How to avoid financial distractions and hack spending habits.

Jan 11, 2021

Welcome to Finance and Fury, I hope you are all going well. Today we will be going through how to avoid financial distractions.

This episode is a little bit of a follow up from the previous - as one of the comments I made was a little oversimplified – that was that if you simply spending less and invest these funds – you can achieve more in your financial future –

1. It is not as easy as it sounds – it is very easy to say to someone spend less and invest more – but to actually achieve this as part of a goal can be almost impossible without the right tools to reduce discretionary or non-essential spending
2. So in this episode – we will outline some of the core reasons behind spending habits and some ways to hopefully hack these in your own lives to help reduce needless spending and instead redirect these funds into towards your financial futures
   1. When I talk about spending - Not talking about needed or essential spending- but those additional spending items that can be made on impulse rather than as part of a plan
3. This whole episode comes back to the economic question – of having finite recourses – but yet unlimited wants – but the real issue is the wants that we don’t know we want until we want them – bit of a mouthful – however: the age of the internet and social media marketing has really redefined wants
   1. Think about the availability to promotions that we have to put up with – advertising everywhere and the temptation to purchase at out fingertips
   2. Facebook, instragram, amazon, ebay – all have massive market places – has increased our access to the offers put on place on an exponential scale –
   3. Before the internet – you would need to go into a local store and be tempted to buy something
      1. Concept of window shopping – looking through the window which provided a trigger and temptation – but now that window is right in your own home or wherever you are with your phone – that black mirror of a smart phone has become the new window shopping and with this – the temptation to buy has increased at an incredible rate – as now – rather than you needing to be in front of a specifics shops window – which you would physically have to travel to and be limited in choice to what that window contained – now any store across the globe is in your hands at any time of the day, on any day of the week
   4. access to technology is a great thing – when used correctly – however – marketers and social media companies know how to manipulate people very well through cues and reward triggers we are pre-disposed towards that fuel addictive purchasing habits
   5. Hence - In the modern era – our wants can definitely outweigh our resources – creating additional problems or barriers to the economic question
   6. But at the same time – we have been the wealthiest any societies have ever known on average – but our resources can be sapped by up in some pretty tricky ways – leaving us no better off long term -

 

So in this episode – want to lay out a game plan and strategy to help curb some spending habits and instead redirect spending to your long term self-prosperity

1. The first step is understanding Distractions and temptations
   1. Story of Tantalus – ancient Greek story - most famous for his eternal punishment - he was made to stand in a pool of water beneath a fruit tree with low branches, with the fruit ever eluding his grasp
      1. The catch was that if he reached for the fruit – it would rise out of his reach – but at the same time - the water he was standing in would always receding before he could take a drink – so he was condemned to the afterlife – to be always hungry and always thirsty – hence – his economic problems were never being met
   2. But we are different from tantalus – we are not dead – someone who is dead technically doesn’t need food – unless they are a zombie searching for brains
   3. But we can learn from Tantalus and his temptations – is very similar to our modern situation – for the vast majority of the population – we may not need the things we crave – but yet still crave them – for tantalus – it was food and water – but he was dead – hence he didn’t need these things – but still was triggered to yearn for these items – for us it may be a new TV or computer, or a new piece of clothing or any item that technically we can go without – due to social conditioning through social programming from advertising or other impulse triggers – we can crave these items and trick ourselves into thinking we need them
2. If you care about your financial future – you need to become less distracted or tempted from the temptation of purchases
   1. Easier said than done - We all have temptations - mine are computer games
      1. For me – I love strategy games – either RTS or grand strategy games –Games are addictive for me – but why? Well - get to progress in an online world gives same feeling as doing it in real life - Also competition – beating others – I can build an empire and thrive online
      2. I think I have a special kind of autism that helps with repetitive tasks – but I got good at these games – gave a feeling of accomplishment and at the same time – provided a strong distraction from doing other things that I needed to do
   2. Buying things does this as well. Not about the item we are buying most of the time – or what that thing physically gives us - but the escape – to distract and help to meet the feeling of achieving something
3. This comes back to greater aspect of distraction and temptation – is that for me – games provide something that is rather easy for me to control and at the same time – relatively easy to succeed at – especially when compared to things in the real world
   1. Something we can control and succeed at can provide a powerful distraction to our own lives – why bother work at something hard in our own lives when we can turn this time and energy into something online – or to purchase something to provide the same feelings
   2. If a goal is too great a goal – and you don’t think you can reach goal then why not play some games or buy some items on amazon and succeed at something else – provides the same sort of reward pattern without providing the long term actual reward that would benefit us the most
      1. As an example – when I was at uni – I could easily play 10 hours a day on an MMORPG – imagine that I continued this to this day – instead of ceasing this activity and instead using this time to start a business and build this to help people with financial advice – I may be living at home still – still playing games – I might be great at online games but I may be a total wreck in my own personal life – but if I was committed to games instead, would this really matter if I was just chasing the feeling of achieving something?
   3. This all comes back to Escapism – escaping the harder tasks of life – at uni – instead of studying – why not play games? Uni was relatively easy to get 5s and 6s in a lot of courses – so why devote any time into getting 7s?
      1. But this habit of playing games instead of studying (outside of the hours that I was working) was the path of least resistance – help me fill a role and feel like I was achieving something else – in other words – escapism –
      2. Spending habits can also be escapism – if you feel like you want to be financially independent and rich – well why not spend some coin now and act like you are FI and rich – even though it might be on a CC – you still get that same escapism feeling now – without actually having to work towards – the temptation of spending itself can provide the very feeling or outcome that our long-term goal does

