If you’re like most people, you probably know you need to make some key moves to get your finances on track. You just haven’t quite gotten used to it yet.
Those who are struggling financially can take some comfort in the fact that they are getting through it honestly. That’s because humans have evolved to generally avoid risk and prefer things as they are, a phenomenon known as status quo bias, says certified financial planner, financial psychologist andStart thinking about getting rich.“
“We are unwilling to make changes,” he said. “In general, it requires thinking, it requires energy and activity. Essentially, we are cognitively lazy.”
What’s more, committing money and resources to paying down debt or saving for retirement requires delaying gratification—setting aside money you can use now to achieve future goals.
To counteract these forces, Klontz says, you have to build a system that excites and motivates you enough to offset financial inertia. It’s hard, but “it’s really the key to getting rich.”
Automate your goals with purpose
For many people, the status quo is that money is spent as soon as it arrives in the bank account. If you’re stuck in a situation like this, the key to getting out of it is to decide what you want your money to do for you.
“The first step is to have a super exciting vision for why you’re doing this. What are your financial goals?” Klontz says. “You’re delaying gratification, which is what you shouldn’t do. So you have to have a compelling vision and be emotionally attached to it.”
This could include long-term goals like retirement, medium-term plans like buying a home, or even urgent needs for financial stability like getting out of debt or building an emergency fund.
Once you have it organized, it’s much easier Create a spending plan to free up money to achieve your various goals.
Klontz recommends using a separate account for each primary goal and naming them. For example, if you’re saving for a vacation, you might call your savings account “Family Trip to Italy 2025” on your bank account’s online dashboard.
“This is a very important hack,” Klontz said. “It’s no longer just an account with money in it because people have an emotional attachment to the target.”
After you set up your accounts, set up funds to be automatically transferred into those accounts, either directly from your paycheck or through automatic transfers from your checking account. At that point, you can easily get back to the status quo, knowing your money is working towards your goals, safely out of sight and out of mind.
“If you rely on yourself to check how much money you have left every month and then write a check to one of those goals, it’s going to fail,” Klontz says. “(Automation) basically removes all the friction, so you never have to think about it.”
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