How to Make More Effective Money Habits

Why tracking your spending can be the simplest and most effective money resolution of all.

Every New Year, millions of people make new financial resolutions.

Spending less money is the most popular financial resolution. Others include paying down debt and saving for retirement.

But as we all know, most New Year’s resolutions fail within weeks. (Just 8% of people say they achieve their New Year’s goals.)  

This is especially true for financial resolutions. They’re usually too big, or too vague to succeed.

Even worse, they tend to rely on willpower, which is highly unreliable, even for people who say they have excellent at self-control.

Financial Habits > Financial Willpower

Intentional Investing

“We repeat about 40% of our behavior almost daily, so if we change our habits, we change our lives.”

Gretchen Rubin, The Science of Willpower

Studies show that rather than relying on willpower for New Year’s resolutions, it’s better to focus on developing new habits.

Some habits provide exponential benefits above others. These are called keystone habits:  “a behavior or routine that naturally pulls the rest of your life in line.”

Keystone habits are the most important habits you can make. They’re different from regular habits because they have ripple effects that help change your behavior in unexpected ways.

As Charles Duhigg writes in The Power of Habit:

  1. Keystone habits support other habits
  2. Keystone habits provide “many small senses of victory”
  3. Keystone habits give you confidence and motivation to do more

“When researchers look at how people change their habitual behaviors, they find when some changes occur, it seems to set off a chain reaction that causes other patterns to change as well. The power of a keystone habit draws from its ability to change your self-image.”

– Charles Duhigg, The Power of Habit

Keystone Habits and Money

My Laptop Is My Everything

Certain keystone habits are necessary for long-term financial success. Without these habits, financial goals and resolutions are simply wishful thinking.

For example, you can resolve to payoff debt. But first you need to find the money to payoff that debt. So you either need to earn more, or spend less in other areas.

Here a Tiller, we think regularly reviewing your finances is the most important financial habit of all. For most people, this really means tracking spending and cash flow.

Financial advisors and personal finance writers agree: tracking spending is a first step toward a more informed, confident, and intentional financial life – regardless of your income, credit score, or debt.

Or, as Business Insider writer Libby Kane writes, “The best first step you can take to improve your finances is to track your spending.”

Why is tracking spending so important?

AutoCat from Tiller 1

“Understanding your spending is the first step to gaining more control over your finances. It’s the foundation on which you can build a rock-solid budget, responsible saving habits, and a foolproof investment strategy.”

Why You Should Track Spending Before Making a Budget

Close, detailed awareness of your spending will transform your relationship with money. It will help you see where your money goes. And it will trigger better spending and saving habits.

Making financial resolutions without understanding your spending creates a cycle of failure. And as Ramit Sethi notes, “Failing at our resolutions has implications…we start to distrust ourselves.”

How to make a new keystone money habit


“I encourage people to think: what’s the smallest step that they could take that is consistent with their goal? And not necessarily worry about whether they believe it’s sufficient.”

– Kelly McGonigal, The Science of Willpower

1. Take tiny, specific steps

Starting very small is the best way to build a new habit. Small, achievable short-term steps accumulate over time and become automatic faster than large changes. And they build momentum toward long-term goals:

So, for example, the smallest step toward creating the keystone habit of tracking spending is simply to look at your spending at least once a week.

This step may seem too small, but as BJ Fogg says, “trust the process.”

2. Write down when and where you’ll review your spending

Deciding in advance when and where you will take specific actions to reach your goal can double or triple your chances for success. —Heidi Grant Halvorson, Columbia University

One of the most powerful tools for achieving any goal is to write down a very simple plan about when and where you’ll take steps to work on it.

Research shows writing down an intention with a “when and where” formula doubles a person’s likelihood of achieving their goal. It goes like this:

“I will ____ on [DAY] at [TIME OF DAY] at/in [PLACE].”

For example, “I will open my transactions to look at my spending for five minutes on Thursday morning before I go to class.”

Some people (like writer Carl Richards) review their spending just once per month. But if you’re trying to make a new financial keystone habit, that’s too infrequent.

The most important thing is writing exactly when and where you’ll review your budget and spending.

3. Choose a trigger to reminds you to look at your spending

It’s also helpful to create a trigger that reminds you to take action. For most people, a digital weekly reminder in iCal, Outlook, or Google Calendar is effective.

You might also follow BJ Fogg‘s advice and set an environmental cue. This could be a wall calendar (Jerry Seinfeld style) or stickie notes on your fridge.

4. Plan for setbacks and mistakes

According to Kelly McGonigal, the number one reason people fail to stick with new habits is that they don’t have a plan for failure.

If you anticipate failure, you can more easily rebound and get back on track.

This is even true when it’s harder than expected to meet your goals.

A simple way to make a backup plan by writing it down in this formula:

“If ____, then ____.”

For example, if I haven’t shown up to look at my spending on Thursday, then I will look at my spending on Sunday after dinner. 

It’s also helpful to know that missing a single day of showing up has little impact on your long-term success.

If you consistently default to your backup plan, consider that your new plan. If you never want to look at your budget on Sunday, but find it easier on Tuesday, then update your plan accordingly.

5. Team up and find a partner for your goal

One of the things I always encourage people to do is to not try to do things alone and to start outsourcing their willpower a little bit.

– Kelly McGonigal

Many people find keeping their goals is easier (and more fun) when they’re working with a friend or partner.

This study showed that “people who wrote down their goals, shared this information with a friend, and sent weekly updates to that friend were on average 33% more successful in accomplishing their stated goals than those who merely formulated goals.”

You’ll get positive, motivating social support from your partner.

How to Track Your Financial Goals

Budget Category Tips2 1

It’s simple to track and review your finances if you put everything on one credit or debit card.

However, most people use several credit cards and bank accounts. So it’s helpful to use a personal finance tool that consolidates all your spending in one place.

Tiller (hello) will import everything into your own Google or Microsoft Excel spreadsheets. Many of the most financially engaged people use spreadsheets to track their spending. Others use apps.

Other tools like YNAB, Quicken, or Pocketsmith can also help.

Above all, look for a service (or services) you’ll actually use.

Sooner or later, as you win the habit of showing up, you’ll start to do things with your budget. You might update some of your earlier assumptions. You might decide to categorize some expenses. This might happen in the first month. It might happen on the 11th.

Plan on showing up to look at your spending at least once per week.

If you consistently look at your spending, eventually you’ll begin to spend less – and spend smarter.

Here’s to happy tracking and powerful new habits ahead!

Edward Shepard

Edward Shepard

Marketing Lead at Tiller. Writer. Spreadsheet nerd. Get in touch with partnership ideas at edward @ tillerhq.com.

Start Your Free Trial

"There isn’t another tool on the market that does what Tiller can do.”
Will Hinton, Google Review October 30, 2023