← Afford Anything | Make Smart Money Choices![The Psychology of Sales, Discounts and Deals [GREATEST HITS VAULT] — Afford Anything | Make Smart Money Choices cover](https://megaphone.imgix.net/podcasts/76596ff0-aae1-11ec-9d71-2f600d8e89e7/image/_artwork_-_AffAny_2019-06_1400_347kb.png?ixlib=rails-4.3.1&max-w=3000&max-h=3000&fit=crop&auto=format,compress)
Afford Anything | Make Smart Money Choices
The Psychology of Sales, Discounts and Deals [GREATEST HITS VAULT]
01:03:10
Loading summary
Transcript75 lines
- [00:00]
A
The easy example is sale prices. You would buy a shirt that was $100, but it's marked down to $60 more frequently than you would just buy a $60 shirt. Because you have that easy comparison, you have the easy good feeling of saying, oh, I'm saving $40.
- [00:16]
B
Today is black Friday. So it's a perfect day to replay an episode from the Greatest Hits Vault on the psychology of discounts, deals and sales. Because right now, millions of people, including me, are shopping discounts. We're bargain hunting. But there's a whole science behind why we feel compelled to shop during sales events. So in today's episode, which Originally aired in January 2020, I chat with behavioral economist Jeff Kreisler about how to make smarter financial decisions. Enjoy and happy Black Friday Cyber Monday. You can afford anything, just not everything. Every decision that you make is a trade off against something else. And, and that doesn't just apply to your money. That applies to your time, your focus, your energy, your attention. Anything in your life that's a scarce or limited resource. And that leads to two questions. Number one, what matters most to you? And number two, how do you align your day to day decisions in a way that reflects that answering these two questions is a lifetime practice. And that is what this podcast is here to explore. My name is Paula Pant. I'm the host of the Afford Anything podcast. And today Jeff Kreisler joins us to talk about how to stop making so many money mistakes. Jeff is the editor in chief of peoplescience.com, a website that explores the ways in which we trip ourselves up when it comes to how we handle money. He's also the co author of the book Dollars and Cents, along with Dan Ariely. Both his website and his book explore how and why we often get in our own way. We often are our own worst enemies when it comes to how we mist, think money and spend in ways that often don't make sense. Jeff attended Princeton and used to be a lawyer before switching gears to become an author and speaker. We're going to spend the first half of today's conversation talking about the ways in which we trip ourselves up. And we'll spend the second half of the conversation talking about how we can save ourselves from ourselves. Here he is, Jeff Kreisle. Hey, Jeff.
- [02:14]
A
Hey, how are you?
- [02:15]
B
I'm great. How are you doing?
- [02:17]
A
I am still alive, as I like to say. So that's a good thing.
- [02:20]
B
That's perfect. That's better than the alternative. Jeff, I wanted to talk to you today about the ways in which we commonly trip ourselves up. I've heard from so many people in this audience who say, I'm trying to keep to a budget, I'm trying to only spend a certain amount, but I keep going over every month. Do I just lack willpower? Am I just a terrible person? Are they terrible people?
- [02:43]
A
Yes. They are not terrible people. In fact, they are people. And people by their nature are flawed and irrational. And most importantly, they're emotional. And I think one of the things about financial decisions that we often don't accept as reality or we think is not true is just how emotional our financial decisions are. Money as this lure, because it's. There's numbers and decimals and you can put on a graph and then charts and there's data that we think it's just cold hearted decision making. Do the right thing and it's easy. And the truth of the matter is that financial decisions, like all of our decisions in life, are driven by emotions. That's sort of the underpinning of this field of behavioral economics, which I've been fortunate enough to be involved with now for some time. Because we're emotional people and when we don't know what the right thing to do is, we often fall prey to sort of traps and biases that are designed to make us go with the emotional flow. Right? Do the easy thing, the thing that feels right. The easy example is sale prices. You would buy a shirt that was $100, but it's marked down to $60 more frequently than you just buy a $60 shirt because you have that easy comparison. You have the easy good feeling of saying, oh, I'm saving $40 or that easy relative to a $100 shirt. A $60 shirt is a great deal. Whereas the challenge of figuring out what a $60 shirt itself is worth without that comparison is difficult. And we emotional beings don't want to do that. And I do want to just say one sort of broad thing for listeners and that is everybody has a hard time when it comes to making financial decisions and that there should be no shame in that. And that's the first thing I often tell people is to not feel bad. I go and I speak to like wealth advisor firms, people that like tell folks with millions of dollars what to do with their money. And I always hear the story about the number one performer, the person who does best telling his or her clients what to do with their money, makes the most mistakes him or herself with her own money. And I started to always wonder what that was. And I Realized it's this emotions thing. When I am telling a client, you know, what to do for their retirement or their college saving funds, I look at the charts and the graphs, I say, this is what you do for your kids and your future. Then we turn it on me. So that's me, that's my future, those are my kids. Or less dramatically, that's like my shopping experience and all those things. It's emotional, it's personal. So I hope that if there's any takeaway from however long we talk today, for your listeners, it's that it's okay to not know what you're doing, to make mistakes and to be human. And that's challenging. But a beautiful thing when you talk.
- [05:21]
B
About money, being emotionally driven. Oftentimes the connotation to the word emotion is, is a very charged feeling that you might to a great extent feel angry or joyous or excited or sad. But on a day to day level, it seems as though a lot of our spending decisions are emotionally influenced. But those emotions are often subtle and not recognized or not consciously identified.
- [05:47]
A
Absolutely. I mean that's the real challenge here. And one of the things that I hope that in my work and the people that are smarter than I in this field can, can help people realize is that these emotions, it's not like we go and we're at a coffee shop and we start weeping with emotion and we say, give me a latte. Right? It's these unconscious sort of hidden emotions that are really create these shortcuts for us, these decision making shortcuts that are emotionally charged. I mean, look, we would be crippled if we were to face every financial choice and every choice in our life and really weigh all our options, right? I mean, the underpinning of any sort of money decision, financial decision, is this idea of opportunity costs, which I'm sure your audience, you have a smart audience, you know, but just real quickly, it's just the opportunity cost is when you spend money on something, what else could you spend it on now or anytime in the future, right? Like Susie Orman's famous don't buy the $5 latte every day is because that $5, you could, you know, put it in a compound interest bearing account and retire at age of 17, right?
- [06:45]
B
That was David Bach by the way. I just have to throw that in there. Otherwise, otherwise I'm going to get like a hundred emails about it.
