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How to Improve Your Financial Willpower

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  • How to Improve Your Financial Willpower

    i found this articile to be most intersting!! maybe a bit of help in attempting our start over...so i thought i would share it.

    November 30, 2010, 12:03 pm
    How to Improve Your Financial Willpower
    By RAMIT SETHI New York Times

    "One of my friends has been meaning to fax his health insurance company to stop an overcharge worth hundreds of dollars each month. When I asked him why it’s taking so long to fix it, he gave me an astonishing reason: He said he didn’t have a fax machine.

    It’d be easy to point and laugh at him for being lazy. But he’s a successful entrepreneur. So why does he find it so hard to motivate himself?

    Many of us think we make rational financial decisions. We believe we’re in control. “If I just try harder,” we say, “I could save $100 more each month.”

    Yet time and time again, our willpower fails us, and we yo-yo back to our same spending patterns.

    So here’s how to turn a few powerful psychological principles in your favor and save more, pay off debt and live a richer life.

    Last year, ClimateWire wrote about a fascinating study in behavioral change. Researchers created a workshop on energy efficiency and invited 40 people to attend.

    The results: Participants “significantly knew and cared more about the issues after the workshop than before.” But when the researchers looked at attendees’ actions afterward, the results said otherwise. Only eight people installed low-flow shower heads, even though all 40 participants had been given the shower heads at the workshop.

    Behavioral change turns out to be extraordinarily hard — even when we believe it’s important and others try to make it easy for us. So we think that if we only try harder we can do anything.

    But new psychological research finally acknowledges that willpower is a limited resource. As Stanford psychologist BJ Fogg says, “In the long term, willpower alone won’t work for difficult behaviors. You need to take a different approach, such as changing your environment, removing triggers and taking baby steps.”

    This is why people who try to save on everything — coffee, clothes, going out, travel — often fail, while people who focus on one or two areas are able to save dramatically more.

    So keeping all of this in mind, what simple psychological changes can you make to change your own behavior, starting immediately?

    Start by changing your defaults.

    Researchers found that when 401(k) accounts went from “opt-in,” which requires employees to fill out enrollment paperwork, to automatically enrolling employees and requiring them to “opt-out” if they didn’t want to participate, contribution rates soared from less than 40 percent to nearly 100 percent.

    If you had asked these employees if their retirement was important to them, 100 percent of them would have said yes. But when you looked at their behavior, these employees were on track to lose tens of thousands of dollars over their lifetimes due to simple inaction. Research has found that educating them would have done very little. But a change in defaults accomplished a lot.

    The same approach works for people who try over and over to save a few hundred dollars each month, but things “just keep coming up.” These people blame themselves for their lack of willpower, but never create systems to automate savings.

    Defaults are boring. They’re not sexy. But they work.

    Here are three other ways to use psychological principles to change your behavior:

    1) Automate your personal finances

    Most people complain about money for their entire lives, getting hit with late fees, never saving enough and dreading the task of budgeting. Yet it’s possible to spend less than one hour per month on money and still save for future purchases, pay bills automatically and invest every single month. I’ve outlined what you need to do to make it this happen in a 12-minute video.

    And here’s a diagram from my book, “I Will Teach You To Be Rich” that shows my automation system:
    Ramit Sethi

    2. Use your behavior to change your attitude

    Many people assume that our attitudes influence behavior, telling ourselves that “I’m frugal, so I don’t buy expensive jeans.” But in psychological research, behavioral change works in reverse, too. Your behaviors can actually affect your attitudes and emotions. For example, researchers have found that if you nod your head when listening to a persuasive message, you’re more likely to be persuaded.

    How can we use this to our advantage?

    Identify one thing you want to do more of (say, read a fiction book). Now, instead of waiting for some day when you’ll actually do it, add a calendar reminder every week for a month. After that, ask yourself if you still need that calendar reminder.

    3. Stop trying to save on everything.

    Every morning we wake up facing infinite financial possibilities. Should we pay down debt? Buy that latte? Eat out with friends?

    Overwhelmed with choices, we do the same thing we always do: nothing.

