these questions and more.
James Clear, entrepreneur and expert on personal habits, gives advice on how to change your behavior to achieve your goals. How can you improve your financial habits if they are deeply ingrained?
Douglas Goldstein: I know you teach people a lot about habit building. Can you give me one or two suggestions to get people who maybe are a little bit too lazy on track?
James Clear: As far as places to start for building new habits, there are a variety of things we can do, but if I were to summarize two useful tips, I would say the first one is to start with a habit that is incredibly small, one that almost seems laughable or unthreatening to any degree. It’s so easy you can’t say no to it. The thing that most people forget when it comes to building new behaviors is that when you’re wrapped in a goal, you’re wrapped in the results of the thing that you’re trying to achieve, the outcomes that you’re going for. It becomes really easy to talk yourself into doing more or reaching for that particular goal rather than focusing on building the new behavior into your life, which actually doesn’t have to focus on the goal in the beginning. I will give you one example.
I have a reader who over the course of about two years lost over 100 pounds when he added exercise into his life. When most people look at that goal, they would say, “I want to lose 20 pounds in the next six months, or 40 pounds in the next six months, or whatever it is.” Rather than focus on the goal, he focused on the behavior. He said, “Okay, I need to become the type of person who doesn’t miss workouts, so I’m going to focus on going to the gym every day, but I can’t stay longer than five minutes. I have to go, but once it gets to six minutes, I have to leave.” That’s the goal that is so small that it’s unthreatening. He showed up. He was there for the first five minutes. Then it got to the sixth minute, and he was like, “Alright, I’m out of here.” He did this for four to six weeks, and at that point, he had become the type of person who wasn’t missing workouts. So he’s like, “Now I’m going to be here all the time, let me go ahead and increase the intensity a little bit,” and that’s a complete opposite approach to how most people go after goals. Most people focus on the result and the outcome, not building the behavior first.
The interesting thing about accountability is that it can be very powerful, but that’s actually not what’s happening in the case that we’re describing, or someone talks about the goal they’re building. It actually isn’t making them accountable to that goal. They are simply talking about feeling like they made progress on it because it’s so on top of their mind. You’re talking about them, but they’re not placing themselves into an environment where that’s the norm, or the new behavior is the type of thing that everybody does. That is probably a great segue into the second tip, which is all about environment, and there are two ways to look at this.
The first is to surround yourself with people for whom the thing that you want to achieve is normal. For them, it’s the standard thing they do each day, and when you’re surrounded by people like that, you can talk about it on a health perspective or talk about it from a money perspective. As an example of my own life, I had no entrepreneurs in my family when I started my business four years ago. So the concept of someone running a $1 million business was so foreign to me. It wasn’t part of my reality at all. Now I have four or five close friends who are all running businesses that make well over half million a year, and it seems much more reasonable to me just because it’s part of my reality now, not because of anything else. I think that idea is a very big shift from whom I’m surrounding myself with, what’s the environment that I’m in, and the new behavior of the norm in that environment.
Start off Small to Pay off Your Debts
Douglas Goldstein: You pointed out that if you start off small by developing a habit, and the example you gave was someone going to the gym for five minutes, ultimately you’ll be able to increase the intensity. It reminded me of one of the techniques that we often taught to people about paying off debt. Sometimes you’ll so get so mired in debt, with credit card debt and school loans, and personal loans and mortgages, that it’s too big. One of the things we say is, “What’s the smallest loan you have? You owe $400 to someone. Let’s pay that one off first.” Then, once they’ve done that, it’s easier to move out, and ultimately they’ll pay off the $4,000 and then the $40,000 worth of loans they may have. But I think that your model of taking things in chunks that are reasonable for a person is a great way to move.
James Clear: Basically, when it comes to building new behaviors and new habits, nothing matters if you don’t perform the behavior consistently. When I was first interested in starting to write consistently, I was talking to a friend of mine named Todd Henry, a published author. I said, “Todd, I only write whenever I feel motivated or inspired, or whenever I get this burst of inspiration, this creative muse. I feel like that’s when I get my best ideas. What do you think about that?” He said, “Well, I only write whenever I feel motivated to. It just happens to be everyday at 8 a.m.” That was when I realized that this is the difference between professionals and amateurs. Amateurs do things when it’s easy for them, when they feel motivated, when they feel inspired, and professionals do things on a schedule. They do things consistently, they show up time after time. You can take that basic framework and apply it to nearly anything. If you want to apply it to debt, amateurs just pay it off whenever it’s like, “I got an influx of cash and now it’s easier for me.” Professionals, people who are going to handle this like a pro, they commit to a consistent system and start to do things in small chunks and show up every day. Maybe that’s just a little bit, maybe you’re only writing for 10 minutes every day at 8 a.m. Maybe you’re only paying $10 of your debt off each week, but you’re committing to that system and that basic idea of doing things consistently and showing up and committing to the behavior rather than getting focused on the result. I think this is the central thesis of my personal behavior change and habit formation.