- [06:51]
A
I apologize to Susie. She can now resume dating, I guess. But the idea is that we weigh like we're supposed to weigh all the possibilities and My co author on the book that I wrote, Dollars and Cents, and it was written with me by a man named Dan Ariely, who everyone here should go check out his other work. He took a group of his graduate students to a Honda dealership. They wanted to find out how people dealt with opportunity costs. And he asked, people say, you're about to spend $30,000 on a Honda. What else could you spend that on? Right? Like the opportunity costs. And people couldn't think of anything. And so they pushed them and they pushed them and the most they got is people would say, well, if I don't spend 30,000 on a Honda, I could spend 30,000 on a Toyota. Now that's not spending your money on something else. It's just a different brand. And that's because people have a hard time thinking about opportunity costs. They couldn't think, oh, $30,000, that's maybe, you know, retiring a year early or a few nice vacations or, I don't know, a few items from a hotel minibar. They couldn't think about opportunity costs because it's just hard to do. It's too much to expect all of us to be these calculating machines. So instead what happens, and it's okay, is we find these shortcuts. The $5 latte every day is a great example. At one point we sat there and thought, oh, should I buy this latte? And we decided that we should. And then the next day, instead of thinking, oh, should we buy this latte? We remember that we did it yesterday and that's an easy thing. And we say, hey, I'm a smart guy, I must have made the right choice. And so we do it again. And then the third day we're like, well, two times in a row I decided to buy a latte, I'm brilliant. And then eventually it just becomes this self reinforcing thing that we keep doing because it's easy. Because like none of us want to go through our day questioning every decision and that's okay. And again, my hope is that we start to see the patterns. We start to see the traps that we fall into. We start to find out which biases affect us. Do we spend too much, discretionary spending, do we fall for brand items, the sale prices, whatever it may be. And then once we see what trips us up, then we can create systems and environments so that we get the better outcomes.
- [08:53]
B
All right, so let's talk about that then and ula, we'll talk about both of those. Recognizing what are some of the errors in thinking that trip us up. Well, let's talk about that first. And then after that, we can talk about how to develop systems to save us from ourselves with regard to our errors in thinking. You've already talked about overvaluing sales and discounts, and can you talk a little bit more about that? There's an interesting example with JCPenney.
- [09:17]
A
Yeah. So the number one thing that people, I think, in my anecdotal experience, fall for is sale prices. And this really has to do with what we call the principle of relativity. I'm careful not to get that confused with Einstein's theory of relativity. It's a different thing that, as I described before we end up comparing prices and before I get into, like, too much of the weeds, the JCPenney story is really informative. So J.C. penney, for those that don't know this, it's a department store. It's around the country. I think it might have started in the Northeast. But regardless, people go in there, and what J.C. penney does is they have prices that are high, but then they also have a ton of sales. Sometimes it's a sign on a rack, and sometimes it's a flyer that's out there. Sometimes, if you're a regular user, there's a sale price to everything. And they had all these loyal customers. Then JCPenney, at one point, they switched their CEO, and the CEO was like, this is ridiculous. Instead of making people jump through all these hoops and do all these things to get sale prices that end up being at the same price as our competitors, let's just list everything at the price that it's worth. There's no more sales. Let's just tell them what they literally called fair and square pricing. And we'll have the same as our competitors. And people, it just saves everybody time. And so they instituted this change, and everybody hated it. They absolutely hated it. They left JCPenney and they went elsewhere. And finally the company fired the new CEO. They brought in someone else, and they reinstituted their sort of sale and discount policy, and people came back. From a rational perspective, it doesn't make any sense. Right? You should just make your decision based upon, is the price a good price? And if that $60 sweater is the same at JCPenney as it is at Sears, it shouldn't matter. Instead, though, J.C. penney had the $100 sweater marked down to 60, and it worked. And it got people loyal because people loved finding sales. They loved sort of the game. It was a dopamine rush. When you felt like you accomplished something or you Won a little prize. And their whole model was based upon this idea of relativity that like giving people sales and creating quote, unquote savings. People would be emotionally connected to the experience and become more loyal and therefore shop there for the $60 sweater when they could go elsewhere. And it worked. It got people connected to J.C. penning because of this relativity. Relativity. Basically what it does is it gives you, like I said hinted at earlier, it gives you a shortcut. Instead of sitting there and looking at the $60 sweater and saying, what's the opportunity cost? What's this really worth to me? And doing this hard calculation, instead you look at it and say, oh, the $60 sweater is a much better deal than the hundred dollar sweater it used to be. And so right there, in a snap of the fingers, you get your choice. You make a value judgment based just upon 60 versus 100 instead of 60 versus anything else in the world. And that's what we love. We love the easy solution. That feels good.
- [12:15]
B
So I have two questions about that example. The first is, is that an issue about the way in which people evaluate their spending decisions or was it a branding issue in that J.C. penney had already selected for the types of customers who were prone to loving sales? And the reason that I ask that is because when you describe that fair and square pricing, I think about immediately, I think about Trader Joe's and Carvana, both of which are businesses that have implemented the fair and square. No sales, no discounts, no gimmicks. This is what the price is and that's that. And both of those companies have done well with it. So is it just that the brand needs to be established like that from the beginning?
- [12:52]
A
Yeah, I mean, I think from a business perspective that was the mistake that they made. I mean, if they had seen suddenly launched a new company called JCPenney2 or, you know, that it come out as this is our thing is we're fair and square pricing, then it would have been different. But they had got all these people, all their loyal customers were used to having a certain experience. The shopping experience isn't just how much money goes out of my bank account and what products do I leave with. It's a literal experience. And a lot of that involved the emotional connection and the emotional satisfaction of finding sale prices. So the fact that they change that, that they were established as one, then changes something else and change back. That was the problem with this particular business example. And it sort of is both of your ideas. That's the business example of the specific case study. And that's all underpinned by like how people make valuations of what something's worth.
- [13:47]
B
And so my second question about that is, so with the J.C. penney example, that seems to be a clear example of a time in which a CEO said, hey, hey, we're not going to try to trick you, we're going to try to be more transparent. And that attempt backfired. But then on the flip side of that, you have all of this talk now about like dark nudges and people find out that Uber, for example, sends its drivers an update of the next ride before their current ride is finished in order to try to gamify them into accepting more and more rides. And when people find out about that, on one hand it sounds like people think those dark nudges are shady. But then on the other hand, with the J.C. penney example, when companies try to do away with that, it seems to be a damned if you do, damned if you don't situation.
