4 ways to trick yourself into smarter money habits Carrie SloanheuristicsLifehackermoney habits
Rumor has it there’s a segment of the population who just naturally has amazing habits when it comes to money, citing family traditions of change bottles turned into wonderful vacation memories and a fully-funded retirement that doesn’t include the resume epilogue of Walmart greeter.
For those of us without these habits, there appear to be a few mind tricks that don’t involve lucky numbers or money blown on a Powerball ticket, as Lifehacker’s Carrie Sloan explains.
Adopt a New Mantra
How It Works: For this exercise, you’ll be using the help of a fancy scientific term known as a “heuristic,” which is essentially a rule of thumb that you live by to make decision-making easier. You probably already have many money heuristics that you abide by every day—whether you’re conscious of them or not.
Some examples: “I only buy used cars,” “always take your tax return to the bank” and “Ideserve to shop online after a hard day at work.” As you can see, some heuristics are better for your finances than others.
Why It Works: If you’re conscious about adopting helpful heuristics, they can be powerful enough beliefs to override bad money behavior. Case in point: “Banking raises, if it becomes a habit, helps us avoid being tempted to spend the money, when we’d rather save it,” says Dr. Shefrin…
Make Saving a No-Brainer
How It Works: In an experiment called Save More Tomorrow, employees were asked to save more for retirement by signing up for a 401(k), then voluntarily increasing contributions by a set amount every few months. The results? Over the course of 28 months, the average participant’s savings rate jumped from 3.5% to 11.6%.
Why It Works: By having the money come directly out of their paychecks, before it hit their bank accounts, the participants never missed the money. Essentially, they bypassed the portion of their brains that loves temptation and activated the slow-thinking region that promotes self-control…
Full story at Lifehacker.
The psychology of saving.
Photo credit: FotoliaPosted by Kate Rinsema