Sometimes the most difficult thing about getting your finances in order is battling your own presets. If you don’t budget your money (you should start now), overcoming that hurdle can feel tremendous. If you don’t have any savings, putting money in a new account might feel like you’re stealing from yourself.
Ramit Sethi, blogger and author of “I will teach you to be rich,” deals with the psychology of money — not just how to get it, how to save it and how to manage it, although he gives advice in those areas as well. But what really intrigues me is that he tries to challenge you about why you think the way you do and to correct those erroneous assumptions.
Here’s a snippet from Sethi’s post on automating finances (via Tim Ferriss’ blog).
Why do so many people believe that personal finance is only about willpower? The idea goes like this: “If I just try harder, I’ll start saving more, pay off my debt, stop spending all that money, keep a budget, learn about investing, start investing, rebalance ever year…” Unlikely. In fact, go ask your friends if they’re taking full advantage of their employer’s 401(k) match. The vast majority of people are not — even though it’s literally free money. Their answer? “Yeah…I really should do that…”
It’s not about willpower. More than anything else, the psychology of automation is critical to successfully getting control of your finances.
In one study, researchers found that making 401(k) accounts opt-out instead of opt-in — in other words, making employees automatically participate, although they could stop at any time — raised contribution rates from less than 40% to nearly 100%.
You can read the whole post for a slew of helpful information.
What one tiny thing could you automate in your finances in order to start saving more or spending less?
– By Lauren Davidson, Atlanta Bargain Hunter