This guest blog was written by Chris Budd, who wrote the original Financial Wellbeing Book as well as The Four Cornerstones of Financial Wellbeing. He founded the Institute for Financial Wellbeing and has written more than 100 episodes of the Financial Wellbeing Podcast.

The new year is a time when we take a moment to take stock. To review what we want from life, and the year ahead in particular. Very often this involves setting goals, making resolutions; trying to change habits.

Actions become habits for a reason. When we reflect on resolutions made in the past, we could easily conclude that many of our habits are, in fact, unchangeable. Only 8% of people achieve their new year resolutions (2 January 2013).

How many of us have paid to join a gym in January? I know I have. Gyms are nearly 40% busier in January than in the previous two months (8 January 2024). 63% of people attend regularly when they first join the gym; six months later, only 33% still attend regularly (9 January 2024).

Habits are hard to change, and this is especially true when it comes to our financial habits.

Financial habits

There is a wide variety of behaviours and habits when it comes to money. It could be our spending habits, or perhaps how we often react emotionally to financial decisions rather than with a cool head.

These habits don’t necessarily serve us well. We might avoid spending money on certain things that are good for us, like putting money into savings or pensions. If we have to do something that doesn’t align with other beliefs, this will make us unhappy (psychologists call this cognitive dissonance).

The first part of setting resolutions and creating habits that will serve us well is to take some time to understand what it is that makes us happy. We can then be more conscious of this when our behaviours and habits are not aligned with what makes us happy.

Where does joy come from?

The question of what brings joy into our lives has been mulled over by humanity for thousands of years. Philosophers, psychologists, writers, musicians, artists, theologians, and academics. Everybody wants to know the secret to a happy life.

There are many different types of joy. Feeling happy in the moment, for example. But what brings a longer source of wellbeing? One significant source is having a sense of self-worth.

What is the source of this self-worth? Perhaps it is derived from other people. Examples of these external sources of self-worth could be someone admiring what you are wearing or driving. Maybe you have pleased someone whose opinion you value. It could be that you have impressed someone you don’t know. Maybe you are meeting a deadline or somebody else’s target.

External self-worth is, by definition, short-lived. Once you have received that admiring glance or the applause has died down, then you need to find somebody else to provide that admiration.

Internal self-worth is something that you feel good about your irrespective of what other people think. It is something you do just for yourself that provides meaning and purpose. It could be helping others through volunteering, showing kindness, or perhaps being creative. It could be getting involved with a local community and connecting with others.

Internal self-worth is a much more nourishing form of wellbeing because it doesn’t need somebody else to provide it. It lives within you.

Money and self-worth

Money can play a big part in achieving external self-worth. Indeed, showing that we have money is often a source of external self-worth. This can create a cycle of habits where we continually chase this very fragile and temporary type of self-worth.

When it comes to internal self-worth, money plays a much more indirect role, in that it can provide time. If we start to apply this idea to our spending habits, then our actions, our beliefs, and intentions can become more aligned, and our behaviours might change.

Know thyself

The final part of this process, therefore, is to consider whether the habits you want to change are making you happy. Are they leading to internal self-worth? Understanding this might just give you that extra motivation to change those habits that are not serving you well.

Identifying what will bring you wellbeing, and identifying the behaviours that will help you get there, will allow you to create financial resolutions which you will be much more likely to keep.

Please note: This article is for general information only and does not constitute advice. The information is aimed at individuals only.