Three keys to saving more
Is the simple act of willpower, in and of itself, all that is required to become a better saver? In a recent book entitled Willpower, Roy F. Baumeister and John Tierney look at the concept of willpower in a world of indulgence and wonder if someone can indeed increase their willpower.
A full review of this book is up-coming. In looking at the concept of willpower and personal finance, the authors make at least three observations to help those who want to save more (or spend less):
- Goal setting is important but so is monitoring your goal. Using a sample size of 2 billion transactions, the authors noted that users of the website www.mint.com slowed their upward trajectory of spending with such effects amplified if the users used the budgeting tool. It appears the act of monitoring spending slows it.
- Look at the glass half full if you want to keep motivated. A University of Chicago study found that advertising agency employees who were asked to reflect on their successes were more content but less likely to move on to new challenges. Those told to focus on what they had planned but not achieved scored higher in motivation.
- Peer scrutiny works. A group of Chilean entrepreneurs were divided into two study groups: one group was given a savings account and the other group given a savings account and an opportunity to speak about their savings goals. The second group- those forced to put their savings habits under peer scrutiny- had a savings rate double the first group.
It would appear that savings is simply not an exercise of making it automatic (although a very good and important start). Instead, good savers tend to be those who monitor, stay motivated and subject themselves to peer scrutiny. I have written on this before but it may be beneficial for those struggling with personal finance issues to have an accountability buddy to help them meet their goal.