- [14:35]
A
Yeah, this is kind of a Pandora's box of a topic, but it's an important one as the field of behavioral science grows and nudging grows. And Richard Thaler, who recently won the Nobel Prize in the field he would call darknoj, they refer to him as sludge as opposed to nudge. And he has a really interesting framework for approaching it from the design angle. Throw. If you are the uber or the JCPenney and you're thinking about this. And his framework is basically that for a nudge to be fair and ethical, it needs to be transparent, it needs to be opt out able and it needs to be designed in a way that's really for the end user's best interest. JCPenney was transparent about what their sale price is. They didn't make it seem like they were hiding something. It, it was here's the price and here's the sale. And it was something that people could opt out of, they could leave. Was it for the best interest of the customer? Maybe that's debatable. Some of the things that Uber does and some of these other companies, it's not as clear that they fall into and they satisfy those sort of three elements. And I think that's why things get rubbed the wrong way. I mean there's, it's an interesting time because there's a lot of companies, more and more companies that are adopting sort of behavioral science and they're not always doing it, I think, in the best long term interest of their customers or them themselves. I mean, this is the ethical challenge, whether it's about behavioral science or it's about CEOs and fudging the numbers for the quarterly earnings. It's always been an issue like long term versus short term. And you can always design like an app or a product that gets people addicted and gets them to spend and stick with it forever. But once that breaks, they're going to not be loyal. They're going to, once they find out what's happening, they're going to be disappointed. You think about casinos. Casinos are an entire experience designed around keeping people trapped and spending money and emotional and literally gamifying, as you mentioned, with the thing to keep people pumping in quarters. But then once that spell is broken, most people walk away from a casino and they don't feel good. They're not necessarily in a rush to come back. And the same can happen with a product or service, whether it's a small company or something like an Amazon or an Uber. It's a fine line to walk. Again, as I said, this is Pandora's box. So I'm sort of wandering around, feeling my way around the box. But I was speaking with someone earlier, we just went through the shopping season and I'm sure plenty of listeners used Amazon.com because they had free shipping. Well, no, they didn't have free shipping. They paid for Prime. They paid $100 a year for shipping. And even if you bought 100 items on Amazon, that's still a dollar an item, but it felt free. Amazon also, they had the one click shopping so it eliminated the friction. I mean, these are all sort of behavioral nudges to make us feel good, like that's the way we want to do. We got to shop on Amazon. We're not going to shop on, you know, whether it's the local store or somewhere else. So I often use Uber as an example of another one of the principles that people fall for. At this point. I'll just say, you know, they have a really bad reputation when people like stop and get in a conversation about Uber and how they treat their drivers and, and all these things. People like, they just don't like Uber as a company, but they end up loving to use a product because just triggers all these emotional responses and it makes it so easy and it's literally right in your hand. And whether that's good or bad is a bigger conversation if the convenience is to overcome sort of corporate questionable behavior. But what you're asking is the important question for our field going forward is what are the ethics that are driving and is short term sort of extracting customers Worth the long term damage. And I would argue it's not. But some might argue it is. We got dark and deep for a second.
- [18:12]
B
We did. Going back to the Amazon example that you gave, that strikes me as an example of another common money mistake that people make, which is separating the pain of paying from the experience of the purchase.
- [18:27]
A
Exactly. The pain of paying is if you were to ask me what are the one or two big money mistakes, one would be the sale prices, the relativity. And there's more layers of that than we touch on. The other is the idea of the pain of paying, especially as financial technology and the way we pay for stuff is evolving rapidly. And just to back up, the pain of paying reflects this finding that when we pay for something, when we hand over a $20 bill at a counter, it stimulates the same region of our brain as physical pain does. And if your listeners maybe stop and think about those moments when they've handed over cash, like, yeah, there's a little bit of a tug, like, you may be getting something in return, but you feel the loss of that, that money. Now, pain, like, from human evolution, biological standpoint, it serves a purpose, right? Pain's supposed to make us stop and pay attention to what's happening. You put your hand on a stove and that burn makes us look at our hand and decide, oh, we should move it away. The same thing should be what happens with a financial decision. That pain of paying should make us stop and think, hey, is this the right decision? In a very, like, egghead way, like, weigh the opportunity costs. That's what we should do. But what ends up happening in our modern world is instead of feeling that pain, we numb the pain. We use devices that make it so we don't actually feel it. In Amazon's case, right, one, you see an item that you want, you can hit one click, and they've already stored your credit card. You don't have to think of it, just hit one little button on your thing and it's coming to your house. That's not a painful process. So you don't stop and have that moment of thinking, should I spend it? The big culprit or the big example that is most common is really credit cards. And nowadays people don't use credit cards. It's on their phones. Because credit cards, they numb that pain of paying. They're not handing over cash. In many ways, they harness the two elements of the pain of paying. One is the time between when you consume a product or service and when you pay for it. And if you think about with a credit card. Say you go out to dinner and you pay with a credit card. You're not actually paying right. Then you're signing a promise to pay later. And then later comes and you're not really consuming. This is for something you had like three weeks ago. And so there's all this time between it and the more time there is between a decision and the consequences of that decision, the less that we really stop and evaluate the worth of that choice and what we should be doing. And credit cards also, in addition to the time, they also harness sort of just our awareness, what's often called the saliency. It's not quite a casino chip where we don't feel like we're spending any money at all, but it's close. It's a little piece of plastic and we don't pay attention to. It doesn't feel like money. People. There are so many studies about credit cards that show that when we use credit cards, we don't remember how much we pay. We don't remember how much we tip. We just sort of forget so much about it, like almost instantly after doing it. And, you know, there's a whole spectrum developing about what's most painful payment and what's least painful. And you know, the less painful it is, the more likely we are to make less conscious and less thoughtful decisions. Right. Cash is the most sort of painful. And a lot of people, financial advisors, if you're having trouble with your spending, they'll say, take a month and just spend cash. That's not totally practical all the time, but it drives home the point that you do that. You're going to start being more careful. You're spending. So cash is most painful. Then it's like checks and debit cards and credit cards. And now it's easy pass and automatic bill pay and all this financial technology. You can wave your phone or your watch. You know, there's even like facial scanning stuff. Like it's. It's crazy how easy it is to pay. And they. These products are marketed as it's easy to pay, but that makes it easy to pay and it makes it less thoughtful and less painful. Yeah, that's convenient. But it will often make it so we're not as conscious and thoughtful about our choices. And I should say, you know, like, I come at a lot of this from the perspective of sort of how they're out to get you, if you will, how these principles are sort of used against us or we fall prey. And I think that's often what happens. But at the same time, we can use these for good. You know, we can be aware of the pain of paying and we can use it to make it so it's automatic and painless to save, right? Like automatic deductions for our 401k, like the default savings that companies have instituted over the last 10 or 15 years have increased people's savings rates dramatically because it's not painful. There's products like Acorns. I'm sure your listeners have heard of Acorns, where if you have a savings goal and you spend money, it automatically rounds up and it puts that spare change into a savings account for you. That makes it painless and it does good things. The key again, as I hinted at earlier, is like we, we need to be conscious of the fact that the pain of paying or the lack thereof is being used for or against us and then have it be at our discretion whether or not we sort of dial that pain up or dial it down.
