How Understanding the Stages of Change Can Help Transform Your Financial Life

I think we can all agree that change is not easy. There can be so many contributing factors to the habits and routines we have in place in our lives that often these habits automatically become part of how we live and who we are. We rarely think to question them.

The Stages of Change Model (formerly known as the Transtheoretical Model of Change) introduced by Prochaska, Norcross, and DiClemente opened the door to understanding the psychology of behavior change from the perspective of biological, psychological, and societal factors. . This model demonstrated that change goes through 5 distinct stages before becoming permanent. Understanding these stages of change and how they relate to our financial lives can give us an idea of ​​what stage we might be in for a given financial goal, allow us to give ourselves credit where it’s due, and help us identify the strategies we can implement to help us move forward with these changes so that we can live our best financial lives.

Stage 1 – Precontemplation

Also known as “denial”, it is not being aware that a problem even exists. This step represents a necessary change, but due to your unawareness or reluctance to question a particular habit or way of thinking, you cannot begin to move on to the next steps for change. For example, if you’re tired of living paycheck to paycheck but have no intention of seriously overhauling your spending habits, you may be in the precontemplation stage.

What you can do if you are at this stage:

Identify your goals and values: Start by listing your financial goals and aspirations and writing down why reaching them would be important to you. What would it mean to accomplish these things, how would it feel, and what would it do for you and the most important people in your life?

Know where your money is going: From there, create a list of how you spend your money. Try to get an average for the last 3-6 months to capture recurring expenses and occasional increases in expenses. I think writing it down is the most efficient way to do it, but some people prefer a spreadsheet like this or use apps like this. Choose the approach that creates the least friction towards progress!

Increase your notoriety: Start asking yourself if your expenses match your goals and aspirations. Then let those thoughts about your spending marinate.

Step 2 – Contemplation

Congratulations! You have made progress towards becoming aware of the change needed and are beginning to understand how it will benefit your financial life. At this stage, you also establish an intention to make a change. However, you may have some ambivalence when weighing the benefits of change against the benefits of keeping things the way they are. For example, you want to save and build emergency savings so you don’t live paycheck to paycheck or go into debt, but you like being able to spend when you feel like it.

What you can do if you are at this stage:

Think about your future self: Think about what will happen in the future if you don’t change anything. What will that future look like and how will it impact the most important people in your life? Then think about what will happen if you implement the change.

Start taking small steps that prepare you for action. For example, if you know it’s important to set up emergency savings, take the first step to opening the account. (Check a site like bankrate.com for ideas.)

Step 3 – Preparation

You have progressed through 2 of the 5 stages, and these may be the MOST difficult. Take a moment to be proud of this achievement. You have now clearly identified the things you want to change and have made changing them a high priority. You have now started thinking about and planning ways to make change happen. Maybe it’s downloading an app and starting to track your spending or figuring out what lower-cost alternatives exist for eating out or other expensive areas of your budget.

What you can do if you are at this stage:

Create an action plan: Plan what you are going to do to start making progress towards your financial goal. For example, if your goal is to pay off debt, use a debt reduction calculator like this one to explore debt repayment options and decide which approach you want to take. If you’re ready to increase your savings, select an approach to tracking and reviewing your expenses and begin selecting the alternatives you plan to put in place, the areas you plan to cut, and/or the parts of your budget you’re going to. to consult. bargain or comparison shop for.

Anticipate triggers: It’s also an important time to plan how you’ll handle the triggers that prompt you to adopt a particular financial habit. Triggers can occur in a certain environment, during a particular mood, or with certain people.

For example, if you notice that your expenses increase every time you go out with a certain friend or group of people, first try reducing the number of times you go out or try setting a spending budget for each outing. Keep a reminder of your financial goal/aspiration on a note in your phone or pull it up and look at it before you go out or whenever temptation hits you. This extra step can do a lot to break the trigger/pulse connection.

Step 4 – Action

At this point, you have committed time and energy to actively putting your plan into action. You have started to implement the steps in your preparedness plan and can “see” your progress.

What you can do if you are at this stage:

Ask for advice: It is at this point that you can actively seek advice from a qualified personal finance professional, such as a CFP® Certified or an experienced and qualified financial coach, through your financial wellness benefit provided. by your employer. Some employer-provided Employee Assistance Programs (EAPs) may also provide you with access. Help from someone like this can give you support and encouragement, and help you break down your action plan into small, digestible steps.

Watch out for relapses: Implementing change can become overwhelming. As a result, relapse is common during this stage. Remember, this is a normal part of the change process.

If you relapse into a habit you’re trying to change, don’t be discouraged. Instead, seek to learn from it whenever it happens. Think about how you can respond better next time. Then apply those learnings as you refine your approach and keep trying. Acting is not a done deal. It takes practice, failures and courage to make it permanent and if you have made it this far, you will get there!

Step 5 – Interview

This is the stage where your new financial habits are now part of your normal routine. You have been able to deal with temptations and can get back on track with relatively little trouble, even after relapses or temporary setbacks.

What you can do if you are at this stage:

To celebrate: After all that hard work, you have now incorporated a lasting financial change that should improve your life for the long term!

Be aware of major life events: At this point, the biggest thing that can shake your foundation is a major life event. Going through a divorce, starting a family, a death in the family – any major life change can create a trigger that can lead you back into counterproductive financial habits. Be prepared to talk to someone to help guide you through this difficult time so you can continue on your financial life-changing journey.

Change is always possible

Change takes time and effort. Understanding the journey ahead can help you embrace the journey and celebrate the ups and downs that are part of the process. I hope understanding these stages of change will let you know that change, especially in your financial life, is always possible. If you need a little help, no matter what stage of the process you are in, do not hesitate to contact someone like a qualified financial professional or an experienced and qualified financial coach who is offered by your financial wellness benefit that can help support and guide you along the way.

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