The Rachel Cruze Show - How to Use the Power of Habit to Become a Millionaire

Episode Date: March 15, 2021

You don’t know what you don’t know, but that means you have to learn. Especially if you want to become a millionaire! So, in this episode of The Rachel Cruze Show, you’ll learn: 5 simple things millionaires do for their money Money habits that are costing you a fortune with bestselling author Charles Duhigg How to find your “why” in regards to your money Resources: Minno Learn more about your ad choices. Visit megaphone.fm/adchoices

You don't know what you don't know. So you have to learn. If you don't feel like you are adequate and you're like, oh, I don't know all this stuff when it comes to building wealth. You have to be proactive. That's what millionaires do. They happen to their money. Hey, everyone.

Welcome to another episode of the Rachel Cruz Show podcast. I'm so glad that you are here. In this episode, I'm going to interview Charles Duhigg. He wrote the book, The Power of Habit, which was such an amazing book. And so getting him on as a guest to talk about habits. and how to create better money habits today. Oh, so, so important. I also answer a question from my Facebook community, from Deb,

and she asks, how does a person find their why in regards to managing their money? And this is a really important question. I mean, you can go about this many different ways, but it's really, really important to have this question answered. But first, let's talk about five things millionaires do for their money and something that you can start implementing today. I want to share with you five,

simple things that millionaires do for their money and how you can do them too, like right now, because let's win with money in the long haul, right? That's what we want. All right, number one, they can log into their bank account online. Some of you are laughing slash rolling your eyes at this piece of advice. Do you know how many people don't even know their login information? They don't even check. They don't even look. But listen, if you're going to be successful with money, you have to know what's going on with your money. Yeah, it sounds really simple, but you have to do the little things because knowing the little things about your spending habits, about your savings, about your investing, about your accounts online, all of that is going to give you a full picture

of your finances and something that every millionaire does. They have a will. You can bet that a lot of millionaires are not going to let Aunt Felicia twice removed or worse, the government decides what's going to happen to their stuff when they die. And neither should you. Now, if you're married, you want to talk about this with your spouse. Again, wills are so important. And these days, you can actually do your will online with Mama Bear Legal Forms. When you make your will, get creative, and decide together where you want your resources to go to leave a legacy after you're gone. Mama Bear Legal Forms is affordable, easy, and you can do it all in the comfort of just your own home.

So go to Mama Bearlegalforms.com and use my promo code, Rachel, to help. Number three, they invest consistently. In our National Study of Millionaires, we pulled the just, general population versus millionaires about the important factors of building wealth. Now, what's interesting is both groups agree that financial discipline is the most important factor when it comes to building wealth. But then after that, millionaires said investing was the most important part of building wealth consistently. Investing didn't appear for the general population until number seven. So I don't know about you, but I'm going to take my advice

from millionaires versus the general population on how to build wealth long term. So investing is so crucial. That's why I want you guys out of debt with a fully funded emergency fund and then you can speed up your investing so much easier. And if you want someone to help you, then you can look into one of our smart fester pros in your area. You can click a link in the description below, but find someone that can help you do this because this is a huge key to building wealth long term. I mean, it's like your money works for you while you're sleeping, while you're hanging out with your friends, your money is making money. It's amazing. Investing is amazing. Number four, they plan for taxes. When you accumulate a lot of wealth, then you owe a whole lot more money in taxes.

And even if you're not wealthy, you need to have a habit you do of planning for your taxes. This is really important. I remember graduating college and we all had different jobs on my friends. And I remember like a year or two later, when my friends was nannying for a family. And we were talking and she told me like a year before that, she was like, yeah, I didn't save anything for taxes. Like, no one told me. She's like, I didn't know. And so we had this whole conversation about it. And I was like, oh, yeah, this is like really, really big. Because, again, you want to be able to plan for it. So think ahead. Taxes, they're important. Lastly, they advocate for themselves. You are your best advocate. This is true with your money. This is also true in life. I have kids and I have learned, yeah,

It is up to me. Like, and if I'm not getting the answer I want from this doctor, I need to go find a specialist or I need to do something, right? Or even our own health. Like, whatever it is, you're the one that's going to be looking out for you. And it's a lot of responsibility. It is. But it's really important.

