I’ve written frequently about how I changed my financial behaviors over time. Once someone who spent her paycheck down to the last penny, I became a successful saver and investor over time. That all happened because I changed both what I believed about money and what I was worth, as well as what I did in my everyday life to align my daily habits with those beliefs.
To understand how best to bring change into your life, you have to be mindful of how you react to rules and structure. If you try and work against your true nature, you are setting yourself up to fail. Alternatively, when you work within your personal style, change is easier. In bestselling author Gretchen Rubin’s groundbreaking work on habit formation, Better Than Before: Mastering the Habits of Our Everyday Lives,Rubin developed a framework of four personality types for how people meet or resist expectations, both inner and outer. Click on each category to watch a video of Rubin discussing each type:
Upholders respond to both outer and inner expectations. Financially speaking, an upholder meets outward expectations without stress such as paying bills or filing taxes early and inner expectations such as managing his investments himself. If you are an upholder, you will have the easiest time with habit formation once you make up your mind – learning new information at a retirement planning workshop would lead to increasing your contribution rate in your 401(k) plan, for example. My husband Steve is primarily an upholder (but also a questioner). He is as conscientious about keeping commitments he’s made at work or to his family as he is about keeping commitments to himself.
Obligers meet outer expectations, but struggle to meet expectations that are self-imposed. An obliger might be the one who saves for her kids’ college but not enough for her own retirement. If you are an obliger, you need to create systems of accountability to meet your own expectations and goals.
Not saving enough? Automate your contributions to your 401(k) plan or savings account. Always picking up the tab for lunch? Bring just enough cash for your meal and leave the credit cards at home.
Obligers, more than anyone, can also benefit from the ongoing encouragement and accountability of a peer-to-peer group such as a Financial Independence Day Group with friends or co-workers. I’m definitely an obliger. This is why I did so well changing my financial habits with the support of a group of friends.
Questioners question the rules. A questioner will only meet an expectation if they think it makes sense. Financially speaking, a questioner would be more likely to be fee-adverse, looking for free account services and low fee index funds.
To change a financial habit as a questioner, you will need to understand why it makes sense for you, not just for the average person. Questioners will benefit from doing research before they make financial decisions so they can weigh the pros and the cons. Read posts from our blog editor Erik Carter and you’ll see how he is a questioner, challenging common assumptions and offering an alternative framework that makes more sense to him.
Rebels resist all expectations, regardless of whether they are externally or internally imposed. A rebel might not want to balance the checkbook or may shun diversification – like remaining 100% in stocks or 100% in rental real estate. Rebels have a hard time changing habits because they can even rebel against themselves.
If you are a rebel, you aren’t likely to show up for a financial education workshop or if you do, you might focus on the exceptions to the rules. To improve financial habits, rebels should focus on broad guidelines with adequate wiggle room, such as the rebel who manages money with her partner by having three accounts – hers, her partner’s and joint family expenses. Many successful entrepreneurs are rebels who flout conventional financial guidance by concentrating risk and offering a new industry paradigm.
Not sure which category best describes you? Take Rubin’s quiz to find out your style of dealing with expectations and reflect on the results. Next week, I’ll focus on how Rubin’s Pillars of Habits can be applied to creating a habit that perseveres.