Hello! Welcome to the inaugural post!
Courtesy the compulsion of staying indoors, I finally caught up on some reading and completed an extremely interesting self development book called ‘Tiny Habits’ by B.J. Foxx. At the risk of giving you spoilers, the book talks about breaking down a habit you would like to cultivate, into its tiniest possible unit and associating it with a time and a place that make it easiest for your to execute said tiny habit.
The best example in the book to understand this was about how the author wanted to cultivate a habit of exercise and so he choose to build the habit by doing two push ups after every trip to the washroom in his room. Fairly simple. This then helped him graduate to bigger stuff like the gym and weight lifiting. I have tried this philosophy and I can say without a doubt, this straight up works. I have had exercise streaks now which are frankly longer than ever. I started with 2 minutes of exercise per day. I’m up to 40 minutes now in about 3 months. So yes, it straight up works.
The primary reason for breaking down a habit into its smallest unit, is because that unit becomes your threshold. If you do just that, you can consider your habit done for the day and that in turn helps you break away from the mindset that small contributions don’t matter. This in turn helps you go easier on yourself and you start to appreciate your perseverance and build a strong habit. I mean honestly, two push ups is nothing. But doing it, builds a certain sense of trust and accomplishment for yourself. This in turn makes you work more but your threshold is still the same. So anything you do above two push ups, is extra. You’ve basically surpassed your goal and that encouragement builds a rock solid habit.
After waking up to my finances, I thought to myself, ‘Hey! Maybe I can include some tiny habits into my finances too now!’. So, I decided to apply this philosophy as a means of incorporating ways to make small savings into something large. But then I thought, why just stop there? Why not take it to the next level and check out some old habits and see if there’s something small which can be eliminated? Boy, did I make some startling discoveries.
I absolutely love jewellery. Costume jewellery, junk jewellery, bead jewellery. Basically anything to do with jewellery. I probably have the largest collection of necklaces and stuff in my entire social circle and maybe even a little beyond that. It’s a collection I’ve built up over 10 years almost. A lot of it was built up, after I started making my own money.
Now the thing with the jewellery that I buy is that there is no upfront heavy investment on it (most of the times). I don’t buy gold or diamonds. At most I have a few pieces of silver. The other times, it’s cheaper metals and materials. Like thread, beads, stones etc. So a piece of jewellery that I buy varies between Rs. 100 to Rs 500 at most on most occassions. I do not permit myself to buy a piece above Rs. 500 unless it is something absolutely spectacular. However despite this cap, never is my bill on jewellery less than Rs 1500 whether at the mall or at a street shop. This is because of a usually valuable mindset of value maximisation, which in this case is detrimental.
Now let me explain this to you. I don’t let me self buy an individual piece for more than Rs. 500 because I don’t perceive value in it. When for Rs. 1500 I can have three pieces, why should I buy just one for the same amount? So while the per piece value is set, a total limit is not set. That means the Rs 100 to Rs 500 limit was my threshold and anything above this surpassed my goal. So if I found one piece in this limit, any additional pieces were extra therby helping me maximise value. Extremely convoluted logic, I know. These tiny glittery habit added up to giant bills each time. Each time I stuck to my per piece limit, I would feel like I’ve saved money because of the perceived value of multiple pieces in the same amount and the kick of ‘saving’ more money by buying ‘small’.
Now let’s come to a time and a place that make it easy to sustain the tiny habit. I can buy this stuff from Amazon on the go. As if that was not enough, right near my therapist’s office is a whole slew of shops which sell some pretty decent stuff for about Rs. 100-200 per piece. This access made it so easy to maintain these spending habits. They make it an extremely easy habit to maintain for my inner shopaholic but not so easy on the ol’ wallet. Let’s also understand one more thing, this is not the only tiny habit I was spending money on. There were several other such undocumented smaller expenses which were adding up.
So why am I telling you about this?
There are several times where we convince are selves that buying more things of smaller denominations is better because of a higher quantity or more perceived value in another way. And that’s a good start. However, if don’t have an overall budgeted limit, you’re going to spend a lot of money to extract more value.
Also, because in your mind, you are spending a small amount of money to get more pieces or value, you find it easier to constantly justify these purchases because you’re not spending much money in the first place. To your mind, you may just be saving money. The mind is coaxing you to buy the stuff for a cheap (perceived cheap) dopamine hit (another topic for another post).
Allow me to demonstrate:
I visit my therapist twice a week. Let’s say I manage to find 2 pieces each time worth about Rs.200 each. That’s Rs. 400 a day. With 8 visits a month, that’s Rs. 3200. Do you know what’s that equal to for me? That half a month of therapy. This basically means that each visit to the therapist cost me 1.5 times than it should have. And this is just the stuff bought at therapist visits. I have not factored in stuff I would have bought at a mall or online.
Now you might say that there’s a difference in the thing that you are spending for in both cases. That jewellery speding cant be substitued by spending the money on therapy. Absolutely true, jewellery and therapy are miles apart. But as I sit inside my home in the midst of a pandemic with credit card debt and no where to wear my jewellery too, I honestly would rather have saved that money and stayed debt free.
Good Tiny Habits I Built:
So in addition to the more massive, going cold turkey habit changing mechanism of deleting apps and looking the other way when I went to my therapist’s office, I built another small habit. I realised that to me spending the money was important. That was a dopamine fix, my brain needed. So I decided to trick myself.
Each time I wanted to purchase jewellery which I didn’t need, I would walk away from the store and open my banking app. I would set aside an amount equal to the value of the jewellery I was just about to purchase in a recurring deposit. The principle of a recurring deposit is simple, you set aisde a fixed amount of money every month for a fixed tenure and at the end of it earn some interest on that principal (typically between 4% to 6% depending on the tenure for which you opt to save). Much like a piggy bank which earns you a little more. Now typically, recurring accounts require to set aside a fixed amount each month which is auto debited on a fixed date. However ICICI bank has something called a Flexible Recurring Deposit where you can put in money on a monthly basis on your own terms with or without auto debit. While I do have auto debit for a fixed amount to go in at the start of the money, I do make these smaller deposits through out the month.
If you don’t have access to this, you can also explore putting in that money into a SIP or stashing it away in another bank account that you don’t use too often.
So now every time I want to buy a small thing like jewellery or books which I can live without, I instead save the money in a recurring deposit, the target of which has to be achieved in 12 months. This does four things:
- I get the satisfaction of having ‘spent’ the money.
- I’m not technically spending that money on something I have 20 dozens of.
- I reach the goal amount faster than anticipated
- Most importantly: That money is helping me earn more money through interest
Should you do it?
For the most part of my working life, I have sat and wondered at the end of each month, where my money went and why I had to resort to credit cards to pay off bills. Its in these small denominations that chunks of my money got wiped off.
So every time you marvel at the mystery of your credit cards’ or bank account statements, just take a gander at the small habits you may have built in your spending patterns. They’re the ones that are possibly causing you more damage than maybe your rent or student loans.
And while cutting out small spending is important, you could also explore other small tiny ways where you can try and save money. And it’s best if you find a way that they saved money earns you a little money too. Some day when that saved money earns you enough, by all means go and splurge on that necklace or that pair of sneakers. But only after your savings earn you that much. I’m working on that, and I’m sure that necklace will be more satisfying without the worry of debt or no savings.
I hope you enjoyed this one! Hope to see you on the next one.