You have to be proactive when it comes to your career, your job, your health, every part of life, but specifically your money. So you don't know what you don't know. So you have to learn. If you don't feel like you are adequate and you're like, oh, I don't know all this stuff when it comes to building wealth, you have to be proactive. That's what millionaires do. They happen to their money.

And so it's really important because we don't learn this stuff in schools. Maybe your parents never taught you. So that is why I'm so glad that you're getting the information to know, okay, how do I go out and when? And that, again, I see it over and over with millionaires. They are intentional. They happen to their lives versus their lives happening to them. And the same is true with your money. Easter is a big deal for our family.

We love it. So whether it's the traditions of the Easter egg hunt or the Easter baskets that they get on Sunday morning, it's all so fun. But also, we try to be really intentional with teaching our kids what Easter really is all about. And that is why I love Minnow. It's a Christian streaming service created just for kids. So there are so many Easter episodes that talk about the Easter story and there's even an Easter family devotional. And Minow gives me all the tools I need to help answer my kids' questions and talk to them about the good news. So celebrate the Easter story and a new way with your family and download the Minnow app or visit gomino.com. That's G-O-M-I-N-N-O.com. And enter Rachel at checkout to get your

first month for free. I am so excited about this episode because the author of The Power of Habit, Charles Duhigg, he is a journalist, an author, all the things are on Habit. So I'm so excited to have him on the show. So welcome, Charles. Thanks so much for having me. I'm really excited to be here. Good. I'm so glad. Okay. So talking about habits and understanding healthy money habits and bad money habits is a big part of what I talk about with my audience because that goes to show how we handle our money. So before we kind of dive into that, I just want to know from you, like, go basic. So what is a habits?

It's a great question. And particularly because we talk about habits all the time and we oftentimes don't know exactly what we're talking about. So a habit is a choice that you made at some point. And then you stopped making that choice and continue doing that thing, almost thoughtlessly. And our brain is actually designed to build these habits and do them thoughtlessly. And the real insight is that sometimes we think about habits as one thing. It's actually three things.

So there's a trigger, which is like a cue for an automatic behavior to begin, right? And then there's the routine, the behavior itself. And then finally, a reward. And that reward, every habit that you have in your life delivers to you a reward, whether you know it or not. And that reward is how our brain decides, oh, I'm going to remember this and make this pattern easier for the future. And about 40 to 45% of what we do every day, including a lot of what we do with money, is in fact a habit.

We at some point made a decision how to spend our money, and then we just started doing it automatically. We started getting a cup of coffee every morning from the local Starbucks, or we started putting a dollar into the hands of whoever's asking us for it. And as a result, we've stopped making that choice, but we continue doing it, which, of course, can be good or bad. That's right, yeah, depending on the cycle that you're in.

And that's what I love about this so much because we're digging in, which was my new book, Know Yourself, No Your Money, but about the why. Like, okay, so why are we doing the things we're doing? And a lot of it is almost just, it's just the only thing you know to do. You're not even putting much thought into it. There's not a lot of intentionality into those decisions. You're just kind of floating through life. And so challenging people to say, no, think about the decisions you're making because a lot of people I talk to, they have bad money habits, right?

They spend just to feel good or they have a habit of not wanting to look at their checking account because that produces anxiety. like whatever that habit is that they have, how would you say to go about changing just bad money habits in life, but also with our money? Well, I think the first thing to do is exactly what you just said, is to draw your attention to it. And this is one of the reasons why I love your books so much and I love your podcast and all the work you do is because the number one rule that I think you put out there is, look, we got to think about this, right? Stop making decisions automatically. Start thinking about whether you want to have debt and should have debt as opposed to. is just letting it happen automatically because you're pulling something out of your wallet. So the very first thing you need to do is to become aware of the habits in your life.

