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Stop Thinking, Start-Automating – Advanced Hindsight – Medium

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Question: I hate thinking about my money. How can I make it less stressful?

This is post number 6 in our ongoing Question and Answer series: “Hacking Personal Finance: Behavior, Not Budgeting”. Check back daily, or Follow @commoncentslab and @advancedhindsight on Twitter, or sign up for our Daily Bits course to find out more ways you can use behavioral science to help manage your money.

Advice from the Lab: Use automatic payments to turn one-time motivation into a commitment device. When you have to think about it, allow yourself a reward for doing it.

One of the best things about digital banking is how easy it is to set up a “set and forget” strategy for money management. It only takes an afternoon of seriously thinking about money and setting up the right transfers, and then you can stop thinking about it for months at a time.

Setting up automatic transfer is what behavioral economists call a Commitment Device. Often when we are feeling motivated it is easy to say today that we are going to save for retirement, lose weight, or exercise in the future. However, when the day arrives we often find an excuse to opt out or simply forget. Setting up an automatic transfer removes the need to feel motivated or remember. It transforms one day of motivation into a commitment that holds our future selves accountable.

Take an hour or so to set up automatic bill payment, credit card payment, and rent payment. Make sure your retirement contribution is coming out of your paycheck. Add an automatic transfer to your savings account every time you get paid, and you are pretty much set. With all your expenses and savings taken care of, the rest is yours to spend on what you like. Just turn off overdraft on your checking account, so you never spend more than you have left each month, and you should be good to go.



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