Identity-Based Habit Formation: Building Good Money Habits That Last
Find out how to make lasting changes to how you handle money!
-
Fitz Villafuerte
-
Published January 21

Find out how to make lasting changes to how you handle money!
Have you ever tried to stick to a budget or save for a big goal, only to fall off track a few weeks later? You’re not alone. For many of us, forming lasting habits feels like an uphill battle.
However, the author of Atomic Habits, James Clear, says, “Lasting change is identity change.”
This means that instead of focusing on what you want to achieve, you should focus on the kind of person you want to become. In other words, to make habits stick, you need to rethink how you see yourself. But how does this work exactly?
ost of us approach habits backward. We focus on the outcome: “I want to save P10,000,” “I want to pay off my credit card debt,” or “I want to stop impulse buying.” While those goals are great, they don’t address the real problem: your identity.
For example, if you see yourself as “bad with money,” it doesn’t matter how detailed your budget is. That identity will eventually pull you back into old patterns. Instead, shift your focus to the type of person you want to be: a saver, a responsible spender, or an informed investor.
Once you have a clear identity in mind, your habits will naturally fall into place as you work to prove that identity to yourself.
Think about it: our actions flow from who we believe we are. If you tell yourself, “I’m terrible at saving,” what’s going to happen the next time you’re tempted to buy something you don’t need? You’ll likely confirm that belief by giving in.
But if you start saying, “I’m a saver,” every small step you take—like transferring P500 to your savings account—becomes proof of that identity. You’re no longer just saving money; you’re becoming a saver.
This approach is way more sustainable than relying on sheer willpower, which eventually runs out. Identity-based habits anchor your actions to something deeper, making them easier to stick with long-term.
Step 1. Define Your Financial Identity
Who do you want to be when it comes to money? A saver? Debt-free? Someone who’s confident about investing? Write it down in a simple, positive statement:
“I am a saver.”
“I am someone who pays off their credit card in full every month.”
“I am financially responsible.”
Make sure this identity resonates with you. It should feel empowering, not overwhelming.
2. Start Small and Build Evidence
Big changes start with small actions. If your goal is to save more, start by saving P10 a day. If you want to stop overspending, track just one category of your expenses this week.
Each small win is like casting a vote for your new identity. Over time, these votes add up, and you’ll start seeing yourself in a new light.
3. Reinforce Your Identity Consistently
Celebrate your progress, no matter how small. Transferred P500 to savings? That’s proof you’re a saver. Packed lunch instead of ordering delivery? Look at you being financially responsible!
It’s also helpful to remind yourself of your identity regularly. Try leaving sticky notes around your space with affirmations like, “I am great with money.”
4. Bounce Back from Setbacks
Nobody’s perfect. You’ll make mistakes—it’s part of the process. The key is to treat setbacks as learning opportunities.
Let’s say you overspend one month. Instead of saying, “I’m so bad with money,” reframe it: “What would a financially responsible person do next? They’d adjust their budget and keep going.”
Building a new identity isn’t always easy. Here are some common hurdles and how to tackle them:
Moreover, identity-based habits don’t just apply to personal finance. You can use this approach to improve your fitness, relationships, or even your career. It’s about becoming the person you want to be, one small step at a time.
So, who do you want to be when it comes to money? Take a moment to define your financial identity and pick one small action to prove it to yourself today. Remember, it’s not about perfection—it’s about progress.
Changing your habits isn’t just about achieving a goal; it’s about becoming the person you want to be. And trust me, the version of you who’s great with money is already in there. Let’s bring them out.
Spotify link to podcast episode.
As the financial ally of Filipinos, Home Credit provides world-class financial inclusion to help you achieve your goals. Get tips on managing your credit score and more on the Home Credit app, available on the Apple App Store and Google Play Store.
About the author: Fitz Gerard Villafuerte is a civil engineer who decided to quit the corporate world back in 2003 to pursue freelancing and entrepreneurship. You can read more financial tips on his blog, Ready To Be Rich, which has won several awards including the Best Business and Finance Blog at the Philippine Blog Awards. He is recognized by Moneysense Magazine as among the Top 12 Most Influential People in Personal Finance in the Philippines. He is an author; an online content creator; a Registered Financial Planner; a resource guest for various television and radio programs; and a corporate speaker and trainer for several socio-civic organizations in the country. Lastly, he is the President of Wealth Arki, Inc., an investment consultancy, and financial planning firm that helps Filipino families achieve their financial goals.
This website uses cookies to improve your experience. No personal data is tracked. By browsing, you agree to our use of cookies as indicated in our Privacy Notice.