- [23:14]
B
It's time for Black Friday. Dell Technologies biggest sale of the year. Enjoy the lowest prices of the year on select PCs like the Dell 16 plus, featuring Intel Core Ultra processors with built in advanced features. It's the PC that helps you do more, faster plus earn Dell rewards and enjoy many other benefits like free shipping, price match guarantee and expert support. They also have huge deals on accessories that pair perfectly with your Dell PC and make perfect gifts for everyone on your list. Shop now@dell.com deals we've all set health goals. Exercise more, eat better, lose weight. But without a plan, they often fade. That's where Prolon comes in. Its five day fasting mimicking diet gives you a structured approach to stay on track and see real results. Prolon offers an injection free way to get help to lose weight, get help to burn fat while protecting lean muscle and maintain results in just five days. It can help activate fasting pathways to help support metabolic health and rejuvenate cells, all while letting you enjoy real food. Prolon is a plant based nutrition program featuring soups, snacks and beverages that are designed to help nourish the body while keeping it in a fasting state. If I were looking for something like this, this is what I'd use. Because Prolon has been shown to support metabolic health, fat loss and energy. And NextGen builds on the original Prolon with 100% organic soups and teas and ready to eat meals for a limited time. Prolon is offering listeners 15% off site wide plus a $40 bonus gift when you subscribe to their five day program. Just visit prolonlife.com Paula that's P R O L O N l I f e.com Paula to claim your 15% discount and your bonus gift. Prolonlife.com Paula these statements and products have not been evaluated by the Food and Drug Administration. These products are not intended to diagnose, treat, cure, or prevent any disease or condition.
- [25:14]
C
At Capella University, learning online doesn't mean learning alone. You'll get support from people who care about your success, like your enrollment specialist who gets to know you and the goals you'd like to achieve. You'll also get a designated academic coach who's with you throughout your entire program. Plus, career coaches are available to help you navigate your professional goals. A different future is closer than you think with Capella University. Learn more at capella. Edu.
- [25:52]
B
When you talk about the gap between the time in which we pay and the time in which we actually use that product, you gave the example of credit cards. Do debit cards have that same effect?
- [26:03]
A
They do, but not as strongly as credit cards. What we found is that because debit cards are connected to our checking account, they're actually like taking money away from us, as opposed to promising to pay money later. And it's a subtle difference, but there are a couple things at play there, and forgive me if I get too in the weeds. One is this idea of loss aversion, which is another behavioral principle. The idea that we feel a loss much more strongly than we feel an equal gain. For instance, losing $10. That bad feeling is only overcome by gaining $20. So the loss of money feels much more strong to us. So if we're in this case taking money away from ourselves using a debit card, we're taking money that we have already and removing it. That is much more painful to us in many ways, and we feel it much more strongly than promising to pay money later.
- [26:59]
B
How salient is that to a person who has internalized the idea that their credit card balance is a big minus on their balance sheet?
- [27:09]
A
Everyone, depending on their perspective, can change the weight that these different principles and biases have. I mean, that's what I would hope people would strive to do. So if you're a person who your credit card balance is something that you're very aware of, then using a credit card will be more painful, perhaps, than a debit card. What most studies are the most recent things I've seen suggest is that when we think about our discretionary spending the money that we have to spend, we often think about our checking account. And that's what we see on our ATM receipt, and that's what our debit card is connected to. So we're more aware of our checking balance than we are our credit card balance. Our checking balance is something we see when we pay our bills. It's something that, like, we're just more conscious of. That's where our paycheck goes into our checking account. And so most people are more aware of the account that's connected to that debit card. So that's why you're more conscious of the pain there than a credit card balance, which, again, is like, it's not taking money away from you. It's money you're promising to pay later. That said, if there are listeners out there that are, like, on top of their credit card, that's amazing. That's great. And I can't in good conscience suggest everyone become obsessive and try to always know that. But if you know that, that's immensely helpful. Oftentimes when I give talks, I'll ask people to raise their hands if you use credit cards. And the whole room raised their hand. And then I say, okay, now keep your hand up. If at the end of the month, you know exactly what your credit card balance will be. And I would say maybe 1% of the thousands of people I've spoken to know that. So most people don't. But if they do, good on you, as the Aussies might say.
- [28:46]
B
Let's talk about some of the other common money mistakes that people often make. You've mentioned in your book overvaluing what you own is a common mistake.
- [28:55]
A
Yeah. So there's something called the endowment effect. This idea that when we possess something, just the mere act of possession makes it more valuable to us. The fascinating study. I mean, there are a few, but it was about, like, mugs. They had mugs from a college store. I think it was Duke. Don't quote me on that. But people that literally held the mug in their hand valued it more highly than people that didn't. And it was the same mug, but it was a matter of, like, connecting to it and having that be something that you possess, you know, on a grander scale, when you're selling a home, you value the home you've lived in and everything that's associated with it and the life that you've had there much more than someone who might buy it. And that's not just a matter of negotiating. You know, sell high and buy low. It's just as objectively as science has been able to measure the fact that you have other value connected to it beyond financial. You sort of conflate with the financial value. So, yeah, the endowment effect is connected to what I mentioned earlier, this idea of loss aversion. Because once you own something, when you give it up, you're going to feel that loss more. So the idea of giving up a house or a mug that is connected to you is going to feel more painful than it would otherwise by virtue of just owning it. It's really like the whole driving force behind drug dealers. The first one is free. Right. Once you're addicted, once you've been connected to something, suddenly you're going to value it a lot more. And this can impact our financial decision making on choices big and small. And sometimes it's a matter of like not being able to leave a brand, even if there's a better brand out there. You know, you're a Starbucks coffee drinker, but you could save a dollar a day if you started drinking Pete's, that's right next door and even closer to your office than the Starbucks is. But you're not going to give up because the value just by being connected already is great. It's why loyalty programs work, because you become connected to a product or service. It's pretty powerful. And again, like many of these things, it's very unconscious. A lot of people don't stop and say, I'm overvaluing this product because I'm connected to it. But that's what we're doing.
- [30:57]
B
And so that has clear implications for future spending because it can trigger you to spend more than you otherwise would need to to get comparable value.
- [31:04]
A
Yeah, absolutely. And look there, I mean, the challenge is many of these things, I mean, like endowment, this idea is a good example, is there's not a cold bottom line that, like, spending the least amount of money is the best thing to do. Sometimes the value to you as a person is worth it. Sometimes that good feeling of being like, loyal and having a product that you really like can be worth it. Again, though, it's. Are you making that decision consciously or are you being tricked into it? You know, if over the course of a year you're going to spend $100 more drinking Starbucks and you actually do feel good about it, you might get more than $100 worth of value out of it, but it's when you're just doing it unconsciously because you've sort of been tricked by these emotional shortcuts, that's when I think it's a problem.
