Sunday 5 March 2017

Genetics May Be Keeing You from Saving for the Future!

Whew!  I dunno about you, but when I used to blame one of my weaknesses of will, personality or morals on my parents and upbringing, that really helped.  But then I decided I couldn't use what did or didn't happen decades ago as an excuse.

But now I can blame it on GENETICS!   You see, it's not me!  Talk to the genes!

A Neuroeconomist (you just knew they had to exist) is making the argument that we may have a genetic reason for not saving for our own future!

“Saving doesn’t do much for your happiness,” says Michael Norton, an associate professor at Harvard Business School and co-author of the upcoming book Happy Money: The Science of Smarter Spending. “Having more money in the bank isn’t highly correlated with being a happier person but the more debt you have, the less happy you are.”

The article goes on to say that if we write ourselves a letter from the 65 year old version of ourselves, thanking us for the money and indicating all the things we can do with out, this will go a long way to encouraging us to save (up to 30% more!)

As well, for those of us who are not wired to save, it helps if we see any money we don't spend as extra money we can have to spend on something else!  It may seem really obvious to those folks who understand why saving is beneficial, but for the rest of us, literally saying "If you don't buy that, you'll have $100 to spend on something else in the future." or maybe even more specifically "You'll be able to buy that trip to Iceland that you've always wanted"... that will trigger the right part of our brain to enjoy the benefit of saving; if only so we can spend it again to dip our frigid body into a warm blue thermal-pool.

Spending activates the same part of our brain as having sex activates.  (Do people really have sex while in fMRI scanners?!)   At the same time, noticing the price tag can activate another part of the brain... the same area where foul smells are registered.  So the lesson here is if you see something you like, check out the price as quickly as possible to reduce your chance of falling totally in love first!

Also, telling others  you're going to save is a real motivator, and reporting to them weekly about how much you save will encourage you to save twice as much!

One area I disagree with this article: it says to pay off the credit card with the highest interest rate first... While this make the most logical sense, the brain REALLY needs to see quick wins to be motivated, so pay off the card with the lowest balance, regardless of the interest rate amount, so your brain will be motivated by this quick win.  Then you will only have 6 more cards!!!!  Then pay off the next lowest balance quickly.  And now you have only 5 more cards.  Certainly, once you're in the habit of paying off the cards, then do the wise thing and pay off the one with the highest interest... but be sure you're IN THE HABIT of paying off cards first!