Hack Your Brain and Save Your Money
Once upon a time as a young lad I couldn’t keep money in my pocket any more than I could a handful of water. Money in, money out, even as the specter of college loomed large on the horizon. As a result I showed up to school with only a week or two’s worth of summer paychecks in the bank, an amount far short of what I could have brought to the table had I been more prudent. After limping to graduation I found things had changed significantly in this regards: I could stretch my meager hourly wages as a laborer a long ways.
So it was with particular interest that some time ago I posted a chart detailing the fact that college graduates, as a whole, tend to save greater percentages of their income than their lesser-educated counterparts. Why? Is it because their relatively higher incomes allow this? Because something fundamentally happens in college that contributes to one’s ability to save? Or, perhaps, because only those who learn to save/control spending survive?
Whatever the case today’s students don’t have the luxury to fart around. Affording an education requires preparation, including all of the various strategies we’ve been exploring in these pages, and it requires rigorous financial discipline. Among other things, students need to learn to save to get ahead of the big bills coming their way. But how?
Good news for the big spenders: I once thought that savers and spenders came wired that way and once so wired, always so wired. But in college I figured out that we possess certain basic psychological tendencies, which we can rejigger to gain control of our income and stack up cash for bigger and better things. In other words, we can “hack” our thinking in the same way we can hack the shape of a dustpan to divert water from a sink or hack a the clasps of a pants hanger to enable hands free reading. This should be good news for anyone who tends to blow paychecks.
Here are a few traits of our brain and how to hack those to our advantage:
Our Brains Pay More Attention to Big (i.e. Threats and Opportunities) Than Small
We use the term “elephant in the room” to describe the absurdity of ignoring the large. If there were, in fact, an elephant in the room we would all sit up and take notice.
Likewise with money. If I were to randomly hand you $5 on the street you would probably blow it at the next corner in the next minute on a venti something-or-other. You would likely do the same if I handed you $5 each and every day. However, if I randomly handed you $150, or 30 days worth of this gift, chances are you would pocket it and treat the funds with a bit more prudence, making sure it went to something more meaningful. You would, in other words, pay more attention to the larger of the amounts. We can hack this tendency a couple of ways:
- Hack: Insist on only paying for goods and services in lump-sum fashion. When we have to pay for something in one shot we take the decision more seriously than when we opt for smaller daily or monthly payment terms. This is why every purveyor of high priced/luxury products offers payment plans. People will opt for the top of the line car stereo when it costs $50/month but would balk at paying the same grand total of $3000 up front. People paying cash for a house approach things completely differently than those signing up for a mortgage. If you can avoid payments you tend to buy less because it suddenly “costs too much.”
- Hack: Defer smaller sums of payment until they add up to something more substantial. As a youth I would cash my checks as soon as I got them. By the time the next week rolled around I would quickly repeat the process. After a summer of such behavior I had literally nothing to show for my efforts. As an adult I stacked my paychecks on my dresser until which point I absolutely needed to deposit one to pay the bills. After two or three weeks of that I had amounts of substance sitting there. The bigger the pile got to be the bigger and better my options became. These days I only draw an income every three months, as opposed to weekly or monthly, and have found that I treat these distributions with a lot more respect and circumspection. It may be worth asking your boss to pay you less frequently. You might also consider depositing your checks in a savings account without debit and checking privileges, letting it add up through inaccessibility.
In Our Brains, Money is Just a Number
We stink at math. Give us a spreadsheet and most of us go cross eyed. Unfortunately, modern money is represented by digits and we just don’t “get it” much of the time. The numbers mean little to us so we make dumb choices with them. The trick, then, is to turn numbers into something meaningful enough to engage our minds.
- Hack: Convert your numbers into opportunities. It rarely sinks in if I sit down with a budget sheet and show people where they’re wasting numbers, ahem, money. But if we can convert these into to wasted opportunities behavior changes in earnest. The trick is to think of a rarer treat you enjoy and price everything by that. Then we can see that this trinket or this bag of junk food costs a portion of a massage or a weekend at the beach. My major turn in college occurred when on an occasional Saturday the boys would go to a second-run movie at the Danbarry dollar theater and split appetizers afterwards. Always a good time and it cost about $5. Once or twice I had to say no because of lack of funds. As soon as I priced everything in “Danbarrys” my junk food addiction lost hold of my wallet. I could now say “no way, I don’t need a milkshake right now. That’s half a Danbarry night.” Nowadays I convert the price on things from dollars to boxes of ammo (few things I love more than heading outdoors to plink targets or hunt, and the more I spend on junk the less I get to do that). Find what works for you and let the savings commence.
- Hack: Convert your numbers into hours worked. Here we learn to phrase our spending not in terms of opportunities lost but in terms of pain cost. How much did you go through to get this particular amount of money… and is X worth it? If at 14 I had converted each frivolous soda purchase into the half an hour of scrubbing pots in a ninety-degree dish pit it took to buy it, I might have entered college with some jingle in my pocket. Later, working in construction after college graduation I did save quite a bit because I would apply this principal. Few doodads are worth fixing pipes at the bottom of a sewer manhole to obtain them.
- Hack: Convert digital money into tangible money. My wife and I some time ago committed to always having an amount of emergency savings on hand. Unfortunately, we found it oh-so-tempting to tap this latent money for non emergency pizza nights. So some time ago I converted a large portion of my bank account into nickels. I have yet to tap into this resource for no other reason than the inconvenience and embarrassment of rolling to the corner cafe with several pounds of coins in a bag.