- [31:46]
B
What's another example of a common trigger for A money mistake that people often make.
- [31:51]
A
I would say another big one is something I hinted at when I mentioned Uber, and that's how we often overpay for effort or the expression or show of effort. People will pay more for a locksmith who takes an hour to open their door, and they swear and sweat and break stuff and have to go back and forth to his or her truck 100 times. They'll pay more for that than a locksmith that opens the door in one minute. Because they see all this effort and they're like, oh, my God, you work so hard. When in truth, you're paying for incompetence. What matters to you should be, how quickly can I get into my home? But that's a hard thing to calculate, is what's the value of getting to my home in a minute. So instead, we jump to what the effort is, and this translates into a lot of ways that now products and services are being designed because some places show effort and some don't kayak and even Domino's Pizza organizations and. And online services show a progress bar, right? That's showing you the effort that they're making, and so we value that more. Uber, again, is this great example Uber. What do you do? You open the Uber app and they make the effort to geolocate you. They see where you are, and they see a bunch of cars around you, and you press a button and they select a car just for you, and then you watch the car slowly but surely creep down the street to get you. And study after study shows. When we're waiting for something, whether it's like checking into a conference or waiting for a car to come, when we're waiting and we see the effort that's being made, we see people scurrying about, or we see a progress bar. We underestimate how long we've waited, and we overestimate the value of that product or service. It's something called operational transparency. Because they're showing you this effort, it's hard to value, like, what's it worth to me to wait three minutes for a ride two miles from here? But they're showing you. They're giving you this emotional shortcut so you can see what it's worth. People that are companies and services that are bad at this, you know, typically creative services, you know, like writers and artists and folks who, you know, might perform for an hour, people think that it's only an hour of work when it's a lifetime of work. And then there are others. I mean, the word artisanal which is one of my most hated words I've seen. I've seen artisanal hammer once listed like, it's everywhere. Because artisanal says handmade and handcrafted and special effort put into this. And it's designed that way to trigger this sense of, like, oh, it's really unique. You go to an expensive restaurant, and they describe, you know, like, how the cow that your steak is from was raised and what her name was and all this stuff, and it's like, it's there to show you how special, how much effort was put into us. And again, like, lest I seem like someone who's. Who's coming and saying, like, pinch every penny. Sometimes going to an expensive restaurant and you're surrounded by candlelight and wine, and someone with a French accent spends an hour describing a steak like, that's an experience that could be worth it as long as I feel like, as long as we are conscious, that's what's happening. We're not just getting fooled into paying $40 for a hamburger because someone's describing it as thus.
- [34:53]
B
And this is why so many companies are now showing the behind the scenes. That's like a whole.
- [34:58]
A
Yeah, absolutely. This is mere speculation on my part, but I sometimes wonder if the open kitchen concept that so many restaurants have adopted. I don't know if you have a lot of foodies with you, if everyone there's eating ramen every day till they retire. But open restaurants, where you're like, you see, they work in the kitchen, whether intentional or not, that's part of what it does, is it shows you how much work is going on. Now there's a whole conversation like, is that a nicer experience than, you know, a quiet restaurant with the violin music? And there are other reasons to have it and all that, but one of the things it shows, it shows you all of the effort that's going in. Many industries are adopting that. I have been curious about knowing how many of them did it consciously because of this idea of operational transparency, and how many of them have sort of stumbled into that. As an added benefit, you've also talked.
- [35:50]
B
About, you know, speaking of foodies and artesian this and that and the other, about how the use of very flowery language often prompts people to overpay.
- [36:00]
A
Yeah. So flowery language. The example I often use is describing wine. I don't know if any of your listeners have ever gone to, like, a vineyard for tasting. It's a great experience, but they often describe the wine for, like, hours. It does two things. One is it will trigger this thing we just mentioned about this effort. The other thing it does is flower language. It raises our expectations for what we're going to get from the product or service. You know, the more you hear something described. In some ways this also works with the endowment idea. Like the more you're invested in it, the more that you're going to expect it to be a good experience, the more that you're going to feel like it's worthy of your time and money. And language can do that. I mean, language can trigger so many emotions. It's why there are writers and performers and poets. So the more that it's an elaborate description, the more likely that it's going to be also highly priced. And again, that can be something that you want. Like some people would love to have an elaborately described cheeseburger, others don't care. But I find myself sort of being aware if I'm in a setting where somebody is suddenly describing in flowery language how special something is. I'm like, look, I just want to buy the newspaper. I don't need to hear about all the other aspects.
- [37:14]
B
Just wanted toenail clippers.
- [37:16]
A
Exactly. Please sir, give me your CVS coupon with 500 pages.
- [37:26]
B
Wayfair's big sale is returning. Get ready for way day. For four days only, score up to 80% off all things home with free shipping on everything from October 26th through 29th. Score Wayfair's best seller deals like up to 80% off area rugs, up to 60% off mattresses, up to 60% off bedroom furniture and more exclusive door buster deals. So mark your calendar and shop Wayday starting October 26th at Wayfair.com Wayfair Every.
- [37:55]
C
Style, every home eczema is unpredictable, but you can flare less with ebglis, a once monthly treatment for moderate to severe eczema. After an initial four month or longer dosing phase, about 4 in 10 people taking MGLIS achieved itch relief and clear or almost clear skin at 16 weeks. And most of those people maintain skin that's still more clear at one year with monthly dosing.
- [38:15]
D
MGLIS Lebricizumab LBKZ a 250mg per 2ml injection is a prescription medicine used to treat adults and children 12 years of age and older who weigh at least 88 pounds or 40 kilograms with moderate to severe eczema, also called atopic dermatitis that is not well controlled with prescription prescription therapies used on the skin or topicals or who cannot Use topical therapies. Ebglis can be used with or without topical corticosteroids. Don't use if you're allergic to Epglis. Allergic reactions can occur that can be severe. Eye problems can occur. Tell your doctor if you have new or worsening eye problems. You should not receive a live vaccine when treated with ebglis. Before starting ebglis, tell your doctor if you have a parasitic infection.
- [38:49]
C
Ask your doctor about eglis and visit eglis.lilly.com or call 1-800-lilyrx or 1-800-545-5979 introducing.
- [38:58]
D
Metaray band display, the world's most advanced AI glasses with a full color display built into the lens of the glasses. It's there when you need it and gone when you don't. Send and receive messages, translate or caption live conversations, collaborate with Meta, AI and more. Be one of the first to try Meta Ray ban display. Visit meta.com metaraybanddisplay to book a demo and find your pair.
- [39:33]
B
So we've talked about a series of errors in thinking that can lead to not spending in the way that we would optimally prefer to do. What are some systems that we can create or processes that we can use in order to save ourselves from ourselves?
