Home' Trinidad and Tobago Guardian : September 21st 2014 Contents SBG18 FINANCE
SUNDAY BUSINESS GUARDIAN www.guardian.co.tt SEPTEMBER 21 •2014
Putting money aside seems
pretty straightforward. But,
seeing as the average person-
al-savings rate is just 5.7 per
cent (compared to 11 per cent
two decades ago), it s definitely
easier said than done.
"We like to think of ourselves as rational
when it comes to finances, but our decisions
are shaped by psychological and emotional
triggers," says financial behaviourist Jacquette
M Timmons, author of "Financial Intimacy."
Not only are many of these cognitive work-
ings subconscious---so we aren t aware of the
profound impact they may have---but some-
times they re completely counterintuitive. Cer-
tain money moves that appear savvy, for exam-
ple having several different savings goals or
focusing on specific ways you ll cut back,
actually end up backfiring and having the
opposite effect of driving you to spend more.
We sorted through the expansive body of
research out there devoted to the science of
saving and discovered some pretty astonishing
findings about what works and what doesn t
when it comes to beefing up your bank
Here s the scoop.
Focus on why you want to save ---
not just how
If you want to sock away more cash, coming
up with specific ways to accomplish your goal
sounds like a smart idea, right? But a study
published in the Journal of Consumer Research
counteracts that notion. It found that people
who honed in on the reasons why they wanted
to put aside money (so you ll be able to go on
that safari you ve always dreamed of, afford
to buy your own home or retire comfortably)
saved more than participants who concentrated
on developing specific techniques for how
they d cut back---say, by going shopping less
It turns out those who strategised concrete
techniques effectively had blinders on that
hindered them from making smart decisions
that fell outside of their plans. So, if a money-
saving opportunity arose that the person hadn t
considered (choosing a cheaper meal at a
restaurant or opting for public transportation
to save on gas), they d be less apt to take
advantage of it.
"Planning is more effective when people
think abstractly, keep an open mind and remind
themselves of why they want to achieve a
goal," explained the study s authors.
Harness your power
The more powerful you feel before making
a financial decision, the more money you ll
stash, according to research from Stanford
University. Before sitting down with your
financial adviser or heading on a shopping
trip, think back to a time in your life when
you felt on top of the world.
Maybe you successfully asked for a raise,
scored a promotion or even spoke up about
an issue important to you. "People who feel
powerful use saving money as a means to
maintain their current state of power," con-
cluded the study authors.
On an everyday basis, carrying yourself in
a way that exudes confidence will help hold
you back from impulse splurging on everything
from a $500 to-die-for DVF wrap to $50 bio-
dynamic, wild-crafted dish detergent made
from sustainably raised guar gum.
Use broad gestures when speaking, lean for-
ward slightly with your weight on the balls of
your feet and be the first one to reach out for
a handshake when you meet someone new to
exude your power.
Put it in writing
Here s one tiny tweak that can make a huge
difference in whether or not you achieve sav-
ings success: Rather than just thinking about
your savings goals, jot them down.
Research from Gail Matthews, PhD, of
Dominican University found that people who
wrote down their goals were significantly more
successful at achieving them than those who
simply pondered them. Sixty-one percent of
the "writers" accomplished their objectives,
compared to only 43 per cent of the "thinkers."
Then, track your progress by creating a
spreadsheet or using a program like Mint Goals.
Because you never actually see or touch cash
you ve invested, it can often feel abstract,
almost as though it s play money.
"Watching your savings creep up will send
your brain a powerful message that your actions
are paying off in real time," says Timmons.
"This positive feedback will fortify your drive
Make saving pleasurable
Cutting back, spending less, being frugal...
yeah, doesn t sound like a heck of a lot of fun,
does it? "We associate saving money with
feelings of deprivation, with having to pass
up things that we love," explains Timmons.
"And that doesn t give us much impetus to
So, try to make the blah process as enjoyable
as possible and you ll be galvanized to stash
more cash. Begin by creating a monthly ritual
for evaluating your savings that you might
actually look forward to. Slip into cozy slippers,
light a few candles and pour yourself a cup
of tea for example. While we re at it, try to
go through your investments at the same time
and place---say, the last Sunday of the month
at your kitchen table---rather than doing it on
A study published in Psychological Science
found that developing regular money-saving
habits helped people bank more of their dis-
"According to our research, any effort to
routinize the process could potentially increase
the amount of savings," says study author
Uptal Dholakia, PhD, professor of at Rice Uni-
Next, reward yourself each time you hit a
"People tend to focus on how far away they
are from their goal," says Timmons. "But it s
also important to give yourself credit for what
you ve accomplished." Celebrate your suc-
cesses---reaching the $10,000 mark in your
IRA, getting to the halfway point in your mort-
gage assets---by indulging in a treat. Uh, not
a shopping spree but maybe a pedicure, movie
night with your friends or a bottle of prosecco
at dinner. That cognitive reinforcement makes
you more likely to stick with your saving objec-
Plan a money date
It s temptingly easy to put off your savings
goals when you only have yourself to answer
to. But Matthews research shows that people
are much more likely to follow through if
there s someone else holding them accountable:
A whopping 76 per cent of study participants
who submitted weekly progress reports to a
supportive friend were successful.
So, ask a close friend or your significant
other to help you stay in line---whether you
actually meetup to discuss your financial sit-
uation or just send a text at the end of the
week or month reporting on your savings sta-
tus. "I meet with a couple of friends and a
financial coach once a month," says Timmons.
"We each explain what our 30-day savings
plans are and debrief on whether or not we
reached our last goal. There s no judgment,
but knowing that I ll have to recount any poor
financial decisions I made gives me an extra
push to save more.
" It also gives you a moment
of reflection to think about what worked, what
didn t and what you d do differently next time.
Narrow your focus
Be it chocolate cake, accessories or even
savings goals, you can have too much of a
good thing. In a University of Toronto study,
individuals who had just one savings objective
were better at socking away money than people
who had multiple aims. "If you have only one
goal, it puts you in an action-oriented mindset
and helps you save more," explained study co
author Min Zhao, PhD, assistant professor of
"Too much thinking about which goal is
more important keeps people from acting."
Okay...but what if there are a number of things
you want to save for (a new car, an emergency
fund, your kid s college education)? Try to
umbrella them under an all-encompassing
target, like supporting your family.
fascinating mind tricks
that help you save money
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