Our Brains Crave Games and Competition
Isn’t it odd that while most American youth remain woefully financially illiterate, some of the most popular games in history have a strong resource management, if not outright money management, component? Think Monopoly, Life, Settlers of Catan, Wits and Wagers, the Sims, Farmville, etc, etc. Obviously we have a disconnect here. We simply haven’t turned financial drudgery into an engaging challenge.
- Hack: Create a challenge and keep score. We used to teach Dave Ramsey’s FPU at church. When I first learned of it it seemed too unsophisticated and simple for this high and mighty pro to get involved in. Seven baby steps. One simple, focused effort at a time. Way too lowbrow. Except that… it has worked personally and in the lives of everyone I’ve seen work it out. The chief reason? Every FPU participant knows their place on the board and exactly what they need to do to get to the next square. Some of the material can be tedious, but in the context of “winning with money” the work and education become much more palatable. Whatever your savings goal, clarify it, break it down, set milestones, and start tracking progress. Give yourself tokens and treats at certain increments. Watch it happen.
- Hack: Compete with a team. I would conjecture that team sports have a higher participation rate than individual sports by at least a factor of ten. Few adults go on to wrestle or dive competitively in advanced ages but softball and basketball leagues around town keep the Parks and Rec department busy indeed. The reason FPU classes, AA meetings, and recreation programs work well is they create an atmosphere of “let’s cooperate toward a shared goal.” I now have a “we” and “we” are in this together. You will accomplish more with money if you can find other people to play the roles of cheerleaders and coaches and teammates. As a bonus in so doing you negate the less beneficial money competitions we tend to engage in, like trying to keep up with the Joneses.
Our Brains Take Shortcuts According to Identity
We as humans find comfort in creating an identity, in associating ourselves with a certain group or culture or way of thinking that aligns with an image. Witness the mobs of strangers wearing team colors and thronging to stadiums each weekend, the various groups on high school campuses all dressed and acting alike, the rise in interest-sharing clubs, and the surge in political identity groups.
Perhaps our brains’ comfort with identity has to do with the mental relief of not having to make little choices and articulating preferences all the time. We accept our label and we live accordingly, offhandedly and mindlessly acting according to this label. Hipsters don’t eat at McDonalds, and bikers don’t order tofu. Greenies drive Priuses and rednecks decidedly don’t. So forth and so on. Right or wrong, we operate thus. How can we use this to our savings advantage?
- Hack: Identify with Less Expensive Groups. Some identities and related groups just require more funds to in order maintain one’s image. If you’re spending too much, take a look around. Your chosen crowd might have undue influence over your purchases. Do you feel a need to buy certain fashions, drive certain cars, and partake of certain activities in order to meet expectations and fit in? In my case I finished high school and began college hanging with a crowd that prowled the mall for kicks. Somewhere along the line I got more and more involved with an athletic crowd, spending more and more of my time chasing a ball around. As you might imagine gym rats spend a lot less money during their time together than do mall rats. Similarly, packs of bicyclists tend to spend less money than motorcyclists and artists less than art buyers in an afternoon. Assess your group activities and see if a shift toward another would generate an opportunity to still have fun but save money in the process.
- Hack: Identify as a Producer, not a Consumer.
When I’m watchin’ my TV and a man comes on to tell me how white my shirts can be. Well he can’t be a man ’cause he doesn’t smoke the same cigarrettes as me. I can’t get no, oh no no no…. no satisfaction.
(The Rolling Stones, 1965).
Specific groups/identities notwithstanding, American culture at large lives according to a driving drumbeat of consumerism. The message of “you are what you buy” has become so ingrained in daily messaging that we seem to absorb it without thought. We simply feel better about ourselves if we consume this brand of cereal or television or family vacation than if we had another because that’s what people like me and people I like buy. But need we identify as a consumer? Doing so, inevitably, leads to spending, not saving.
But what if we ran the opposite direction altogether and identified not according to consumption but took pride in production? Now, instead of gloating about something off the shelf I in essence take pride in an actual accomplishment of some sort. Learn a craft, a skill, or develop an ability. Work, volunteer, and make the world a better place than before you arrived on the scene. Leave an impact. In so doing not only will you save money down the road you’ll have something besides rusty clunkers and outmoded fashions to point to as defining elements of your life.
- Hack: Toss the TV. What does TV watching have to do with spending/saving? Plenty. TV and other forms of mass media are free and/or cheap to the end user. Why? The content gets paid for by advertisers. Advertisers who wouldn’t spend such sums if it didn’t positively affect their bottom line. Advertisers who know that this “free” programming leads to increased sales. Studies have indeed shown a very direct correlation between one’s TV viewership and the amount one spends on consumer goods. It goes without reason. The whole point of TV is to drive advertising and the whole point of advertising is to get you to think about, consider, and purchase a whole host of goods and services that otherwise wouldn’t appeal to you. If you shut off the tube and opt for a book instead instead, it probably would never occur to you to in the course of your reading to replace your deodorant brand, check out the new offerings at TGIFridays, or lust after a new ride.
So there you have it: a few ways our brains work and how we can work our brains to our savings advantage. I’m sure I missed something. If you think of more let me know and we’ll work up a part II.