    Instead of trying to save a little bit on everything, focus on your two biggest discretionary expenses. For example, my two biggest discretionary expenses are eating out and drinking. Over the next six months, cut each down by 25 to 33 percent."


    http://bucks.blogs.nytimes.com/2010/...e&ref=business
    8/4/2008 MAKE SURE AND VISIT Tobee's Blogs! http://www.bkforum.com/blog.php?32727-tobee43 and all are welcome to bk forum's Florida State Questions and Answers on BK http://www.bkforum.com/group.php?groupid=9

  • #2
    well...we don't eat out....since for us that's a waste of money....but i think the theory is pretty good here. i think each household has their own way to cut some expense to be able to save....

    for us yesterday was our 2nd deposit into a saving account...we decided to do that so we could SEE it....as opposed to the under the bed hoarding!! we are hoping to see it in "black and white" monthly may help motivate us into savings as much as possible.
    8/4/2008 MAKE SURE AND VISIT Tobee's Blogs! http://www.bkforum.com/blog.php?32727-tobee43 and all are welcome to bk forum's Florida State Questions and Answers on BK http://www.bkforum.com/group.php?groupid=9

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    • #3
      thanks t43...i really enjoyed this.
      filed: 8/10 ...341:10/8/10 ... Discharged & Close: 12/9/10
      "Nothing is easy to the unwilling" Thomas Fuller

      Comment


      • #4
        Originally posted by oregonpilot View Post
        thanks t43...i really enjoyed this.
        can you just PLEASE pass the cat!!!
        8/4/2008 MAKE SURE AND VISIT Tobee's Blogs! http://www.bkforum.com/blog.php?32727-tobee43 and all are welcome to bk forum's Florida State Questions and Answers on BK http://www.bkforum.com/group.php?groupid=9

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        • #5
          it's always good to find ways to save!!! i'm really hoping after the first of the year we will be able to save more!
          8/4/2008 MAKE SURE AND VISIT Tobee's Blogs! http://www.bkforum.com/blog.php?32727-tobee43 and all are welcome to bk forum's Florida State Questions and Answers on BK http://www.bkforum.com/group.php?groupid=9

          Comment


          • #6
            Good article tobee43! I especially like #2. Use your behavior to change your attitude. One thing I've been reminding my teenager recently is "By your actions, you are known." In other words, you can have the best intentions to do something, and you can have great plans to do it, but until you actually step up and do it, it doesn't become real. Don't get me wrong -- intention is a powerful thing. But what you actually DO is what's real, what impacts the world, and what's noticed and remembered by other people. And once you do it, it's easier to keep doing it.

            With that in mind, DH and I have recognized that in order to improve our finances, we had to change behaviors that got us into trouble before. We were hit really hard by his job loss, but if we'd made smarter choices before then, we wouldn't have been impacted as drastically. So now, spending has gone from sometimes-impulsive to a conscious decision that we weigh against the experience of BK and foreclosure. We are doing longterm financial planning now, and have a savings plan in place that we contribute to each month. We still go out to eat, but it's an occasional treat instead of what happens by default when we don't feel like cooking dinner -- and even then, we tend to go out for breakfast or lunch instead of dinner and skip the $$ cocktails.

            We're just doing little things, and we've had a few back-steps, but it does add up -- and that feels so good that we're starting to look for other ways to save. We've built a small emergency fund in just three months, and now we're saving towards buying a second car (with CASH) after letting mine go in the BK. And we're now two weeks ahead on the rent instead of panicking on the last day of every month. Ahhhhh.
            DH laid off 3/08 | Last mortgage payment 12/09 | Filed Ch13 5/10 | Converted to Ch7 7/10 | 341 held 8/10 | AP filed by secured creditor 10/10 | Ch7 discharged & closed 11/10 | Foreclosure 10/2011

            Comment


            • #7
              Originally posted by researchnerd View Post
              Good article tobee43! I especially like #2. Use your behavior to change your attitude. One thing I've been reminding my teenager recently is "By your actions, you are known." In other words, you can have the best intentions to do something, and you can have great plans to do it, but until you actually step up and do it, it doesn't become real. Don't get me wrong -- intention is a powerful thing. But what you actually DO is what's real, what impacts the world, and what's noticed and remembered by other people. And once you do it, it's easier to keep doing it.

