Have you ever really, really wanted something but then sloughed it off because the likelihood of saving the money to achieve it was super low? You may have just thrown away the possible. How could I know this? For two reasons: research and client experience.
In a recent interview with Jill Cornfield of NBC Universal, we discussed this very topic. She also quoted Brad Klontz, a financial psychologist who contributes good work to our growing field. His research on the topic is called The Sentimental Savings Study and addresses the proof behind increasing savings 73%. The research highlights 3 particular modules that lead to your ability to save and achieve goals. I have been practicing all 3 of these for some time with my clients. Here they are and here is how to use them:
Part of saving is to understand what your own money beliefs are, and how you can manage them. We all have money beliefs, and one money profile (e.g. saver) isn’t necessarily better than another (e.g. status focus). Awareness of how we think about our money, and what behaviors those thoughts can drive, is the first step to becoming a healthy saver. Here’s an example. You’re a spender, and you’re triggered by bad days at work or when things go wrong. Your regular default thought is “I deserve a treat” after surviving that day, so I’ll go buy something. When you become aware of your trigger > thought > behavior, you can stop it and change it. So, after a bad day (trigger), you might change your thought to “let’s shake if off and do something positive” and do something you love to do like a spring walk, read a book, chat with a friend. Answer this questionnaire to get your own money profile: www.behavioralcents.com/my-money-behaviors.
Connect Saving to Your True Values
Sometimes planners and investment advisors confuse goals with the tools to achieve the goals. For instance, your goal isn’t to save in a 529 College Plan. That is the tool to help you save, keep the savings locked in, and minimize taxes on those savings. Your real goal might be to give your child the best education possible so she can use that knowledge to give back to the world. Your value might be supporting family, and thinking about it gives you the warm and fuzzies all over. The savings intent aligns with your values, so it can fit into your life and gives you purpose to save every time you think about it.
Here is where the fun part comes in. Let’s go back to your child who will go to college one day. Let’s visualize that day. Close your eyes, watch your daughter walk up to the stage in her gown and receive her diploma. Admire with pride how she has grown into a young adult, and how she will use her science/engineering/social degree to add value to the world. See her smile and say thank you for supporting her all these years. Watch her hug her friends, pose for pictures, and celebrate the day.
Visualizing creates emotion. It makes the end target stick in your mind. And here’s what else it does – it goes head to head in battle against the instant gratification emotion. So next time you think about spending because you might be triggered by the newest iPhone or TV, take a pause. You’re feeling excitement about buying something new, but shift. Picture your daughter up on that stage. Feel the pride. You may just find your values and family love will put that money into savings instead.