We invest in all types of personal wellness these days. For physical wellness, we’re offered work-out fads and superfoods. For mental wellness, it’s self-care and gratitude practice. And the list goes on: emotional wellness, social wellness, spiritual wellness. . . but how should we care for our financial wellness?
Aside from a number in the bank, we don’t often dive into the nitty gritty tactics for financial wellness. But 77% of Americans report feeling anxious about their financial situation. We need to invest in our financial well-being, just like we do for our physical and mental well-being.
While financial wellness might sound like obtaining a certain level of wealth, it isn’t about having money – it’s about having a good relationship with our money.
And as surprising as it may sound, it’s not all about education. Financial literacy programs may increase understanding, but research shows that they don’t change behavior. Instead, we need to center psychological factors, like self-efficacy and self-belief.
Today, we’re diving into how behavioral science can make or break our relationship with money. We’ll look at what sustains the vicious cycle of financial stress, and how you can shift your strategies to feel financially well.
Until next time,
Sarah and the money-minded team @ TDL
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Today’s topics 👀
💵 Why are we so financially stressed?
📫 Bringing rebates into the 21st century
💪 How to beat financial anxiety
DEEP DIVE
💵 Why are we so financially stressed?
We rely on System 1 thinking. Research has shown that older adults aren’t more susceptible to financial scams due to tech learning curves – it’s a tendency to rely on System 1 thinking and heightened vulnerability to choice overload.
We seek growth over balance. The science is clear: earning more makes us happier. But fixating on numbers can lead us to ignore the other pillars of life, like satisfaction at work, fulfilling hobbies, or time with loved ones.
We don’t walk the walk. Sure, we might have a few best practices up our sleeves. But that doesn’t mean we’ll use them. Next time you brush up on your financial literacy, be sure to include relevant behavioral concepts, like social norms and empathy gaps.
FIELD NOTES: Bringing rebates into the 21st century
Everyone loves a good discount – but we know surprisingly little about how consumers make decisions about things like rebates.
Why do we jump on some offers, while others languish in our inboxes forever? Is it better to give gift cards or prepaid cards? Should you frame rebates as a percentage or a dollar value?
TDL partnered with Tremendous, a digital incentives and payouts company, to conduct the first behavioral research on consumer rebates in over 20 years. Tune into our free webinar on August 15th at 2 pm CDT (11 am PST) to get an advance look at our findings — plus a chance to get involved in some exciting new projects. Register here!
Viewpoints
💪 How to beat financial anxiety
Think big picture. We teamed up with Capital One to find out how to reduce the impacts of stress on financial decision-making. The biggest takeaway? Use ‘big picture’ thinking: Center your spending on your values, and don’t fret the mistakes.
Measure your happiness. Even if you have quantitative goals in the bag – like how much you want to put towards retirement this year – don’t skip out on behavioral KPIs. Regularly check in with yourself or an advisor about how you feel about your money. A simple starting point is the three tenets of self-determination theory: competency, relatedness, and autonomy.
Reflect on your “why.” Our research found a 15% drop in financial stress when participants were asked to think about why they wanted to save money. They were also more likely to feel in control of their money, regularly write a budget, and avoid impulse spending.
Plan for low-stress “money time.” Instead of making decisions in the heat of the moment, like when an unexpected bill is due, set aside regularly scheduled ‘money time’ to review your finances – even if there’s no immediate urge. Creating unstressful space for decisions is one of the easiest ways to get confident about your finances.
Data from the PwC Employee Financial Wellbeing Survey 2020
Mental Accounting
Even though money has objective value, we tend to assign it different rules based on the role it plays: birthday money isn’t different from paycheck money, but it feels different. When we assign subjective values to cold, hard cash, it’s known as mental accounting. The best way to avoid this cognitive bias? That’s right – budgeting and financial planning.
Opportunities in Behavioral Science
TDL is hiring! We’re hiring for a number of positions, both remote and based in our Montreal office. Some open roles include:
4030 St Ambroise Street Quebec The Decision Lab Montreal https://editions.thedecisionlab.com/hs/manage-preferences/unsubscribe-test?languagePreference=en&d=VmYj734TfwCTVKgD3Q3_YlyBW2m3bL73_YlyBN1JxwY5GKd_PV20N453CCpzmW8RvmnX1fzYMbF5Nmbwg24T31&v=3
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