(This week, Kyle Zwiren presents guest columnist Jay Johnson of Coeus Creative Group.)
If you were offered a crisp, clean $100 bill today, no strings attached, or alternatively, you could wait six weeks and receive a check for $150, which would you take?
Most people will take the cash in hand, despite the fact that a six-week wait would be the equivalent of a 50 percent return on a six-week investment. We know that is a good rate of return, but we still prefer the instant gratification of the $100 up front.
Financial behaviors are surprisingly no different from other human behaviors of different contexts. They can be explained, predicted, influenced, and controlled using the unique framework of Behavioral Intelligence as defined by Coeus Creative Group. But first, we need to be able to explain our behavior and this comes from improving our awareness. Why do some people spend money while some people are able to resist?
In 1972, researchers at Stanford University decided to try and study delayed gratification. In a variety of conditions, a child was offered either one marshmallow or pretzel immediately, or if they waited 15 minutes without eating the treat, they would receive two treats. The study found that when the treat was placed in front of the child with nothing to distract them, the majority of the children found it almost impossible to not eat the treat immediately. However, if the children could distract themselves or if the treat was not directly in front of their eyes, the children were able to wait. Are adults any different? Well, science says no.
Many people have trouble saving money because we spend it too quickly on other items. When we see something we want in a store, we become that child with the marshmallow in front of them. Many of us can't help but to give in to that impulse purchase, only to suffer from buyer's remorse later. But just as the Stanford study found, we are far more able to resist those impulses when we can distract ourselves or when the item is not directly in front of us. When shopping and you find an item that you are considering buying, take a moment to distract yourself. Go somewhere else in the store or go get lunch. If you have the ability to distract yourself for just a few minutes, you might just realize that you don't actually need or want the item. The same works for online shopping. Place the item in your cart or waitlist, and then exit out of the page. If you still want the item the next day, you can purchase it then. Leaving the item out of eyesight or delaying the purchase gives you time to really evaluate whether you need it.
By improving our behavioral intelligence, we can more effectively understand what drives our financial behaviors. Through this understanding, we can predict why we feel compelled to buy that item now, allowing you to better influence and control those impulses.
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Jay Johnson is an internationally renowned speaker specializing in behavior and organizational development. He has given keynotes and workshops in 20 countries across 4 continents, empowering audiences with a unique perspective on behavior, communication, and leadership.
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Attorney Kyle Zwiren works with Financial Architects Inc., an independently-owned company located in Farmington Hills. Zwiren and his team serve attorneys and other professionals to help them design financial plans in line with their goals and based on optimal efficiency. He practiced law prior to becoming a Financial Architect and left the practice to follow his passion. To talk to Zwiren about other topics featured in The Economic Blueprint, email him at kzwiren@financialarch.com or call him at 248-482-3622.
Published: Fri, Apr 03, 2020
