Tips & Tricks

Atomic Habits for your Finances

Emma Nunes-Vaz
January 16, 2024

Atomic Habits is a 2018 best-selling book published by James Clear, self-described as ‘an easy and proven way to build good habits and break bad ones’. He discusses the concept of working on self-improvement by 1% everyday; and how these tiny changes can have life-altering effects down the line. These micro adjustments to your habits can also be applied to your finances, allowing you to get out of debt and become financially secure once and for all. If you're looking to make some positive changes to your financial habits, here's how to do so using James Clear's framework:

1. Form a plan

The first step is to sit down and create a plan. What are your financial goals? Do you want to get out of debt? Save up for a big purchase? Build up your emergency fund? Once you know what you want to achieve, you can start breaking down these goals into smaller, more manageable steps. For example, if your goal is to save £10,000 over the next year, that works out to be around £830 per month. 

2. Set up a system

Now that you know what you want to achieve and a plan for how to get there, it's time to set up a system to help you stay on track. One way to do this is to set up automatic transfers from your current account to your savings account each month. That way, you'll never even see the money and will be less tempted to spend it. Another system you can use is the envelope method; where you'll physically set aside cash each month for specific expenses, like food or a holiday. Once the money in the envelope is gone, you're done spending for the month. 

3. Track your progress

It's important to keep track of your progress so you can see how far you've come - and how well your system is working. One way to do this is to set up a simple spreadsheet where you track your income and expenses each month. This will help you see where your money is going and whether or not you're on track to reach your goals; hopefully inspiring you to keep going!

4. Make it a habit

As explained by Clear, making positive changes to your finances is all about forming new habits - and ditching old ones. The best way to do that is to make those habits as easy as possible to stick to. For example, setting up a direct debit to be transferred into your savings account each month; or if you're trying to pay off debt, using our Incredible app to easily automate and optimise your repayments. The key is to start small and make it as simple as possible to keep up with your new habit. Once it becomes second nature, you can start increasing the amount you're saving or paying off each week!

Following James Clear's Atomic Habits framework, you can make small changes to your daily routine that will have big impacts on your finances down the line. So, if you're ready to get out of debt and start saving money, there's no time like the present to start making those changes.