              With that in mind, DH and I have recognized that in order to improve our finances, we had to change behaviors that got us into trouble before. We were hit really hard by his job loss, but if we'd made smarter choices before then, we wouldn't have been impacted as drastically. So now, spending has gone from sometimes-impulsive to a conscious decision that we weigh against the experience of BK and foreclosure. We are doing longterm financial planning now, and have a savings plan in place that we contribute to each month. We still go out to eat, but it's an occasional treat instead of what happens by default when we don't feel like cooking dinner -- and even then, we tend to go out for breakfast or lunch instead of dinner and skip the $$ cocktails.

              We're just doing little things, and we've had a few back-steps, but it does add up -- and that feels so good that we're starting to look for other ways to save. We've built a small emergency fund in just three months, and now we're saving towards buying a second car (with CASH) after letting mine go in the BK. And we're now two weeks ahead on the rent instead of panicking on the last day of every month. Ahhhhh.
              it's truly amazing when one things about our behaviors and what little changes can in fact, result in BIG positive results it really works.

              we are now making "regular" savings deposits monthly...just for the psychological reasons...(since we know the bank is really not the best place for money). it just helps to see it there in black and white. we feel like we have accomplished something...maybe not much...but something!

              nice news on being two weeks ahead with the rent!
              8/4/2008 MAKE SURE AND VISIT Tobee's Blogs! http://www.bkforum.com/blog.php?32727-tobee43 and all are welcome to bk forum's Florida State Questions and Answers on BK http://www.bkforum.com/group.php?groupid=9

              Comment


              • #8
                this is fairly interesting..... and i wonder how true????????


                Americans Now Have Less Debt and More Savings than in 2008

                February 16, 2011

                A new report from the Federal Reserve Bank of New York shows Americans now have less debt than in previous years and are taking steps toward adding to their savings. According to the report, Americans now have less mortgage, auto loan and credit card debt than in 2008 when consumer debt peaked. Even better is that they’ve saved a significant amount since the crisis.
                Eliminating Debt and Saving More a Consumer Priority

                The report revealed that Americans have 7 percent less mortgage debt, 12 percent less auto loan debt and 15 percent less credit card debt than they did in the summer of 2008. Also, loan payments were at the lowest level in a decade.

                Americans have been working hard to ensure they don’t crash and burn as they did after the financial crisis when everyone saw the repercussions of borrowing and spending more than they could afford.

                Now, consumers are making an effort to pay back who they owe and place money in their savings accounts before buying new items. In fact, the Consumer Department found Americans are saving at nearly triple the rate they did between 2007 and 2009, having placed 5.3 percent of their money in their savings in December.
                How to Stay on the Savings and Debt Relief Track

                After years of overspending and failing to save, it seems Americans have been shocked into getting it right. If you want to stay on the savings and debt relief track, here are some ways to get this done:

                * Create your budget: First, create a budget that will help you organize the money you have coming in and going out.
                * Open a savings account: If you don’t already have one, it’s good to open a high-interest savings account that will allow your money to grow as it sits in the bank.
                * Consider waiting over borrowing: If there’s something you want to buy, instead of purchasing it on your credit card or taking out a short-term loan, consider waiting until you save enough of your own money to purchase it. This way, you don’t have to waste money on the interest you’ll owe as you repay.
                * Pay debts before buying new items: Also, consider paying debts before buying new items in cash or taking on new debts. If you need help eliminating bad debt and creating a good credit utilization ratio, employ the help of debt settlement or credit counseling.

                Eliminating debt and avoiding unnecessary spending could help add more to your savings accounts. So consider the options above to help keep you on the track to financial freedom.
                8/4/2008 MAKE SURE AND VISIT Tobee's Blogs! http://www.bkforum.com/blog.php?32727-tobee43 and all are welcome to bk forum's Florida State Questions and Answers on BK http://www.bkforum.com/group.php?groupid=9

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                • #9
                  anyone know where to get a HIGH interest savings account?????????
                  8/4/2008 MAKE SURE AND VISIT Tobee's Blogs! http://www.bkforum.com/blog.php?32727-tobee43 and all are welcome to bk forum's Florida State Questions and Answers on BK http://www.bkforum.com/group.php?groupid=9

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                  • #10
                    I definitely believe this. I think this statement is the key:

