The Psychology of Sales, Discounts and Deals [GREATEST HITS VAULT]

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26:00When you talk about the gap between the time in which we pay and the time in which we actually use that product, you gave the example of credit cards. Do debit cards have that same effect? They do, but not as strongly as credit cards. What we found is that because debit cards are connected to our checking account, they're actually taking money away from us as opposed to promising to pay money later. And it's a subtle difference, but there are a couple of things at play there. And forgive me if I get two in the weeds. One is this idea of loss aversion, which is another behavioral principle, the idea that we feel a loss much more strongly than we feel an equal gain.

26:42For instance, losing$10, that bad feeling is only overcome by gaining$20. So the loss of money feels much more strong to us. So if we're, in this case, taking money away from ourselves using a debit card, taking money that we have already and removing it, that is much more painful to us in many ways. And we feel it much more strongly than promising to pay money later. How salient is that to a person who has internalized the idea that their credit card balance is a big minus on their balance sheet? Everyone, depending on their perspective, it can change the weight that these different principles and biases have.

27:23I mean, that's what I would hope people would strive to do. So if you're a person who your credit card balance is something that you're very aware of, then using a credit card will be more painful perhaps than a debit card. What most studies of the most recent things I've seen suggest is that when we think about our discretionary spending, the money that we have to spend, we often think about our checking account. And that's what we see on our ATM receipt. And that's what our debit card is connected to. So we're more aware of our checking balance than we are our credit card balance. Our checking balance is something we see when we pay our bills.

27:57It's something that we're just more conscious of. That's where our paycheck goes, into our checking account. And so most people are more aware of the account that's connected to that debit card. So that's why you're more conscious of the pain there. Then a credit card balance, which again is like, it's not taking money away from you. It's money you're promising to pay later. That said, if there are listeners out there that are on top of their credit card, that's amazing. That's great. And I can't in good conscience suggest everyone become obsessive and try to always know that. But if you know that, that's immensely helpful.

28:32Oftentimes when I give talks, I'll ask people to raise their hands if you use credit cards and the whole room raise their hand. And then I say, okay, now keep your hand up if at the end of the month, you know exactly what your credit card balance will be. And I would say maybe 1 % of the thousands of people I've spoken to know that. So most people don't, but if they do, good on you, as the Aussies might say. Let's talk about some of the other common money mistakes that people often make. You've mentioned in your book, overvaluing what you own is a common mistake. Yeah. So there's something called the endowment effect, this idea that when we possess something, just the mere act of possession makes it more valuable to us.

29:15The fascinating study, I mean, there are a few, but it was about like mugs. They had mugs from a college store. I think it was Duke. Don't quote me on that. But people that literally held the mug in their hand valued it more highly than people that didn't. And it was the same mug, but it was a matter of connecting to it and having that be something that you possess. On a grander scale, when you're selling a home, you value the home you've lived in and everything that's associated with it and the life that you've had there much more than someone who might buy it. And that's not just a matter of negotiating sell high and buy low.

29:48It's just as objectively as science has been able to measure, the fact that you have other value connected to it beyond financial, you sort of conflate with the financial value. So, yeah, the endowment effect is connected to what I mentioned earlier, this idea of loss aversion. Because once you own something, when you give it up, you're going to feel that loss more. So the idea of giving up a house or a mug that is connected to you is going to feel more painful than it would otherwise by virtue of just owning it. it's really like the whole driving force behind drug dealers the first one is free right once you're addicted once you've been connected to something suddenly you're going to value it a lot more and this can impact our financial decision making on choices big and small and sometimes it's a matter of like not being able to leave a brand even if there's a better brand out there you know you're a starbucks coffee drinker but you could save a dollar a day if you started drinking pete's that's right next door and even closer to your office than the starbucks is but you're not going to give up because the value just by being connected already is great.

30:50It's why loyalty programs work because you've become connected to a product or service. It's pretty powerful. And again, like many of these things, it's very unconscious. A lot of people don't stop and say, I'm overvaluing this product because I'm connected to it. But that's what we're doing. And so that has clear implications for future spending because it can trigger you to spend more than you otherwise would need to to get comparable value. Yeah, absolutely. And look, I mean, the challenge is many of these things, something like endowment, this idea is a good example, is there's not a cold bottom line that spending the least amount of money is the best thing to do.