And this is pretty easy, right? If you just sit down and take 10 minutes, you can probably write three ways that you spend money habitually or save money habitually. And once you've identified just a couple of habits, the next thing is to try and figure out, try and diagnose them by breaking them into their cues, their routines, and their rewards. So when you pull out your wallet and you pull out, say, a credit card rather than cash, what's the cue there? And all cues, all of them fall into one to five categories. It's usually a time of day, a particular place, other people, right, there's certain other people, a particular emotion or for money, this is usually what it is, a preceding behavior that's become somewhat ritualized, right?

You're online at the grocery store. In the back of your mind, you know, I should pay for this with cash because that's going to help me save some money. But instead, you get up there and they tell you that totally. and you pull out your wallet and you pull out your credit card, that's usually a preceding behavior that's become ritualized. That grocery store line has become your cue. So now if we know the queue, then the question becomes, okay, so what's the reward, right? Why are you pulling out that credit card rather than pulling out the cash?

This gets to the why that you talk about. And the answer usually, once you think about it, it's pretty obvious. It's a lot easier to pull out the credit card, right? It means that, like, instead of counting the money that I have in my pocket, I just pull out a credit card and I hand it over and I don't have to get any change, and I hate putting the change in my pocket because it's heavy. So we know what the reward is there, that the credit card is easier. But of course, in the long term, there's a negative reward,

which is that my credit card balance grows and I have to pay interest on it, and I'm not keeping track of how much I'm spending. So once I'm able to say to myself, look, I want a different reward when I pull out my wallet, instead of thinking immediately of how easy it is to take that credit card and put it into the thing, I'm going to hand them some cash, and I'm going to think to myself, the real reward here is I get to congratulate myself because I'm doing the fiscally responsible thing, that's going to help undermining that old pattern and then create a new pattern and give you a reward for it. Oh, that makes so much sense.

But even the idea, I'm like, yeah, even the ritual aspect that you're talking about, like I even think about Christmas, right? It's like the one season in life, I feel like everyone just justifies everything. Like, oh, yeah, we're going to just buy a bunch of stuff for our kids. They need it. They need it because we think the reward is they're going to be happy. And then in turn, children are much like us as adults. The more you buy and consume, you kind of get bored with it a week later. and it just becomes another toy, right?

Or another thing that you bought. Or not even a week later. Exactly. Me and my wife do the same thing. Christmas just here. We, like, wrapped all the presents. We put them under the tree. We're so excited.

And then, like, 40 minutes after the kids opened them, they found, like, the one thing that they like, and the rest of them are basically forgotten, right? But, of course, we're really bad at estimating those rewards. We think that things are going to be much more rewarding than they actually are. We don't pay attention to rewards when they actually occur. And this becomes. an interesting question when it comes to saving, right? So if you want to build a saving habit,

how do you build a reward for it? Because we know that we need to reward that activity. And there was actually a series of really interesting experiments that was done. Some of them were done in Peru, in this small village, where what they did is they took a group of people who would come in every week and they would cash their paychecks. And for half the group, they said, when they came in and they cash their paychecks, they said to them, look, do you want to save any of this money? And they had whatever option they could either save it or they could take all of it. And for some of them, they said, you know, if you save it, then 10 years from now, you're going to be able to buy a house with this. And then the other group, instead of saying that, they said, you know, if you save it, I think you should go home and, like, tell your wife, hey, or your husband,

hey, I save some money today. Or maybe you have like a, take the evening off, have a, have a glass of wine because you save some money today. So they do these two things, right? One of them, they emphasize long-term reward. one of them they emphasized short-term reward, they found that the people who had a short-term reward who focused on the immediate reward, instead of the long-term reward, instead of what happens in 10 years, those people saved 70% more money.