Douglas Goldstein: If you’re someone who really wants to improve the situation, let’s say in terms of personal finance, how do you surround yourself with people who are good at it?
James Clear: I think the first thing is, again, similar to habits and goals, we start by focusing on the result. We think about how much money we want to make, or how much money we need to save, or whatever it happens to be, rather than focusing on the identity. What I mean is, think about the result you would like to achieve. Think about where you would like to go, the direction you want to head in, and then ask yourself what is the identity of the type of person who could achieve that goal, or the type of person in that situation? What do they believe about themselves? What do they do on a day-to- day basis? It’s not only about building a new identity for yourself. Earlier, I mentioned this idea of most people wanting to lose weight, but are you building the identity of becoming a type of person who doesn’t miss workouts? So it’s not just about building an identity for yourself. It’s also about surrounding yourself with a group that has the identity that you want. This is why fitness programs like cross fit have become so popular and so compelling for a lot of people. It’s because you get into that system and you start to join the gym, and all of a sudden the identity that this culture has starts to manifest itself in you as well. Same way with religions. If you join in a religion, you choose to take on that identity, to take on that set of values and beliefs and culture or norms.
This is really what we’re talking about when we’re talking about behavior change. It’s not just the change and result. It’s a change in lifestyle, it’s a change in what you think about yourself, and it’s a change in identity. I have a friend of mine named Adam Gilbert who does nutritional coaching and consulting, and he often tells people when he’s working with weight loss clients that if the only thing that changes is the food on your plate, you’re not going to change for very long. The basic idea is you have to develop a different relationship with food. You have to look at this behavior in a different way, and I would say that’s just as true for money or fitness or any other habit or behavior.
How Do You Get Your Family to Join In?
Douglas Goldstein: If a guy goes home and his wife is spending too much, and he goes out and spends too much, you can’t swap out your whole family for people who are financial nerds. What would you suggest to that case?
James Clear: You took the decision-making out of your hands basically. The easiest way to make better decisions is to surround yourself with a set of defaults that are easier. I’ll give you an example. There’s a professor from Stanford University named BJ Fogg, and he talks about this concept of designing for laziness. I think this is something that could really apply to a lot of different financial systems, personal budgeting, investing and saving, all sorts of different things. His basic idea, the story he tells, is he likes popcorn. He enjoyed eating popcorn but he didn’t want to eat as much. So he took the popcorn out of his pantry, walked down the hall, and into the garage, got up on the highest ladder in the garage, and put it up on the highest shelf. Now if he really wants the popcorn, he can just walk out there and get it. It’s only 30 seconds away, but if he’s designing for his lazy decision, his default action, the thing that he is going to do without thinking about it, then he’s not going to go and get the popcorn.
There are all sorts of things that we can set up in our financial lives to make the default decision easier, to design for your lazy choice, so that the good choices are already made. You can automatically have X number of dollars withdrawn from your account two days after your paycheck hits and go on into some type of savings account. It’s painless. You don’t even think about it. It just happens. Same way with 401(k) withdrawals and matching from your company, depending on what options you have. There are a variety of things that you can do so that the decision-making is taken away from you rather than putting those things in front of you.
There are a number of things that you can do. Say you have this online shopping habit. You can buy apps. For example, there’s an app called Freedom for Mac, and you can download that for $10, and it can block a website. This leads into a concept that’s help decision fatigue, which is this basic idea that as we go throughout the day and make more decisions, our willpower fades, our motivation to build and resist fades. So you may find yourself often making a bad online shopping purchase late at night. You can install a program like Freedom for Mac, or there’s another one called Self Control that will automatically block those websites from say 6pm to 2am, so you can’t even get to it to shop. If you want to shop, you need to do it during the middle of the day, but your willpower is higher then. So you have a better likelihood of making a smart choice, rather than a poor online shopping purchase late at night. There are a variety of things you can do to structure your environment to make those default decisions better and take the decision-making out of your own hands.
Douglas Goldstein: How can people follow you, or learn more about your work, and keep track of the new research that you’re doing?
James Clear: I write every Monday and Thursday at www.jamesclear.com. About this conversation we’ve had about habits and building new behaviors, if you want more on that, I put together a free guide. It’s 45 pages, and it’s called Transform Your Habits. It goes over the science of habit formation, as well as some practical strategies you can use to implement new behaviors in your life. You can download that at www.jamesclear.com/habits.