31:25Sometimes the value to you as a person is worth it. Sometimes that good feeling of being loyal and having a product that you really like can be worth it. Again, though, it's are you making that decision consciously or are you being tricked into it? You know, if over the course of a year, you're going to spend$100 more drinking Starbucks and you actually do feel good about it, you might get more than$100 worth of value out of it. But it's when you're just doing it unconsciously because you've sort of been tricked by these emotional shortcuts. That's when I think it's a problem. What's another example of a common trigger for a money mistake that people often make?

31:59I would say another big one is something I hinted at when I mentioned Uber. And that's how we often overpay for effort or the expression or show of effort. People will pay more for a locksmith who takes an hour to open their door and they swear and sweat and break stuff and have to go back and forth to his or her truck a hundred times. I'll pay more for that and locksmith that opens the door in one minute because they see all this effort. They're like, oh my God, you work so hard when in truth, you're paying for incompetence. What matters to you should be how quickly can I get into my home? But that's a hard thing to calculate.

32:35It's what's the value of getting to my home in a minute. So instead, we jump to what the effort is. And this translates into a lot of ways that now products and services are being designed because some places show effort and some don't, right? Kayak and even Domino's Pizza organizations and online services show a progress bar, right? That's showing you the effort that they're making. And so we value that more. Uber, again, is this great example. Uber, what do you do? You open the Uber app and they make the effort to geolocate you. They see where you are and they see a bunch of cars around you.

33:08And you press a button and they select a car just for you. And then you watch the car slowly but surely creep down the street to get you. And study after study shows when we're waiting for something, whether it's like checking into a conference or waiting for a car to come, when we're waiting and we see the effort that's being made, we see people scurrying about or we see a progress bar. we underestimate how long we've waited and we overestimate the value of their product or service it's something called operational transparency because they're showing you this effort it's hard to value like what's it worth to me to wait three minutes for a ride two miles from here but they're showing you they're giving you this emotional shortcut so you can see what it's worth people that are companies and services that are bad at this you know typically creative services you know like writers and artists and folks who, you know, might perform for an hour.

33:59People think that it's only an hour of work when it's a lifetime of work. And then there are others. I mean, the word artisanal, which is one of my most hated words I've seen, I've seen artisanal hammer once listed, like it's everywhere because artisanal says handmade and handcrafted and special effort put into this. And it's designed that way to trigger this sense of like, oh, it's really unique. You go to an expensive restaurant and they describe, you know, like how the cow that your steak is from was raised and what her name was and all this stuff. And it's like, it's there to show you how special, how much effort was put into us.

34:36And again, like, lest I seem like someone who's, who's coming in and saying like, pinch every penny, sometimes going to an expensive restaurant and you're surrounded by candlelight and wine and someone with a French accent spends an hour describing a steak. Like that's an experience that could be worth it. As long as I feel like, as long as we are conscious that's what's happening. We're not just getting fooled into paying$40 for a hamburger because someone's describing it as thus. And this is why so many companies are now showing the behind the scenes. That's like a whole, yeah. Absolutely. This is mere speculation on my part, but I sometimes wonder if the open kitchen concept that so many restaurants have adopted, I don't know if you have a lot of foodies with you if everyone there is eating ramen every day until they retire.

35:21But open restaurants where you see the work in the kitchen, whether intentional or not, that's part of what it does, is it shows you how much work is going on. Now, there's a whole conversation, like, is that a nicer experience than a quiet restaurant with the violin music? And there are other reasons to have it and all that. But one of the things it shows, it shows you all of the effort that's going in. Many industries are adopting that. I have been curious about knowing how many of them did it consciously because of this idea of operational transparency and how many of them have sort of stumbled into that as an added benefit.

35:58You've also talked about, speaking of foodies and artesian, this and that and the other, about how the use of very flowery language often prompts people to overpay. Yeah. So flowery language, the example I often use is describing wine. I don't know if any of your listeners have ever gone to like a vineyard for tasting. It's a great experience, but they often describe the wine for like hours. It does two things. One is it will trigger this thing we just mentioned about this effort. The other thing it does is flower language, it raises our expectations for what we're going to get from the product or service.