And the lesson here is, when you think about it, most of us when we're saving, we're thinking about something that's way off in the future. We're saving for a mortgage or for a kid's college or something. That reward is too far away. If you save money today, you need to give yourself a reward today. And sometimes that reward is as simple as having a glass of wine with your spouse

or even just going home and saying, hey, honey, guess what I did today? I put away an extra 20 bucks and that's going to pay off. Or even just writing it down on a spreadsheet, on a little book that you have to keep track of how much you need to make some sort of ceremony from saving where you give yourself an immediate reward. And that's going to make it more into a habit. Oh, that makes so much sense too, because I was talking about having short

term goals, something that you can get within five years. You need to always be having that, so you get that payoff. But that's me. I mean, literally, my husband will have this conversation all the time. We're even talking about 2021 and our financial goals and like kind of what we want for this year. And I'm like, he's like, okay, I want X amount saved. You know, that can be our goal. And I'm like, okay, but for what? Like, I need the reward. Like, I am so on that train where I'm like, okay, well, I need to know for what. Like, I have to know that I'm not just saving into this black hole just for the heck of it. I need to know what that reward is. And so that doesn't make sense. How much?

do you think that that plays in, that mindsets that even people in Peru have, right, not even just Americans, that our society this century that we're in, right, 2020, this 2021 this year, is so instant gratification driven. Do you think that that plays into it? Do you think people would have had that same thought back in like 1901? I do. Is that a human nature or a society? Okay. I think it's a human nature. And I think what's important is something you just said. you said that for your husband, him being able to come up with a number and saying, we need to save to this number, that is rewarding to him, right? And probably the way he does it is each week he gets 10% closer or 5% closer that number.

And just knowing that he's gotten closer to that number, that's rewarding for him. Whereas for you, a number is not rewarding. For you being able to say, here's how we're going to use those funds, here's what I'm working towards, that's rewarding. And what's important here is different people find different salience from different. kinds of rewards. And we just need to know what we find rewarding. And so the key here isn't to deny how you find rewards. It's to really investigate yourself and admit to yourself what you find rewarding and then build rewards to give that to you. And for your husband, that means writing down in his

checkbook. I saved another 20 bucks this week. And for you, it means writing down, I am three percent closer to buying that X that I really, really want. That is so good. Yeah. And then you put the marriage puzzle to all of that, right? And when two spouses see rewards so differently, it's so important to know that. And not that it's not that one is right or wrong. And I think that's what's important too. It's not to shame one person or the other, but your motivation to do these things, whether it is to get out of debt and sacrifice your lifestyle, whether it is to save to X amount that you want, to know those rewards is so helpful. That's so good. Okay, so we talked about changing habits and kind of creating new ones. So overall,

and I've heard different numbers on this, but how long does it take to create a habit? We basically, this has been researched a lot, and the answer is it's different for every person and every habit. If you want to create a new habit that involves eating chocolate, you could probably do that in like 10 minutes, right? If you want to create a habit that involves exercise, it's going to take a little bit longer.

But here's the secret and the thing that I think is so hopeful is that what the science does tell us is that whether it takes two days or 21 days or a month, what we know is if you have a stable queue, like if you put your running shoes next to your bed, or if you plan on meeting your friend at the gym every Wednesday night, even if you're walking two blocks around your house, even if you're going to the gym for just 10 minutes and working out,

it will eventually get longer and longer. It'll get easier and easier, and it will become a habit. It does not matter how old you are. It does not matter how ingrained that old behavior is. there are people today who have been smoking for 30 years who will have their last cigarette and will never smoke again. There are people out there in America today who are 40 pounds overweight and they're going to decide to go on a diet and a year from now, they are going to have lost 30 or 40 pounds. Anyone can change no matter how old you are. The key is understanding how your own brain works. Diagnosing what are those cues and those rewards that are driving healthy and unhealthy behaviors.

If you can identify those, and all it takes is a little bit of time to think about them, if you can identify those, you can change any behavior. And it doesn't have to be a big change all at once. In fact, it shouldn't be a big change all at once. I don't know whether it's going to take two days or 21 days or two months. But if you commit to some small change on a regular basis, someday you're going to wake up and you're going to say, you know what, instead of walking two blocks, I'm going to walk four blocks today because I might as well. I already got my running shorts on. and then a month later you're going to say, you know what, I might as well run half a mile. And then three months after that, you're going to say, you know what, I've been running a mile, I might as well run three miles.