- [39:50]
A
Sure, that's a great question. And I would answer one with a general approach and two with some specific ideas. And maybe I'll actually do this in reverse. And the specific ideas have to do with if you identify which of these sort of traps you most commonly fall into, that's the first big step. If you spend too much on shoes, or you spend too much discretionary spending every month, or you always buy the brand name item when you could buy the same item. That's the CVS brand, the generic. If you identify your problems, that's going to be the first big step. And then you can have a very specific approach to how you make better decisions. And the key to this in any context is to make stuff sort of automatic. When it's about changing habits, don't make it so that every day you have to stop and think, oh my gosh, I need to eat healthy today. Oh my gosh, I need to spend better today. Just change your systems and your environment so that the better choices are automatic. Because again, this emotional stuff we talked about, what's so powerful about it is that it's unconscious and it's easy. And if you can create an environment that's unconscious and easy to get to the right choice, that's Going to serve you well. As a specific example, when we talk about folks who tend to spend too much on their monthly discretionary spending, recall earlier I mentioned how we often judge how much money we have to spend based upon our checking account. So one thing we can do, one sort of one time trick we can play on ourself that has impact is if we get automatic deposits from our we have a regular job. God bless you. If you have a regular job and you know, normally it's deposited into our account, we can ask our HR department say, hey listen, can you put $200 a week into just a savings account? I don't mean like your 401k, a savings account that is easy to set up and you can get the money if you want it, but it's a different account than your checking account. Suddenly we've hidden $200 a week from ourselves. And when we look at our spending each week, when we look at our ATM receipt that's on our checking account or our debit account, we're going to think we have less money to spend and we're going to slow down our spend and we're going to only hit that limit. And what we found is that people then don't spend as much. Again, that money is still there. That $200 that's been put aside, it's still there if you need it. But it requires a step or two to get there. And often that step or two, that pain of paying will make us stop and think about what we're doing and make better choices. And all that requires, it's creating a whole new system. It requires going to your HR department once and saying, hey, can you set this up? And they will if they're decent people say yes. That's one specific example. On a sort of bigger picture level, I often reflect upon this idea that I mentioned with credit cards that like the time between a decision and the consequences of the decision can make a big difference. Particularly when you think about the biggest spending and saving issue that we have, which is like saving for the future, for retirement and everything. There's so much time between now and our retired self that we just Future Jeff is a different person than present day Jeff. I'm doing a very short version of why self control is a problem. Why we don't say. But one of the core things that we don't feel the consequences of our decisions when it comes to saving. We don't feel the negative impact of having spent too much right now at the detriment to saving for later and if that is sort of the core underpinning of most people's money mistakes, is spending too much now when we want to spend it later, then what I often talk about doing is making the consequences specific, personal and visible. When we try to make the consequence on this specific, like the more details we have when we think about the future, to the extent that we stop and think about our retired selves, people find when you think about the specific date of retirement, as opposed to, you know, retiring in 40 years, you think about where you want to live and if you have kids and what your health might be and what are your hobby is going to be and you know, what are your different items. The more you can make the future concrete, the more you connect to it and the more you're going to behave in a way that's responsible for that future self. Sometimes it's not retirement, right? I want to save money so I can go on a trip to Iceland next fall. The more you are daydreaming about that trip, the more you're thinking about the specifics of that trip, the more connected you become and the more you're going to be able to overcome your lack of self control to make better decisions today to benefit that Iceland trip. So the more you can be specific about it, the better. In a similar way, the more you can make the consequences of your decisions personal and you can connect them. We talked about holding a mug that becomes part of your person, it becomes part of who you are. And so the more you can think about whether it's retirement and how that affects me, or decisions, how it might affect your children if you have kids, or how it impacts your life, the more you're going to connect to it and feel responsible to the good outcome. Oftentimes it's the bad outcome, the spending now, the emotionally tempting stuff that leads us to respond because we're emotionally connected to that. But if we can make that other choice more personal and more specific, it matters. And the final element that I think is powerful is making good decisions, making saving and investment decisions, making them visible. And what I mean by that is if you stop and think about spending versus savings as sort of the two, I don't know, two sides of a teeter totter, I guess. But the two options, we see spending, right, we see our neighbors, new clothes and new car. We see the good food that we're eating and by its nature that drives us to be competitive, right? FOMO and keeping up with the Joneses. Like we compete on the stuff that we see and that stuff that feels measurable and tangible, we never really talk about or see savings or investing. That stuff is invisible. In fact, more than it being invisible, when you save money for the future, what do you see now? You see less, right? Like, you know, if you're living in, in a scarcity city, if you're barely getting by and you put beside $50 a week, that's less food on your table, right? Maybe we don't feel it as much if we have a little bit more abundance, but, you know, we don't see the benefits of that. There's some fascinating studies showing that when we find ways to make savings visible and tangible, to make the good choices obvious to us, it triggers, like, our identity. I think part of the success of like this fire movement, financial independence, retire early. Is that what it is, is this identity? Right? You've created this identity of like, I'm doing something now for my future. And if you can make the find a way to make that visible and tangible, you're going to be more connected to making good financial decisions. The study that I often talk about, again, my co authored this thing where they went to Africa and they had people save and it was a surprise result to them. But the device that made people save the most wasn't like text messages. It wasn't family triggering, wasn't emotional. It was a little coin where each week, if someone saved money, they would scratch off this coin. They put it on their mantle. And what that did is just showed the family that, yeah, we have a little bit less food this week, but that's because of this thing that we're doing. And there's a survey, that sort of thing, that pushed me over the edge and made me decide I had to write this book. And it was a survey that said men in America were more willing to talk about whether or not they use Viagra than how much they save for retirement. What's more embarrassing, your little teeny, tiny, ineffective savings account or this other issue? And it's just, it's so indicative of how the good choices. And this is a, this is a big social statement too, not just financial. But the good choices are often the ones that aren't rewarded and aren't part of our competitive culture and aren't seen. And so if you can find a way to make the good choices visible, whether that's about your discretionary spending or about not falling for brands or whatever it is to reward yourself by showing you're making the right thing, you're going to connect to it and your identity will slowly but surely change as someone who makes better financial choices. And also, if you can just listen to me babble about financial decision making over and over, just hit this repeat over and over again and support your sponsors and that's going to be the way to do it.
- [47:52]
B
There might be something to that. Repetition is going to really drill it into people's minds.
- [47:56]
A
Exactly. Especially because if you play this at two times speed, which some people do with audio stuff, I secretly make you all send me money via PayPal. So go ahead, do that. I don't know if you realize that was a level that we were. Someday I bet there's somebody doing that. There's some algorithm out there making people do that.
