9 Ways to Trick
Yourself Into Getting Rich
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Profitable ways to retrain your brain
Building wealth is about more than just hitting a number. It’s also about cultivating the habits of mind that make
saving second nature—or at least a whole lot less painful. But as anyone who’s
ever tried to get in shape can tell you, changing behavior isn’t easy. Sometimes you need
a clever “cheat” to help you on your way. So here are 9 mental tricks that can
speed you on the path to financial security.
1. Set a savings goal that matches your money
mindset.
When you hear the word “saving,” do you
imagine the retirement you hope to enjoy? Or does your brain go right to the
401(k) forms you need to fill out? For those who tend to focus on the big
picture, a specific target (say, to reach a balance of $50,000 by a certain
date) can motivate saving, says Gülden Ülkümen, a business professor at the
University of Southern California. If you’re thinking mainly of the nuts and
bolts, though, picking a dollar figure may make the task feel harder. Instead,
concentrate on putting away as much as you can.
·
2. Whatever the goal,
keep it real.
“You don’t want goals that are so aggressive
that you’ll lose steam,” says Lisa Ordóñez of the University of Arizona, who
has studied the effects of goals on behavior.
Building wealth is about more than just hitting a number. It’s also about
cultivating the habits of mind that make saving second nature—or at least a
whole lot less painful. But as anyone who’s ever tried to get in shape can tell you, changing behavior isn’t easy. Sometimes you need
a clever “cheat” to help you on your way. So here are 9 mental tricks that can
speed you on the path to financial security.
“You
don’t want goals that are so aggressive that you’ll lose steam,” says Lisa
Ordóñez of the University of Arizona, who has studied the effects of goals on
behavior.
·
3. Use windfalls to
ramp up.
The easiest dollars to set aside are the ones
you aren’t used to spending. So put a portion of bonuses and tax refunds into
savings. Make raises an occasion to up your 401(k) contribution. About 44% of
plans have some kind of auto-escalation feature, which allows your savings rate
to rise with your income, but you may have to specifically sign up for this
option.
“You don’t want goals that are so aggressive
that you’ll lose steam,” says Lisa Ordóñez of the University of Arizona, who
has studied the effects of goals on behavior.
The easiest dollars to set aside are the ones
you aren’t used to spending. So put a portion of bonuses and tax refunds into
savings. Make raises an occasion to up your 401(k) contribution. About 44% of
plans have some kind of auto-escalation feature, which allows your savings rate
to rise with your income, but you may have to specifically sign up for this
option.
·
4. Don’t make
financial decisions after a rough day at work.
You save more when you feel powerful, even
when it’s for a quirky reason. A recent study in the Journal of Consumer
Research found that people who had just answered questions while sitting in
a tall chair were more likely to save money than those on a low ottoman. A
practical takeaway: Consider reserving your major financial chores for “up”
days when you are feeling in command, says study coauthor Anne-Kathrin Klesse.
·
5. Ignore the
three-year plan.
Credit card statements must show how much
you’d pay if you settle in three years, if paying the minimum takes longer.
That’s good if it speeds you up. But business professors Neal Roese and Hal
Hershfield have found that people who see a three-year example may pay back
more slowly than otherwise, perhaps because they (incorrectly) take the example
as a suggestion. Faster is better: Pay a $5,000 credit card debt (at 15%APR) in
one year instead of three, and you’ll save $824.
·
6. Start small to pay
off big debt.
If heavy balances are weighing you down, start
paying off the smallest balance first, suggests Beverly Harzog, author of The
Debt Escape Plan. The math says to go after the card with the highest
interest. But unless there’s a big difference in two cards’ rates, it’s often
more helpful to get positive mental feedback from clearing a debt so that you
sustain your repayment plan.
7. Lobby yourself.
At the end of the day, the only person who can persuade you to
be a disciplined saver is you. Now there’s a way to communicate with your
future self. Go to FutureMe.org and send yourself an email, which you
can schedule for delivery at a later date. For instance, if you know that a
bonus is coming at the end of the year, send yourself a reminder to sock the
money away for retirement. You’ll thank yourself later.
8. Budget like it’s yesterday.
Maybe you have several recurring bills that are on the
verge of going away, like car loans or student debt payments. When that
happens, don’t free up the cash. Instead, set aside the same amount of
money—you’ve shown you can afford it—to bolster your nest egg. For example,
keep saving $450 a month (the typical nut on a five-year auto loan for $25,000)
after the SUV is paid off, and you’ll drive off with more than $140,000 in 15
years, assuming 7% annual returns.
9. Shift your view.
Around age 50, you enter peak saving years. Imagine
your goal now not as a lump sum—which can be abstract—but as a monthly
retirement income. A study in the Journal of Public Economics found
that savers who were shown income projections socked away more. To get a
ballpark sense of where you are, use T. Rowe Price’s free online retirement-income planner.
source: http://time.com/money/collection-post/3815579/trick-yourself-into-getting-rich/
