Even though I consider it one of my biggest money mistakes, that doesn’t mean I didn’t learn a few things when getting my Master’s degree. The focus of my degree was a mix between criminal justice and computer forensics (think of crime shows where the good guys scan the bad guy’s laptop to find hidden stuff). Many of my classes involved different theories revolving around crime, why people commit crimes, how people react to crimes, the best ways to stop crime, etc. One of the theories that I think we can directly relate to our finances and ourselves as a whole is the Broken Windows Theory.
Broken Windows Theory
The Broken Windows Theory was first published in an article titled “Broken Windows” in the March 1982 issue of The Atlantic Monthly. In a nutshell, this theory states that in any given neighborhood, if there are visible signs of crimes or anti-social behavior, such as a broken window, it will help create an atmosphere where more crime is likely to happen. Think about this scenario:
A few teenagers with nothing better to do are walking around town. Bored, they decide to vandalize a random building. Nothing major, break a window or maybe put a small amount of graffiti on it, typical teenage stuff. The teenagers do their thing and get away with it.
The following week, the same bored teenagers are again walking around town. Seeing that they got away with their minor crime last week, they decide to return to the same building and add to their handy work. This time, they are getting a little bolder. More graffiti, more broken windows, no one seemed to care last time, right?
As each passing week goes by, the teenagers continue to escalate the severity of their crimes. Other people in the neighborhood see the vandalism and, seeing that no one seems to care, think that they can get away with other minor crimes as well. Before you know it, you have a neighborhood full of minor criminals, which eventually leads to some people attempting to get away with more significant and more harmful crimes.
Let’s rewind to after the first time the teenagers vandalized the building. Let’s say the owner of that building sees the damage and immediately has it repaired. Now when the teenagers come by to admire their work, they see that the window is fixed or a fresh coat of paint covering their recent artwork. Maybe the owner even went as far as putting up a security camera. Clearly, someone cares about the building, and the odds of them getting away with last week’s antics is not likely, or at least that’s what they will think.
Not wanting to risk getting in trouble, the bored teens move along and will find something better to fill up their time.
This is essentially the Broken Windows Theory. When a neighborhood doesn’t let minor infractions go unnoticed, it will not only stop the minor violations from happening as often (there will always be bored teenagers), but it will also stop the minor crimes from escalating to more serious ones.
Fixing Your Broken Windows
So what does this have to do with your finances, you might ask. The answer is…everything! Think of your overall financial situation as the neighborhood in the theory, and bad financial habits are your broken windows. Don’t have a budget? That’s a broken window. No emergency fund; that’s a broken window. Spending money on things you don’t need, broken window. I think I’ve made my point.
There are two things at play here. For one, it’s essential to fix any of your currently broken windows. You don’t need to fix the whole neighborhood all at once, just take it one step at a time. Find a few habits that you can easily change and correct them, fixing a few of your windows. Then, once you’ve nixed those bad habits, start working on improving a few others. You’ll find that it becomes easier and easier each time, and you’ll start gaining some serious momentum.
The next thing to do is not allow yourself to break any new financial windows, and if you do, fix them immediately. It’s incredibly easy to slip up once and not make a big deal out of it because, in all reality, it’s probably not a big deal. But, lo and behold, that one slip up now becomes the norm, no big deal, right? Wrong!
Now that you have a new norm, later on down the line, you stray from that norm and spend a little extra in an area you shouldn’t again. Like before, you think it’s only a tiny infraction right, no biggie. I think we see where this is going. Eventually, enough small changes add up to big ones. Suppose you had applied the Broken Windows Theory and nixed the bad habit after the first change. In that case, you’d be in a much better financial situation.
The overall idea here is that even though an infraction might seem minor, over time, it can lead to other minor violations or the escalation to more severe problems. I’m not by any means that we all need to be perfect with our finances, but we do need to police ourselves and show that we care enough to fix our broken windows when we slip up.
Don’t Do It Alone
Change our ways can be difficult, especially when we attempt to go it alone. So if you want to fix your windows, try finding some help.
Find a Partner(s)
Everything is easier when you have a partner. Working out, dieting, projects, really anything is better when you know you’re not the only one going through it. Find a partner or even a whole group of people in the same situation as you. You’ll be more likely to succeed since not only will other people be going through it with you, but you’ll all be able to help self-police each other by holding each other accountable.
Find a Professional
There are tons of professionals out there that can help you with any broken windows, financial or otherwise. In the financial world, that might be a financial coach, financial advisor, accountant, tax professional, or a slew of other finance-related professionals.No matter what your broken window is, there is someone out there that has seen it, and can help fix it.
Use All the Tools Available
Even if you don’t find an actual person to help you in your journey, there is still plenty of help out there. Websites like Personal Capital, You Need a Budget, Mint.com, and many others can help you get a hold of your finances. In addition, there are apps available for not just those websites but many others as well.
What seems like a minor problem today can quickly become a significant problem down the road. We are human and by no means perfect, but by policing our own financial neighborhoods, we can keep the number of broken windows to a minimum. This will help us from forming new bad habits or making existing ones worse. There is always plenty of help out there to be had, whether it be from a support group, a professional, or technology. Now get out there and start fixing some windows!
Jeff is a fan of all things finance. When he’s not out there changing the world with his blog, you can find him on a run, a Mets game, playing video games, or just playing around with his kids.