At first glance they might not seem important, but a combination of good money goals and money habits is a fundamental foundation for achieving financial independence. So what’s the difference between financial goals and habits – and why are they both so important?
Money goals
Examples of money goals include paying off your credit card debt or becoming mortgage-free – they are financial outcomes we want to achieve.
Our money goals are driven by our life goals, which in turn are driven by our lifestyle aspirations and values.
Someone with more materialistic aspirations will be more open to borrowing and working longer to pay for things like a big house and car. Other people might value time and freedom, which means they are more thrifty and modest in the things they need.
Both these examples are massive generalisations, but hopefully they illustrate how values and aspirations influence our financial behaviours.
A useful exercise next time you set a money goal or make a big financial decision, is to ask yourself why the outcome is important to you?
In fact, taking time out to understand your real aspirations and values, and then re-clarifying the link with your money goals, is a very valuable activity (although it will probably make your brain ache 🙂 …).
Money habits
It’s said ‘we are the sum of our actions, and therefore our habits make all the difference’. This means the things we do every day, our habits and routines, all add up to make us who we are over the long-run.
So me eating a doughnut every day in my early 20s, eventually resulted in me having a bit of a tummy! Only by changing my eating (and drinking) habits, was I able to reduce the size of said tummy.
Money habits are the same as eating habits. There are good habits (budgeting) and bad habits (excessive spending).
Arguably many people would probably want to reclassify these as boring habits and fun habits 😀. But by developing good money habits around spending, saving, learning and earning, it’s possible to transform your financial situation over time.
By the way, in case you’re wondering who penned the ‘sum of our actions’ quote above, it was Aristotle. Yes that’s tried and tested wisdom that’s lasted for thousands of years, so ya can’t ignore it 😉
Bringing them together
Together money goals and money habits make a powerful combination. And perhaps the best way to summarise it is:
Money goals set the destination and general direction of travel, while money habits enable us to get there.
Thanks for reading 🙂