                    After years of overspending and failing to save, it seems Americans have been shocked into getting it right.
                    Damn right we've been shocked into having less mortgage debt, less auto loan debt, and more savings. With 15 million people unemployed, another 12 million underemployed, >1.5 million bankruptcies and >3.8 million foreclosures in 2010, we have had no other choice. I wonder how much of the debt reduction mentioned here is due to BK and FC?
                    DH laid off 3/08 | Last mortgage payment 12/09 | Filed Ch13 5/10 | Converted to Ch7 7/10 | 341 held 8/10 | AP filed by secured creditor 10/10 | Ch7 discharged & closed 11/10 | Foreclosure 10/2011

                    Comment


                    • #11
                      Originally posted by researchnerd View Post
                      I definitely believe this. I think this statement is the key:



                      Damn right we've been shocked into having less mortgage debt, less auto loan debt, and more savings. With 15 million people unemployed, another 12 million underemployed, >1.5 million bankruptcies and >3.8 million foreclosures in 2010, we have had no other choice. I wonder how much of the debt reduction mentioned here is due to BK and FC?
                      yes, and they conveniently left out how many are due to the BK and FC.....not surprising at all is it??

                      i really really wonder what the actual truth is....i suppose we will never know... and that's what is scary..)....as i asked before...pass the soma...brave new world is now here!
                      8/4/2008 MAKE SURE AND VISIT Tobee's Blogs! http://www.bkforum.com/blog.php?32727-tobee43 and all are welcome to bk forum's Florida State Questions and Answers on BK http://www.bkforum.com/group.php?groupid=9

                      Comment


                      • #12
                        maybe huxley was a time traveler!! LOL!!!!
                        8/4/2008 MAKE SURE AND VISIT Tobee's Blogs! http://www.bkforum.com/blog.php?32727-tobee43 and all are welcome to bk forum's Florida State Questions and Answers on BK http://www.bkforum.com/group.php?groupid=9

                        Comment


                        • #13
                          We changed everything by going cash. We now use the dave ramsey envelope system. When the cash is gone, it's gone. So I'm careful not to waste it. We plan every penny for the month before it comes in. It's on a spread sheet. So if we go over, it's easy to point to the reason why. I do not want that reason to be me.

                          We also moved our savings account to a bank that isn't the same as our checking. When it was at the same bank I could too easily log on and transfer the money into my checking to cover my Archivers purchase.

                          Comment


                          • #14
                            Originally posted by lovemybugs10 View Post
                            We changed everything by going cash. We now use the dave ramsey envelope system. When the cash is gone, it's gone. So I'm careful not to waste it. We plan every penny for the month before it comes in. It's on a spread sheet. So if we go over, it's easy to point to the reason why. I do not want that reason to be me.

                            We also moved our savings account to a bank that isn't the same as our checking. When it was at the same bank I could too easily log on and transfer the money into my checking to cover my Archivers purchase.
                            we did exactly the same thing.....

                            and my other half whom never had anything do to with our finances has asked me...which i did to make an excel sheet to show him the budget...where what goes....by putting it in "black and white" he's able to see where our money is going. i don't need the "paper" since i can even blance both check books in my head...but that's because there's no longer much to "balance"..
                            8/4/2008 MAKE SURE AND VISIT Tobee's Blogs! http://www.bkforum.com/blog.php?32727-tobee43 and all are welcome to bk forum's Florida State Questions and Answers on BK http://www.bkforum.com/group.php?groupid=9

                            Comment


                            • #15
                              Originally posted by tobee43 View Post
                              we did exactly the same thing.....

                              and my other half whom never had anything do to with our finances has asked me...which i did to make an excel sheet to show him the budget...where what goes....by putting it in "black and white" he's able to see where our money is going. i don't need the "paper" since i can even blance both check books in my head...but that's because there's no longer much to "balance"..




                              LOL Toby. Well you know Excel so also use the graph feature. Most male executives don't understand numbers but show them a picture and the low one in RED vs the big one in Green works everytime. Should work on hubbys too. 'Hub
                              If I knew it all, would I be here?? Hang in there = Retained attorney 8-06, Filed 12-28-07, Discharge 8-13-08, Finally CLOSED 11-3-09, 3-31-10 AP Dismissed, Informed by incompetent lawyer of CLOSED status, October 14, 2010.

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