Using money well is one of those things we never get fully right.  We’re constantly trying to make changes, improvements. And the bigger the change, the greater the challenge.

That’s why I’ve been taking an in-depth look at the findings from Switch, Chip and Dan Heath’s excellent book on “How to Change Things When Change is Hard.”

In the first post, we looked at ways to overcome analysis paralysisand get our lost-in-the-details analytic side moving toward the change we want.  In the second post, we examined how to tap the power of our emotions.

In this post, we’re looking at ways to Shape the Path toward change.

Tweak the Environment

The Heath brothers talk about an experiment involving two groups of moviegoers.  Group one was given an enormous bucket of popcorn.  Group two received a somewhat smaller, but still huge bucket.  The buckets were weighed before and after the movie.  Group one ate noticeably more than group two.

The lesson?  In many cases, it’s easiest to bring about positive change by changing our situation.

It wasn’t that members of group one were more gluttonous than those in group two or the products of poor parenting.  It was that their popcorn containers were bigger.

There are all kinds of implications here for wise money management.  For example, research has shown that the more television we watch, the less money we save.  The researchers explain that frequent TV watchers don’t just see more commercials. They also regularly see people on TV programs living lifestyles that are more expensive than their own, and that tends to increase their spending on clothing, cars, and more.

You could tell yourself to save more, believe you should save more, and even want to save more.  But changing your environment in ways that lead to less TV watching, like canceling your cable subscription, may end up being more effective.  Sure, you’ll save on the cost of cable, but you’ll probably save even more because you’ll be watching less TV.

Here are some other simple ways to improve your finances by tweaking your environment:

  • Spending too much?  Get off the mailing lists of all those catalog companies that tempt you to overspend.
  • Having trouble sticking with a budget because you keep forgetting to record each day’s spending?  Tape your Cash Flow Trackerto your refrigerator as a reminder.
  • Missing your bill due dates?  Sign up for e-mail reminders from your credit card companies (yes, there is such a thing as the wise use of credit cards).

Build Habits

As the Heaths point out, when behavior is habitual, it doesn’t require willpower.  But that begs the question: how do you build a new habit?  The Heaths suggest the use of Action Triggers, which they describe as preloading decisions.

Planning to go for a run this week?  Maybe you will; maybe you won’t.  But if you decide ahead of time which day and what time you’re going, and if you think about what route you’ll take, chances are good you’ll go for that run.

As for financial habits,

  • Build savingsby setting up an automatic transfer each month from your checking account to a separate savings account.
  • Get in the habit of reviewing your actual spending against your planned spending by putting notes in your calendar on the first of every month to review your budget.

Rally the Herd