Frugality is about more than pinching pennies; it’s about pinching yourself each time you handle money. According to behavioral finance thought leaders, our spending habits are ruled by emotions. So how can you spend sparingly – and stay sane – in a world where buying is more a reaction than a transaction? Take a look at these six TED Talks for some financial insight.
1. Daniel Goldstein: The battle between your present and future self
- Summary: Daniel Goldstein gives us the image of Odysseus tied to the mast in the midst of sirens and how it all went wrong. He struggled with temptation and lack of future planning. Goldstein notes modern temptation: spending. It’s the battle between our present and future self—and our inability to picture the future— that keeps us from saving.
- Key Takeaway: Goldstein created a behavioral time machine that cognitively connects your present self to your future by linking your age progressed image to a savings budget. If you can picture your future self, and the things you can afford, you are more likely to save for them. Consider using an age progression app to transform an image of yourself and place it next to your calculator as you budget. Seeing your future self will help you value your future life and the money you put toward it.
2. Shlomo Benartzi: Saving for tomorrow, tomorrow
- Summary: We equate saving money with less spending, and it makes us uncomfortable. This is known as “present bias.” Saving money keeps it from your present self and that’s why you’re apt to avoid it. Benartzi suggests an automatic approach to saving that won’t disrupt your current lifestyle.
- Key Takeaway: Save 3% more every time you get a pay raise. Starting today, the next time you receive a promotion, save 3% of your income. The following promotion, save six percent—and so on. Save money you didn’t have (pre-raise), and you’ll never need to change your spending habits. Talk to your employer about automatically deducting this percentage before you even see it in your paycheck. You’ll be more likely to commit to saving.
3. Graham Hill: Less stuff, more happiness
- Summary: Graham Hill suggests a noble idea: downsizing can save you money and increase your happiness. Hill reminds us of the times in life when we tend to feel more free and happy with very little: living in a college dorm, camping, and traveling. Hill points to his website, Life Edited, for success in saving money and your life by cutting out the excess.
- Key Takeaway: Hill recommends self-editing when making purchases. Before you buy something, consider: Will it actually make you happy or will it simply take up space? Focus on buying items that last and keep only the essentials. Hill has more tips for editing that work with any budget.
4. Derek Sivers: Keep your goals to yourself
- Summary: In the digital age of the social self, it’s better to keep your goals private. Why? Derek Sivers points to the connection between telling our goals to others and the sense of accomplishment we feel in social affirmation. Announcing your goal triggers a feelings success, and you’re less likely to achieve your goals if you feel like the work is done.
- Key Takeaway: Simply don’t announce your finance goals. As tempting as it may be to boast about your resolution to “edit your life,” don’t. Keep your spending and your saving habits to yourself. You’ll be more likely to follow through with your objective.
5. Joachim de Posada: Don’t eat the marshmallow!
- Summary: Choose to delay gratification and it points to your probability for success. Joachim de Posada cites a study in scientists tell children they can eat the marshmallow in front of them, but if they wait 50 minutes, they can have two instead of one. Two out of three children ate the marshmallow. The study followed up with these children later in life and found that those who chose instant gratification were more likely to make poor life decisions.
- Key Takeaway: Instant consumer gratification leads to financial disaster and lack of success. Posada’s sentiment is similar to Benartzi’s (save for tomorrow), except Posada points out that if we save today we could have twice as much tomorrow.
6. Kathryn Schulz: Don’t regret regret
- Summary: Kathryn Schulz reminds us that the inability to experience regret is the trademark of a sociopath. So why do we societally suppress the urge to regret? Schulz proposes a revolutionary idea: Live with regret. As she so aptly puts it, “Regret doesn’t remind us that we did badly; it reminds us that we know we can do better.”
- Key Takeaway: Learn lessons from your money mistakes and make peace with them by experiencing regret. Financial regret is akin to buyer’s remorse. However you often can’t take back your debts. So what can you do? Focus on regret to help you never forget the financial mistakes you made. Experience financial regret in order to make better fiscal decisions in the future.
What’s your favorite frugal advice? Share your thoughts in the comments below.