This article was originally posted on The Pivot Blog.
The more research and work I do with people around money, the more I’m realising we are actually hard wired to be unsuccessful. We’re destined for failure. We actually have very little hope of doing what needs to be done to get ahead.
Young professionals want it all. We all have a burning desire to maximise every moment, and jam pack as many experiences as we can into our lives. Our bucket lists are long. Our patience is short.
Can we really have it all?
There are some basic principles of psychology that set us up for failure from the start. These fundamental drivers push us to make bad money decisions and stop us from doing the things we should to get the other things we want.
But you can hack the system…
Our basic psychological drivers push us to be bad with money. Our desire for short term satisfaction is in direct conflict with our goal of getting ahead. Our desire to live life often result in slower progress toward the things we want for our future.
This is hard-wired into our DNA. We make decisions to avoid pain, experience satisfaction, and get the things we want.
But all is not lost here. There is hope. You can prevail.
There are some things you can do hack the system and make it easier to get the things you want. But you need to know the rules of the game.
You need to know the basics of money psychology. You need to understand it’s impact. You need to know how to recognise when these things are happening. But most importantly you need to know how to game the system.
So how do you hack the system?
There is one simple, straightforward, basic human desire that holds us back from getting the things we want, and sets us up for failure.
It’s hard wired into us to choose an action that will give us immediate pleasure over another action that will give less pleasure now (or in some cases pain), as a trade off for more pleasure in the future. Our subconscious brain isn’t very forward thinking, and just wants the most pleasure in the shortest amount of time.
We’re driven to take actions that will maximise our short term pleasure, often at the expense of our future wants. This is why it’s so easy to become unhealthy and put on weight, because it’s much more enjoyable to feast on delicious food than it is to exercise.
Money is no different. It’s much more pleasurable to spend all our income (and sometimes more than our income) on things that will give us pleasure. Things like travel, eating out, a big night out, or sometimes just frivolous online shopping.
So what does all this mean for you?
You need to actually rewire your brain here. Don’t stress, this sounds hard but there are some simple things you can do to help.
The main goal here is to reset the way you think about your money. You have to have some targets, otherwise this step will be impossible. Once you’ve set your targets, the next step is a subtle change in the way you think about what you’re doing with your money.
I was working with a client that really wanted to go on a big trip around Asia, will call her Emma.
Emma had done the backpacker thing when she was younger and was keen for a little more comfort on the trip she was planning. So Emma knew this wouldn’t be a cheap trip done on a shoestring budget, and she’d need a decent amount of savings to do the trip the way she wanted.
When I met Emma she had been thinking about this for around a year but hadn’t really made much progress. When we talked about why, Emma said she had done a budget but struggled to stick to it because she was enjoying her lifestyle and didn’t like to say no to things.
When Emma’s mates were planning a weekend away or a big night out Emma didn’t want to say no and often went along for the ride. Here we see our basic money psychology at play, where Emma didn’t want to go without something she’d enjoy in the short term, even if she knew in the back of her mind these things were slowing down her progress toward the trip she wanted.
I chatted with Emma about some of this psychology stuff and our approach to hacking the system. We guided Emma through the process of setting a clear target for her trip and set a clear plan to get there with some timeframes around it.
This is where the psychological shift kicked in.
Once we had the clear plan set with a timeframe for this holiday, Emma was no longer just saying ‘no’ to things. After the plan was set, instead of saying ‘no’, she was choosing the trip she really wanted over the other things that came up.
Emma now knew that every time she deviated from the path she had set, she was delaying getting the money for her trip. Can you guess what she chose?
Emma smashed her targets and as the plan started working and the milestones were being ‘ticked off’, Emma got a huge motivational boost. The closer Emma got to her target, she started building even more momentum and managed to find some extra money to add to her holiday budget and splurge a little more on some of those extra comforts she wanted.
This simple shift in thinking, with the help of a solid plan behind Emma’s strategy made simple something she had been failing at for a year.
You can do this just as easily.
Trying to save or make sacrifices without focus on exactly what you want and when it’s possible is tough going. You might make progress, but it will be hard fought.
Whether you’re planning your next holiday, trying to hit another savings target, or saving for your first property or investment, the same principle applies.
That one, simple, straightforward, basic psychological principle that holds us back, is nothing more than our desire for short term satisfaction.
Shift your thinking so you can see how every action you take is pushing you toward the things you want and away from bad decisions.
Hack the system here and you’ll put yourself ahead of the pack and make it easier to get what you want.
Ben Nash is Director and Founder of Pivot Wealth, a Money Management company that helps young professionals balance their lifestyle and money.
Front page image from www.restate.nz/