And then someday you're going to think to yourself, you know, exercising is like the easiest part of my day. I just do it automatically. And that's the hope, right? That's the hope that people have lost. People have lost the hope, okay, I can change my money habits, my lifestyle habits, my eating habits, whatever it is, I think, oh, it's just I can't change. But that's the hope is you can. You have the ability to make different decisions.

And by putting things in place, like a cue or reward, it's going to help you along the way. It's going to give you that hope that you can change. But I love that you said it's going to be hard at first because there's always friction, right? When you're doing something new, naturally there's always going to be friction. But as that becomes your new normal, that's your new normal. And that's the beautiful thing. When it's good habits, okay, then your brain automatically goes to the good things that you're focusing on and that you've changed in your life. So that's powerful.

And it's important to think about those rewards, right? Think about how most of us, when we start an exercise routine, you know, most of us, we wake up in the morning, we decide to go for a walk, a jog around the block. So we jog for two blocks. Come home. Now you're running late, right? Now your kids are like hungry. You rush them through breakfast.

You rush through a shower. You rush them to school because you're running late. You get to your desk. You're all sweaty. Finally, you're like, oh, my gosh, finally. Like, you basically just punished yourself for exercising, right? And your brain pays attention to that punishment and says, I don't want to exercise. anymore. I'm not going to make that easier. But if you schedule it right and you say,

look, I'm not going to do this until Thursday morning because I know that I don't have anything big going on on Thursday. I can come home. I can take like a nice long shower. I'm not going to be rushed. I'm not going to be panicked. Then your brain says, oh, this is great. I got rewarded for running. Same thing that's true of money, right? Oftentimes when we do the right thing with money, when we save, we don't reward ourselves for it. Instead, we say like, oh man, I would have loved to have gotten that, but I got to save this money. I'm just going to say no to myself. And we punish ourselves. We punish ourselves psychologically.

What we should say is, oh, man, I can't afford X. I'm not going to get it. Instead, I'm going to put that money in this account. I'm going to go home and I'm going to tell my spouse, I saved today. And my spouse is going to give me a big kiss. We're going to have a glass of wine. We're going to talk about how proud we are of me. If you reward yourself for doing the right thing, it will become easier and easier and easier to do.

I believe it. And being realistic. like you're saying, right? Rushing through all that, you're punishing yourself, right? And that's why I say even with the budget. Like I'm like, okay, if people are getting out of debt, I'm like, yes, cut your lifestyle. Someone puts $50 for food.

I'm like, okay, that's not realistic. You're not, you're going to spend a little bit more than $50. And then you're going to get frustrated with yourself when it doesn't become a reality. So keeping it realistic, again, oh, yeah, I can't buy that because I don't have the money. Okay, so I'll be realistic of what I can save and then that reward on the back end.

It helps it. That's all up here, Charles. It's all here. Our minds. It's crazy. That is so great. Well, Charles, thanks for being on. I so appreciate all your wisdom and all that you have to offer because, again, money habits. It's a big part, a big part of winning financially in the long haul. So I appreciate all your work and all that you do. Tell everyone where they can find you, buy your book and everything. Absolutely. You can reach out to me. I'm on Twitter at C. Doohigg. My website is Charlesduhig.com. The name of the book is The Power of Habit. And if anyone has any questions or thoughts, I'm just Charles at Charlesduhig.com. I actually respond to every.

email I get, I would love to hear from you with any questions or thoughts. And definitely tell me what works for you. And thank you, Rachel. I have to say, we had you on my podcast, and it was such a wonderful episode. You actually, like, changed this woman's life who was struggling financially. We got an email from her saying, like, everything's been turned around. She's doing so much better now. Yeah, it was, it was like life changing for her.

And so thank you for all the work that you're doing. I think there are so many people benefiting from your advice. And it's just great to see you. Oh, I appreciate it. Well, thank you, Charles. Everyone, again, connect with him and you answer email. It's very impressive. So ask all your habit questions to him.

