I am one of those people who really goes hard for one aspect of behavioural science, and then blatantly ignores all other insights. For example, I know every behavioural insight there is on budgeting. Or credit cards. Or mental accounting. Or hedonistic spending. I love that stuff. When personal finance is in the mix, I’m on it.
But obviously there is more to behavioural science than just personal finance. The issue is, besides some topics which are relevant to my job, I often fail to be really that interested. The domain of health, for example, has been greatly impacted by behavioural science. But do I care? Barely. When it comes to integrating it into my personal life, that is.
Imagine my surprise when I recently had a conversation about mental accounting for calories. And how people also fail to ‘budget’ accurately for cheat meals. Que?!
There’s a couple of key findings in behavioural science when it comes to managing money, especially budgeting:
We always underestimate how much we’re going to end up spending (optimism bias)
We completely fail to predict exceptional spending, thereby always going over budget (planning fallacy)
We fail to keep track of our spending as we go and are always surprised when we see the bill at the end of the month. This is predominantly driven by not taking into account exceptional expenditures, even after they have occurred (mental accounting) and
We always promise to do better next time, but really we’re just delaying getting started properly (present bias).
Now for brighter minds than mine, you can really quite easily see how you would flip these insights to fit the fitness narrative:
We always underestimate how much we’re going to end up eating
We completely fail to predict exceptional food intake, thereby always going over our calorie budget
We fail to keep track of our eating (calorie intake) as we go and are always surprised when we see the scale (?) at the end of the month. This is predominantly driven by not taking into account exceptional food intake, even after it has occurred and
We always promise to do better next time, but really we’re just delaying getting started properly (no changes here!).
Now when it comes to finance, those 4 key problems have been addressed in a variety of ways.
For number 1 and 2, what is required is a different kind of planning. Most people predict and plan their spending according to their pay cycle, which for a lot of people is on a monthly basis (assuming little to no volatility). But a month is a long time, and really, if I had to plan out the entire month of April in terms of spending, I would struggle. I noticed that planning my own expenses became easier when I moved to a fortnightly pay cycle. But all expenditures that weren’t mine (by this I mainly mean bills – so stuff that had to get paid, not stuff I wanted to spend on) aren’t on this cycle. They tend to be monthly or quarterly, so it’s still a kerfuffle. It does help to have all of this on a calendar, so you know when these expenses are going to happen so you can plan for them. To make it even easier, try to budget on a weekly cycle. With this exercise you can literally go Monday through Sunday, and ask yourself, for each and every day, what your spending is likely to be. If you’ve agreed to meet up with ‘the girls’ on Thursday evening, and you’re meeting out for drinks, well that’s going to require you to set aside money. If it’s the last week of Halloween, you’ll need to set aside additional grocery money to buy a lot of candy (if you’re American, that is). Working with smaller chunks of time makes individual events much more salient, and allows you to adjust your budget to really fit all of your expenses so you don’t end up being surprised. And if it’s not a question of adjusting your budget but sticking to a stringent one, what events and spends can you either change or cut out? If going out is too expensive, have a potluck in. Have a no-buy month for certain categories of spending (or all categories to the best of your ability). Cancel some of your subscriptions for a period of time. There’s ways to save if you’re not already on the bare minimum.
For number 3, the evidence doesn’t lie: mental accounting really isn’t that helpful. Track everything, preferably in the moment, and stop lying to yourself. We’re lucky that for spending most things are tracked by our bank by default. If you’re still a cash queen, you’ll need to log it yourself. Do it. And don’t lie!
For number 4, only the road to hell is paved with good intentions, the road to a better looking financial situation is not. For a plan to work you do actually have to start it. Now there are ways to make sure you do: one of them is the fresh start effect, where you tie the start of your behavioural change to a date that is significant to you. This can be your birthday, your kid’s birthday (especially useful if the savings goal is related to them), a certain amount of time before a deadline etc. The sooner the better. And if you’re doubting your own willpower, well you can always get yourself an accountability-buddy, someone who will check on your progress and compliance every so often. Or even better, someone who’s in it with you – as in, they also want their financial situation to improve! We are who we surround ourselves with, after all.
So for finance this is all quite clear (to me, at least). What does it look like for fitness? The solutions are eerily similar. If you want to have a proper diet, you’ll need to properly track what’s going on (#3) – most likely you’ll have to log this yourself. Do it in the moment so you don’t forget later – because it’s very easy to ‘forget’ that cheeseburger you had over lunch. Also, try to ‘budget’ your meals on a short-term basis, say per week (#1, #2). This allows you to ‘budget’ in events that may make it more difficult to stick to your original calorie budget. Sticking to your budget can also be greatly aided by meal prep, where you prepare all your meals for that week in advance, so you know exactly what’s planned and budgeted for! And yes, #4 is the exact same. Start!
Oh and as always – do it consistently! Starving yourself for a month (whether food wise or financially) might be a sufficient short-term fix (doubtful, but hey) but it won’t fix any of the underlying issues and won’t really change your behaviour. Small, consistent, incremental changes always beat heavy shocks to the system, in terms of sustainable behavioural change. Regardless of which area of your life you’re applying it to!