• This can be a dangerous form of escapism if you don’t fully understand it – I was luck enough to realise I was wasting my life on games during the uni days and kick that habit before getting into my full time working career

1. But if a spending habit lingers with you through your working life – this can be a massive drain on your financial recourse – which back ‘to the economic problem – means you have less to achieve your long term wants – as you are meeting a short term outcome which is draining your longer term financial future

 

Understanding the root causes of spending habits – being discontent

• If something stops discomfort or the feeling of being discontent – and instead allows you to feel a small amount of control in your own life, it can control you. Being discontent is good. We are hardwired for this. It provides motivation to do more. But with more options to satiate the feeling of being discontent – can create a habit to spend to avoid this – one of the major factors that we need to be aware of that is driving spending habits – that is the need to feel satisfied and to not feel discomfort
  1. But We should feel uncomfortable with ourselves – Being uncomfortable is actually a good thing – many people like to avoid boredom – or the feeling of lacking in themselves – understandable – nobody wants to feel uncomfortable – but at the same time – we are hard wired to do this – it is what drives us forward as a specie to improve –
  2. We are also hardwired in habits through the cue – action – reward sequence – so the aim of a strategy to change behaviours is to track the cue, or trigger, change the action and receive a reward that benefits you long term

Strategies – no one right way to go about this – the first major step is understanding why behaviours and habits form– from there, there are some options:

• Step 1. What is the cue or trigger. Is it a diversion from difficult work. Or a feeling of not being satisfied? Something generally triggers spending behaviours – the first major step is looking around and where you are and what you are doing?
  1. Is it scrolling online, or at work, or being bored and feeling unsatisfied? Is it at some shops?
  2. This can be hard to do initially – most of this occurs subconsciously – have to make it a mental focus to pay attention as opposed to letting the part of our lizard brains take over
• Step 2. Write down the trigger. Track the sensations – start a journal – this helps people to become more aware
  1. Being aware of what is a trigger for spending habits is the key – as you can be aware of your surroundings and how they affect your focus and thought patterns – knowing what, when and where then allows you to actively change your behaviours and actions
• Step 3. Change the action – your actions are what you can control – hard to turn off the triggers – but once you know the triggers – and one pops up – if you are aware of this – you can then aim to change an action
  1. These actions will depend on what the situation calls for – if it is making a spending decision – wait a day or so
  2. If it is scrolling through amazon or an online shopping platform – hold off for 10mins or an hour before instantly clicking – take some time to reflect - If you think about spending or buying – it can be hard to distract yourself – ironic process theory - explain this more in another episode about a positive wealth mindset
• Step 4. Change your reward – this is personalised to the individual but at the core can be avoiding the feeling of discomfort
  1. Options - Put 5 into a savings account if you have done well and held out from spending – or put the equivalent value of the item off on a credit card -
  2. Could be as easy as positive self-talk – or tracking goals and ticking off a goal of spending less

In summary -

• A lot of needless spending habits come from a subconscious root – either wanting to feel in control, as a distraction from being uncomfortable –
  1. If you then use purchasing more things to satiate these feelings – and that you might think that you need these items – then that’s fine – but it will come at the expense of diverting resources towards items that have diminishing marginal returns – due to hedonic adaption -
  2. As opposed to those with compounding returns if you harness these feelings and put it towards achieving something positive long term – like saving additional funds, investing or paying off debt – once your brain is rewired – can still avoid that feeling of discomfort as you are moving towards achieving goals
• If it is part of your spending plans – then spend it – but if it is spontaneous – you can aim to minimise these spending patterns by changing the cue, action reward sequences by tracking the cues and being aware of the triggers, changing the action and then providing yourself a positive reward towards achieving goals

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