- [48:12]
B
Secretly send them money.
- [48:13]
A
Yeah, exactly.
- [48:14]
B
Yeah, well. And if the money is already just in your PayPal account, not in your checking account in the first place, then. Or in your Venmo account, but not in your checking account in the first place, then it doesn't even feel like real money.
- [48:25]
A
It's not. It's totally. It's Playboy. How many people send people Venmo go out to dinner and then they Venmo somebody some money and they say, hey, that's for the drugs I bought. That's fun, right? That's not real money.
- [48:36]
B
And that's what's fascinating about Venmo. It's almost like the casino poker chips of money.
- [48:40]
A
Yeah, well, that's. I mean that's another area we can get to this idea of mental accounting that, that our money depending on like the source and the account and the use of it, it feels different. Right. Like people treat a bonus year end bonus differently than they do. The same equivalent of a raise. Right. Like a raise that you get every month you treat like more responsibly. A bonus, you splurge.
- [49:02]
B
Well, thank you, Jeff. Where can people find you if they'd like to learn more?
- [49:05]
A
A few places. One is, I would invite them to check out peoplescience.com it's a website that I run that's about this behavioral science and it's not just about financial decision making, but it's about habits and loyalty and design and motivation. And it takes what I was lucky to write about in the book and it expands it and applies it more broadly. And I share the ideas of people a lot smarter than me and I'm really proud of the work we do there. And the other thing is, you can always check me out. Jeff Kreisler K R E I S l e r jeffchrisler.com My Twitter is Jeff Chrysler. All my social stuff, I don't do Instagram. I'm too old for that, I guess. But just Jeff Chrysler is a good way to track me down.
- [49:47]
B
Thank you, Jeff. What are some of the key takeaways that we got from today's conversation? I'm going to review five common ways that we make money mistakes, followed by four solutions that can help us save ourselves from ourselves. Here we go. Number one, beware of falling for sales prices. I see this frequently with people who are new to frugality or who are new to the financial independence movement, and they're thinking about various ways to save money. For the first time, it can be easy to jump to the conclusion that, oh, if I shop deals and discounts, if I only shop sales, if I never buy anything at full price, that means that I'll be saving money. Meh. Not necessarily. Sometimes a sale or a deal or a discount can give you the thrill of winning, the thrill of a good deal. And that thrill either prompts you to spend more than you otherwise would by buying items that you otherwise would not have bought, or it gives you that dopamine rush, that excitement of having scored a great deal. So you keep going back to the same retailer, not realizing that you could get that same comparable item at the same price or maybe even less from a different retailer that doesn't give you an advertised sale.
- [51:05]
A
Instead of sitting there and looking at the $60 sweater and saying, what's the opportunity cost, right? What's this really worth to me? And doing this hard calculation, instead you look at it and say, oh, the $60 sweater is a much better deal than the $100 sweater it used to be be. And so right there, in a snap of the fingers, you get your choice. You make a value judgment based just upon 60 versus 100 instead of 60 versus anything else in the world. And that's what we love. We love the easy solution. That feels good.
- [51:35]
B
Every November on Black Friday, when all of the basically every company out there is advertising some type of a deal or a discount or some Black Friday Cyber Monday special, I always put up a post on Instagram where I say, hey, you know what? You can save 100% by just not buying anything. So don't forget, there's nothing frugal about saving 50% on an item that you wouldn't have purchased in the first place had it been full price. So beware of overvaluing sales and discounts and deals. That is key takeaway and money mistake number one. Number two, beware of ignoring the Opportunity costs of a particular purchase as a result of mentally earmarking a certain batch of money to go towards a certain type of purchase. So, for example, you might mentally earmark 30 grand as the money that you're going to spend on a car, and then you start comparison shopping between different types of cars, overlooking the idea that if you only spent 20 grand on a car instead of 30, then that $10,000 difference could fully fund your Roth IRA and your HSA and you'd still have money left over.
- [52:43]
A
You're about to spend $30,000 on a Honda. What else could you spend that on? Right, like the opportunity costs. And people couldn't think of anything. And so they pushed them and they pushed them, and the most they got is people would say, well, if I don't spend 30,000 on a Honda, I could spend 30,000 on a Toyota. Now, that's not spending your money on something else. It's just a different brand.
- [53:02]
B
Likewise, let's say you're negotiating on a car or on a house, and you're thinking in terms of tens of thousands or hundreds of thousands of dollars. In that type of a negotiation, it can be easy to let 200 bucks slide. Because what's 200 bucks in the context of spending 20 grand or 30 grand on a car? Proportionately, it seems like a small amount. And yet you might, on that same day, carry coupons into the grocery store in order to save $7 off of your $75 grocery purchase, because proportionately, that feels large. But framing these expenditures as proportions distracts us from the fact that there is real opportunity cost in that $7 or that $200. And that opportunity cost exists regardless of our feeling about that amount based on its relative value. So as you are making negotiations, as you're shopping for a better mortgage rate, as you're negotiating on a home or a car or furniture, or thinking about any other big ticket purchase, remember to keep that in mind as well. And so that is key takeaway number two, key takeaway number three. And the third example of how we often trip ourselves up is that we try to numb the pain of paying. If you take cash out of your wallet to pay for something, you feel the loss of that money. That pain response is present because that loss is so visceral and tangible and right there in your hands.
- [54:37]
A
The pain of paying reflects this finding that when we pay for something, when we hand over a $20 bill at a counter, it stimulates the same region of our brain as physical pain does.
- [54:49]
B
By contrast, if you use your apple Watch to quickly tap for payment. You don't even feel it. The payment doesn't feel real and therefore doesn't hurt as much. Because now it's not cash out of your wallet. It's just an electronic buzz. It's just numbers on a spreadsheet. You're just moving around a few electronic digits and that doesn't hurt as much, and so you're likely to spend more.
- [55:13]
A
What ends up happening in our modern world is instead of feeling that pain, we numb the pain. We use devices that make it so we don't actually feel it.
- [55:22]
B
So making that purchase more visceral, whether that means manually typing in your credit or debit car information when you're making an online purchase rather than using an autofill feature, or whether that means compulsively checking your credit card balance and being hyper aware of what that number is so that any type of credit card payment that you make feels like an immediate loss of money rather than a promise to pay later. Or whether that means literally paying in cash, at least for a day or two. As an experiment, be aware of when you feel the pain of the loss of money versus when you don't, and how that impacts the number of items that you buy and the amount that you spend on those items. So that is key takeaway number three about ways that our brains just trip us up and key takeaway. And example number four is closely related. And it's the idea that we don't feel it as much when we separate the time that we make the payment from the time that we receive the service. Jeff illustrates this perfectly and succinctly in his example about Amazon free shipping.
