Getting Better

Jonathan Clements

TO IMPROVE OUR behavior, we first need to realize we’re on the wrong path and then figure out the right way forward. Often, this isn’t especially difficult. If we have no savings, obviously we need to sock away some money. If we’re overweight, we should cut back on the calories. If we’re out of shape, we need to hit the gym.

Instead, the real problem is getting ourselves to act.

The contemplative side of our brain is fully aware we ought to eat and spend less, while exercising more. But our hardwired instincts keep telling us there’s great pleasure to be had in relaxing, snacking and shopping—and, much of the time, our instincts win out and immediate gratification rules the day.

How can we bolster the contemplative side of our brain, so we have a fighting chance at improving our behavior? I’ve become fascinated by the topic. In particular, I’d highly recommend The Willpower Instinct by Stanford University lecturer Kelly McGonigal.

Here are some strategies we can use to improve not just our financial behavior, but also other areas where we’re coming up short:

Commit to change. The first step is to figure out how we want to change—and thereafter keep that long-term commitment at the forefront of our thinking. The more desirable we can make our long-term goals—by pondering how great we’ll look in a bathing suit or all the wonderful things we will do once we retire—the greater the likelihood that we’ll make the necessary short-term sacrifices.

Even then, it’s easy to slip. Because we behaved well yesterday, or simply because we’re feeling down and our willpower is at a low ebb, we might decide to reward ourselves with a shopping spree or a Big Mac. We tell ourselves we’ll behave better tomorrow, but tomorrow often brings no improvement.

How can we avoid this cycle of one step forward, one step back? In her book, McGonigal suggests thinking about how we’d feel if we behaved badly not just today, but every day for the next year. Polishing off a bottle of wine tonight might not seem so terrible. But if we ponder knocking off a bottle every night for the next year, it drives home how much cumulative damage we could potentially do—and maybe that’ll give us the willpower tonight to stop at a single glass.

This goes to the issue of mindset. Through college and for a few years after, I smoked. A few times, I tried to stop but failed—until I read an article that noted that most smokers have the attitude, “I don’t really want to quit, but I’ll try.” The article argued this was a recipe for failure, because it underscored our lack of commitment. Instead, we need to tell ourselves, “I want to quit” and mean it. I tried that approach—and it worked.

Hit the pause button. If we’re to thwart our instincts, we need to give the contemplative side of our brains a chance to weigh in. Got your eye on an expensive bauble? Instead of immediately pulling out the credit card, try walking away and pondering whether there are better uses for the money. Even a 10-minute cooling-off period can do the trick.

Reframe the choice. The classic example is the 401(k) plan. Many now require employees to opt out of participating, rather than requiring them to opt in. That makes contributing seem like the norm.

Cafeterias have also experimented with guiding people’s choices. For instance, smaller plates encourage less food consumption. Similarly, giving healthier items more prominence, more appetizing names and displaying them more attractively can influence our choices.

We tend to be loss averse, meaning we get far more pain from losses than pleasure from gains. We might use this insight to encourage ourselves to save. Let’s say we want to retire in 30 years with $1 million. Assuming a 4% real return, that would require us to sock away $1,436 per month. What if we put off saving for retirement for five years, so we save and invest for just 25 years? We’d lose $259,000 of our hoped-for million.

Automate it. Inertia can stop us from ever starting. But if we can overcome that initial inertia and establish automatic savings plans, inertia becomes our friend, because we’re unlikely to cancel these plans once they’re set up.

This is another advantage of 401(k) and 403(b) plans, which are funded by automatic deductions from employees’ paychecks. We can also take advantage of inertia by establishing automatic contributions to a savings account or a mutual fund, with the money pulled from our checking account every month.

Put it out of reach. Don’t want to eat chocolate? Don’t keep it in the house. Want to avoid impulse purchases? Leave the credit cards at home. Don’t want to spend your savings? Stash them in a retirement account, where any withdrawals will trigger income taxes and tax penalties.

Take baby steps. Training for a marathon is a daunting task, especially if we don’t run regularly. How about starting with something less ambitious, like the local 5k?

The same thinking applies to other areas of our lives: We shouldn’t try to do too much all at once. It seems we have a daily willpower budget. If we blow it early in the day on one area of self-improvement, we’ll have less left for other goals. With that in mind, we should pick one area to improve—say, losing 10 pounds or saving 10% of our income—and then, once we’ve conquered that goal, move on to the next one.

Create financial incentives. The federal government offers savers all kinds of tax incentives, including lower tax rates if we buy stocks for the long haul in our taxable account, tax-free growth if we fund Roth retirement accounts, and an immediate tax deduction and tax-deferred growth for contributing to traditional 401(k) plans and traditional IRAs. Those who contribute to 401(k) plans often also have an added incentive, in the guise of a matching employer contribution.

Along the same lines, check out, an intriguing website that allows you to make commitments, with a financial penalty—in the form of, say, a payment to a charity, a friend or even an enemy—if you fail to follow through.

Get competitive. If we compete against others, it can bring out the best in us and push us to try even harder. Knowing that our neighbors exercise five times a week could prod us to follow suit.

But if the competition is too stiff, we may throw up our hands in despair. This isn’t just a phenomenon in the world of sports. Studies suggest that knowing how we stack up financially against others can spur us on—but, if we’re horribly far behind, it can leave us so discouraged that we give up.

Hire a coach. If we don’t have the necessary discipline to exercise, we might hire a personal trainer, who will push us to work out regularly—and whom we’ll likely listen to, because we’re paying for the help and because we don’t want to disappoint our trainer.

We might even turn over responsibility to somebody else. That obviously won’t work with exercising—we need, alas, to be involved—but it’s an option with our financial affairs. A good advisor could bring a degree of discipline and rationality to our investments that perhaps we can’t muster on our own. We should make sure our advisor is a fiduciary, so he or she is legally obligated to act in our best interest.

Go public. An impending dentist’s appointment can unleash a week of flossing. A visit from the in-laws can spur us to clean the house. Our annual physical can prompt us to shed a few pounds.

Such social pressure can also help us improve our finances. Aiming to buy a house within the next year or pay off all credit card debt? If we announce to friends and family that we have these goals, we’re more likely to stick with them.

Indeed, our financial commitments may encourage others. It seems that both good and bad behavior can be contagious. Need inspiration? We might seek out people who have turned their lives around, and use them as our role models.

We might even create formal or informal support groups with others who are also seeking to change. This sort of peer pressure works best when others are encouraging and when we’re anxious to look good in their eyes. Anticipating feelings of pride can be a powerful motivator.

Avoiding shame can also work, but it’s more treacherous territory. If we slip and we’re berated by others, or we beat ourselves up over our failings, we’ll likely feel badly. Result: In an effort to feel momentarily better, we may repeat the bad behavior—and, the next thing we know, we’re back to eating daily Big Macs.

Behavior Change: Talking the Talk

Moral licensing: When we’ve behaved well and feel virtuous, we often give ourselves permission to behave badly. Ran five miles this morning? How about a burger and fries for lunch?

Halo effect: We feel so good about eating something labeled “organic” that we end up overeating. We’re so proud of the money we “saved” by buying items that are on sale that we blow our budget.

Social proof: We tend to follow the crowd—but the crowd can lead us astray. Think about all the folks who piled into tech stocks in the late 1990s and loaded up on real estate in 2005 and early 2006.

Mirroring: We often unintentionally mimic the actions of others, which can either help or hurt us as we seek to change behavior.

Hyperbolic discounting: In our desire for immediate gratification, we favor smaller rewards now over larger rewards later—even if waiting offers a high percentage gain.

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