Lack of Control Is Undermining Your Financial Game
Four ways of getting back in charge
Expense management is all about control: How much responsibility do you take for your current financial situation? You look around and every income stream you have seems either set or at risk of exhaustion.
On the other hand, you treat your expending profile as something to be left alone: most of it is untouchable, and the remaining part, which you think you could change, you don’t because it seems insignificant. Who did ever become rich by cutting small expenses?
Yet, as research suggests, a sense of control over the things you are supposed to manage is so important for the future of your savings that you would do better by revising carefully each one of those assumptions.
Researchers found that you can make better saving decisions if you’d only have your experience of it pushed a little bit up.
To get study participants in the right mindset, researchers divided subjects into two groups: one composed of people sitting in a tall chair (the leaders), and the other were made of people given a low ottoman for them to sit (these were the followers).
The researchers then asked both groups how much money they wanted to save. The leaders were willing to save on average 76 percent of their income, while the followers preferred to save an average of 15 percent of theirs.
While taller chairs are certainly not a solution to your problems, the researchers suggested that a sense of power will unconsciously lead to decisions that will tend to keep the subject's relative position in the power struggle.
You read well. It is supposed to work both ways. Even if you are part of the underprivileged side of the game, your decisions will, unbeknownst to you, work to keep you exactly where you already are.
One important lesson to take from this study is that human beings love to keep the social order as it is. Both groups intuit, one of them at their own expense, that they deserve to be in their respective positions, even though they were simply told to sit on chairs of varying heights.
Collective role attribution is a very real phenomenon. It’s not rare for people to find themselves in positions where they enjoy near-zero benefit as individuals but even so, like sacrificial ants, they keep performing their role for the benefit of a larger-scale organization, be it a company, their family or the social hierarchy.
Keeping that libertarian view in mind, let’s expand on some decisions that will help us find the agency we need to be fairer with ourselves.
Liberation through realization
The first thing to consider is not an action but a realization. We have to be aware of the traps our unconscious biases are setting up against us. The only hope of countering those tendencies is precisely through the realization that they exist.
Try listing the things, that for some personal reason, you might associate with your bad financial performance. Go through them, convince yourself that it might be interfering on the way you think of yourself.
It could be a humble background, it could be because you did not do well at school, it could be a bad traumatizing financial decision you made. All sorts of memories may be contributing to set you back. It’s your job to realize them and argue with yourself why they don’t define you.
The importance of deliberation
Learn to deliberate on your decisions. If you are used to delegating big and small financial decisions to other people (partners, relatives, or even friends), stop doing that, or at least get more involved. Avoiding decision making is a good way to perpetuate the status quo.
The more you know what is going on, the more leverage you have at changing anything in your life.
Stop Automating Everything
Payment automation may be a huge issue if you are having problems stepping up on the driver seat. Undo it all if necessary. Unsubscribe your bills from automatic debit. Unregister your credit card from websites so you become obliged to type everything every time money is withdrawn from your account.
Some might even counsel that you go cash-only until you have been able to restore back your financial goal. The thing with physical money is that you actually see that what remains after a purchase is less than what you had before it. Automatic payments, on the other hand, are good at deceiving us into thinking it is weightless — what’s the cost of a few clicks?
Beware that you should consider what works for you. For some, avoiding automation wouldn’t make much difference, while for others it could really help.
Face your budget like a math problem
Besides the short term changes that are at play when deliberating on case-by-case decisions, one should also use long-term strategies to beat the control game and reduce the weight of your self-sabotaging tendencies.
This involves putting everything down on paper or on a spreadsheet so that all pertinent financial data you have can be put into perspective.
Once you have the data presented in a nice way (a chart would be good), you will be in a position to build a longterm plan. This analytical take has the excellent advantage of being less vulnerable to subjective distortions.
If your savings and expenses are tilting in the wrong way, it would be very hard to brush it off once it carries the cogency of a plotted curve.
The objective analysis of your financial decisions will contribute to encouraging more good decisions on the future. The positive feedback generated by the fruit of your reasonable well-thought actions will keep you on the winning side against your natural tendencies to undermine yourself.