- [56:31]
A
We just went through the shopping season and I'm sure plenty of listeners used Amazon.com because they had free shipping. Well, no, they didn't have free shipping. They paid for Prime. They paid $100 a year for shipping. And even if you bought 100 items on Amazon, that's still a dollar an item, but it felt free.
- [56:47]
B
We see this with a lot of the spending decisions that we make in our daily lives. With a pay as you go a la carte pricing model, you think carefully about each individual purchase. But the more distance that you create between the time that you make that payment and the time that you actually get that Amazon free shipping item, the greater that time distance, the more it reduces our visceral feeling of the cost. And so when we notice that this is a tendency that we all have, well, then that makes us evaluate those types of purchases in a new light. And it allows you to reframe your spending decisions so that instead of saying, hey, my Gym membership is $40 a month, you would instead say, hey, for the last six months, I've been going to the gym on average four times a month. Would I be willing to pay 10 bucks per visit? And when you reframe the question like that, it can often change the answer. So that is key takeaway number four. Finally, key takeaway number five with regard to ways that we make money mistakes is that we often overvalue the things that we're already familiar with.
- [57:57]
A
You're a Starbucks coffee drinker, but you could save a dollar a day if you started drinking Pete's, that's right next door and even closer to your office than the Starbucks is. But you're not going to give up, because the value just by being connected already is great. It's why loyalty programs work, because you become connected to a product or service.
- [58:16]
B
We overvalue the items that we already own or even the items that we're already holding. And that can lead to two major consequences. Number one, if you list your home for sale, you might overprice it because you are overvaluing your emotional experience of living in that home. And as a result, you think that your house is worth more than it is. And the consequence of that, overpricing your home when you list it on the market could lead to ultimate net loss if it results in a delayed sale or frequent price reductions that may signal to a buyer that you are an easy negotiation target. So that's one of the negative consequences that can come out of this. And then the other one is that you might be more prone to spending money on brands that you're loyal to, even when that brand loyalty no longer makes sense. So those are five ways that we trip ourselves up. But what are some of the solutions? Here are four. Number one, be specific and personal.
- [59:11]
A
When you think about the specific date of retirement, as opposed to retiring in 40 years, you think about where you want to live and if you have kids and what your health might be and what are your hobby's going to be. And you know, what are your different items. The more you can make the future concrete, the more you connect to it and the more you're going to behave in a way that's responsible for that future self.
- [59:32]
B
When you're thinking about the future that you're planning for or saving for, make it incredibly concrete. So, for example, instead of saying I'm going to retire in 12 years, try saying, I'm going to retire on September 18, 2032. And instead of saying, when I retire, I'm going to travel, try saying, when I retire, I'm first going to rent an Airbnb cabin on Lake Michigan for exactly three months. And I will start my mornings by waking up, going on a run, and then making a big breakfast from scratch and reading the news while I eat a long, luxurious breakfast. The more specific, the more personal, the more concrete those details, the more you know what your future self is striving for and the more that can motivate you to change your decisions now for the sake of future you. So that's number one. Number two, hide money from yourself. Lower your own limits. If you think that you have X amount of money to spend because that's what's in your checking account, there's a decent chance that your spending will rise to the level that you think you're able to spend. By contrast, if you hide money from yourself by setting up automatic transfers from your checking account into investment accounts, retirement accounts, health savings accounts, regular savings accounts, and ideally, if you place these accounts in different institutions so that when you log in to your checking account, you don't see the balance in your savings account, you don't see the balance in any other accounts, you see purely checkings. And that's it. That's a way that you can hide your money from yourself, and by extension, you're likely to not spend as much.
- [61:16]
A
Suddenly, we've hidden $200 a week from ourselves. And when we look at our spending each week, when we look at our ATM receipt that's on our checking account or our debit account, we're going to think we have less money to spend and we're going to slow down our spend and we're going to only hit that limit. And what we found is that people then don't spend as much.
- [61:36]
B
So that is solution number two. Solution number three, make your savings and investments as visible, as tangible, as visceral as you're spending.
- [61:49]
A
We see spending, we see our neighbors, new clothes and new car. We see the good food that we're eating. And by its nature, that drives us to be competitive. FOMO and keeping up with the Joneses. We compete on the stuff that we see and that's stuff that feels measurable and tangible. We never really talk about or see savings or investing. That stuff is invisible. In fact, more than it being invisible, when you save money for the future, what do you see now? You see less.
- [62:19]
B
Keep a post it note on your bathroom mirror in which you track your savings or your investments. Create a chart that shows the growth of your net worth and place it somewhere in your home where you can see it, or make it the wallpaper on your phone, or make it the photographic background on your laptop. Make the balance in your retirement account as visible as right there in your face as that fancy dining room table that you bought. And so, making your smart decisions visible is solution number three. And finally, solution number four is to create an identity around saving and investing. And if you are part of the fire community, the financial independence early retirement community, then you are already doing this.
- [63:04]
A
There's some fascinating studies showing that when we find ways to make savings visible and tangible, to make the good choices obvious to us, it triggers our identity. I think part of the success of this fire movement is this identity you've created, this identity of I'm doing something now for my future. And if you can find a way to make that visible and tangible, you're gonna be more connected to making good financial decisions.
- [63:35]
B
And if you are not yet part of the community, or if you haven't interacted very much with other people in this community, you can head to affordanything.com community where you can interact with other people in the community. You can form identity around shared goals, like if you wanna start a side hustle or you wanna retire early, or you're trying to pay off debt, or you're trying to cross the seven figure net worth mark, you can build tribes around these shared goals. You can talk about specific topics. All of that you can access for free@affordanything.com community. It's a great way to form a sense of identity around saving, investing and building financial independence. And it's a great way to keep your head in the game and get encouragement from your peers. So again, that's affordanything.comcommunity. i'll see you there. So those are nine key takeaways that we got from this conversation with Jeff Kreisler, five common mistakes, and four ways that we can save ourselves from ourselves. If you want a written list of everything that we've talked about, detailed notes that can jog your memory and serve as a reminder and help you implement this stuff and take action on it, you can get that for free by going to our show notes@affordanything.com episode 2, 3, 8, that's affordanything.com episode 238. While you're there, you can sign up for our email list, head to affordanything.com Episode 238. You can check out our show notes and sign up for our email list. Thank you so much for tuning in. If you enjoyed today's episode, please share it with a friend or a family member. That's the single best way that you can help other people improve their financial situation, as well as spread the message of financial independence. Make sure that you hit subscribe or follow in whatever app you're using to listen to this podcast. Subscribe so that you won't miss any of our upcoming shows. That's our show for today. My name is Paula Pant. You can find me on Instagram Paula Pant P A U L A P A N T thank you so much for being part of this community and I will catch you next week.