He'll answer them. But thanks again, Charles. Stay safe, stay well, and talk to you soon. This episode, we're going to dive in to an ask Rachel question. It's one of my favorite things, is to answer your questions. So this question comes from Deb, who asked, how does a person find their why in regard to managing their money? I have a budget, but I can't see him. to stick with it. I think it has to do with fear and scarcity from growing up. I really want to get

a handle on my finances. Well, Deb, number one, you're not alone. This can be a really hard one because it kind of is a big question. And just to know as well that your why can change during your life. And it probably will. And that's okay. So maybe your why has to do with something bigger than yourself. And this is one thing I challenge people on. For your why, if your why you want to win with money is just to go on a great vacation, or your why is just to buy a brand new car, like those are not bad things. Trust me, I love vacation. I love a new car. But if that's your only motivator is just stuff, it gets to this point where that starts to become demotivating, because once you get that thing, you're going to want the next thing and the next thing. And if that's

your ultimate, it's not great. So ask yourself why. Maybe a vacation, for an example, why do you want to take a great vacation? Is it because you want to spend time with your kids? And you're like, oh, I just want a lone time, and I want them to experience something great. Okay, so maybe your real why is your kids and spending that time together. So how can you create that somewhere else?

Or maybe it's, you just want time away. Okay, well, why do you want time away? Is it because your life right now is just hectic and crazy, which A. Amen's sister, mine is two. I get it. But is it because you, like, want to get away from your job and you just hate your job. Maybe you want a different job.

You know, like start asking those. deeper questions of what you want, because that will get you your why. Ask, what are things in life that you would regret not doing? That's a big why. And again, going back to that material thing, this is something I've realized throughout my life, is I'm like, when I can focus on things that I can't buy, that is the valuable stuff. When you can focus on things like, again, your family, your marriage, your faith, your friendships. Like the things that money can't buy usually hold some of the greatest value. So finding your why in one of those categories as well is going to help you to be motivated. I mean, it really, really is. And again, it's a big question

and your why could change, but that why is almost your reward. When you change a habit, you need that reward. And it can be a small reward from just maybe you hit your budget goals and you just text a friend. You're like, oh, I did it. And they like give you all the emojis and you're like, okay. Or maybe the reward is having a glass of wine with your spouse when you, when you guys hit that monthly budget. Like having that reward is really, really important. And so part of that reward, too, is your why. So you can start to kind of say, okay, if I start to stick to my budget and I can save X amount or I can pay off X amount of debt because my budget is the tool that's helping me do these things, I'm able to get to that why. And those small rewards of knowing that you're one

step closer to your why is going to help you stick to the budget as well. There's another thing I talk about my new book, Know Yourself, Know Your Money, where the question of why do you want money? And this is a pretty simple one, but it's that Y of, is it more for security purposes or is it more for status? And that security is to feel, okay, if I, if I budget, if I save, I'm going to feel this level of peace in my life that I've never felt before. That's a big motivator. That could be a why. Just simply that. Like you said that you lived with a scarcity mentality growing up.

And I'm like, okay, so maybe it's like to actually have money and surplus in the bank. Maybe that's your why. I don't know. I'm throwing out all these ideas, Deb, because it's a... It's a complex thing. Money really is because it shows us, again, what we truly value, and it exposes parts of us that we don't really like always as well. So I think acknowledging all of that, sitting down, having a good friend or a spouse to have these conversations with, I think is important because for the long run, you want that why. You want that why to be big because you're going to be

making sacrifices. You're going to have to say no to yourself at times. But when you have that why out there, something that really means so much to you, that's your reward. That's what's to help you get through when the budget doesn't seem to work. So I hope that helps Deb. Hope it motivates you to get that why. And for all you guys, I would love to hear from you. I love answering your questions and knowing where you're at on your money journey. So you can ask any question on any social media from YouTube, Facebook, Instagram, Twitter.

It doesn't matter. We're scouring the internet, finding those questions. And hopefully I'll be answering yours in the next episode. Well, thank you to Charles Duhigg for coming on the show and motivating us. teaching us about habits. Oh, it's so, so important. And if you guys have not hit that subscribe button, make sure you do that. And if the spirit leads, you can leave a review. Thanks to you guys for listening to this episode. And as always, make sure you take control of your money and create a life you love. So if you guys enjoyed this podcast, we have more from the

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