I often read books and articles that provide common sense tips on how to save money, get out of debt, or build wealth. So why is it so difficult to do so? I’ve been reading the book, Wealthy Choices: 7 Competencies of Financial Success by Penelope Tzougros, and the further into it I get, the more I realize how much of successful financial management is more mindset than habit.

I suppose it’s like doing anything long term. It takes 21 days to form a habit, but you have to do (or not do) something every day in order for it to stick. Steve Pavlina recommends 30 days. Even so, it’s often very easy to get started, but as the days pass, your (or at least my) mind starts rationalizing how good you’ve been and how you could skip just one day to reward yourself for your efforts so far. Often, I find that if I give in, I never go back until I start the process over yet again.

Money management, I think, is very similar. It’s easy to pay credit cards down, save a percentage of earnings, and cut back on spending for a little while. But if I’m not thinking about it consistently and my intent to accomplish something isn’t strong enough, I’ll give in and spend. The weird thing is that in most cases, unless what I purchases truly wasn’t worth my money - like a bad experience at a restaurant or a gadget that just doesn’t work like it’s supposed to - I rarely feel bad about it.

Tzougros explains that the first step to effective financial decision making is to evaluate how we value money. For example, there are some people who can see two identical coats for $150 difference - one branded and the other generic - and still go with the branded coat because they value the label that much. BusinessWeek just wrote about a 15 year old value investing book that’s going for $700 used because it’s so highly regarded - yet extremely rare - within the industry.

Every time we make a purchase, on some level, we’re weighing the value with the cost. Many times, this is impulsive, as in “it was on sale” or “I just had to have it.” Other times, it’s out of habit - I buy Total Raisin Brand over Post because I’ve bought into the notion that Total is more nutritious, think it tastes better and therefore, it’s worth a little more. That doesn’t mean I’ll skimp on a coupon if I have one, but it does mean that given the choice, I value one over the other.

A better way to value purchases is to consider them consciously.

Unless you’re a billionaire, you’re likely to have more uses for your money than you have money, so a better way to think about what you are spending is to ask the following three questions:

1. What are the benefits of my making this purchase?
2. How important is making this purchase?
3. Is this the best use of my money?

In my upcoming posts, I’m going to explore this mindset further.