36:32The more you hear something described, I mean, in some ways this also works with the endowment an idea. The more you're invested in it, the more that you're going to expect it to be a good experience. The more that you're going to feel like it's worthy of your time and money. And language can do that. I mean, language can trigger so many emotions. It's why there are writers and performers and poets. So the more that it's an elaborate description, the more likely that it's going to be also highly priced. And again, that can be something that you want. Some people would love to have an elaborately described cheeseburger.

37:09Others don't care. But I find myself sort of being aware if I'm in a setting where somebody is suddenly describing in flowery language how special something is. I'm like, look, I just want to buy the newspaper. I don't need to hear about all the other aspects. Just wanted toenail clippers. Exactly. Please, give me your CVS coupon with 500 pages.

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39:12So we've talked about a series of errors in thinking that can lead to not spending in the way that we would optimally prefer to do. What are some systems that we can create or processes that we can use in order to save ourselves from ourselves? Sure. That's a great question. And I would answer one with a general approach and two with some specific ideas. And maybe I'll actually do this in reverse. And the specific ideas have to do with if you identify which of these sort of traps you most commonly fall into, that's the first big step. If you spend too much on shoes or you spend too much discretionary spending every month or you always buy the brand name item when you could buy the same item that's the CVS brand, the generic.

39:59If you identify your problems, that's going to be the first big step. And then you can have a very specific approach to how you make better decisions. And the key to this in any context is to make stuff sort of automatic. when it's about changing habits. Don't make it so that every day you have to stop and think, oh my gosh, I need to eat healthy today. Oh my gosh, I need to spend better today. Just change your systems and your environment so that the better choices are automatic. Because again, this emotional stuff we talked about, what's so powerful about it is that it's unconscious and it's easy.

40:34And if you can create an environment that's unconscious and easy to get to the right choice, that's gonna serve you well. As a specific example, So when we talk about folks who tend to spend too much on their monthly discretionary spending, recall earlier I mentioned how we often judge how much money we have to spend based upon our checking account. So one thing we can do, one sort of one-time trick we can play on ourselves that has impact is if we get automatic deposits from our – we have a regular job. God bless you if you have a regular job. And normally it's deposited into our account. we can ask our HR department, say, hey, listen, can you put$200 a week into just a savings account?

41:12I don't mean like your 401k, a savings account that is easy to set up and you can get the money if you want it, but it's a different account than your checking account. Suddenly we've hidden$200 a week from ourselves. And when we look at our spending each week, when we look at our ATM receipt that's on our checking account or our debit account, we're going to think we have less money to spend and we're going to slow down our spend and we're going to only hit that limit. And what we found is that people then don't spend as much. Again, that money is still there, that$200 that's been put aside. It's still there if you need it, but it requires a step or two to get there.

41:47And often that step or two, that pain of paying will make us stop and think about what we're doing and make better choices. And all that requires, it's creating a whole new system. It requires going to your HR department once and saying, hey, can you set this up? And they will, if they're decent people, say yes. That's one specific example. On a sort of bigger picture level, I often reflect upon this idea that I mentioned with credit cards that like the time between a decision and the consequences of the decision can make a big difference, particularly when you think about the biggest spending and saving issue that we have, which is like saving for the future for retirement and everything.

42:23There's so much time between now and our retired itself that we just future Jeff is a different person than present day Jeff. I'm doing a very short version of why self-control is a problem, why we don't save. But one of the core things that we don't feel the consequences of our decisions when it comes to saving. We don't feel the negative impact of having spent too much right now at the detriment to saving for later. And if that is sort of the core underpinning of both people's money mistakes is spending too much now when we want to spend it later. And what I often talk about doing is making the consequences specific, personal, and visible.

43:00When we try to make the consequence something specific, like the more details we have when we think about the future, to the extent that we stop and think about our retired selves, people find when you think about the specific date of retirement, as opposed to, you know, retiring in 40 years, you think about where you want to live and if you have kids and what your health might be and what your hobby is going to be and, you know, what are your different items, the more you can make the future concrete, the more you connect to it, and the more you're going to behave in a way that's responsible for that future self.

43:31Sometimes it's not retirement, right? I want to save money so I can go on a trip to Iceland next fall. The more you are daydreaming about that trip, the more you're thinking about the specifics of that trip, the more connected to become and the more you're going to be able to overcome your lack of self-control to make better decisions today to benefit that Iceland trip. So the more you can be specific about it, the better. In a similar way, the more you can make the consequences of your decisions personal and you can connect them. We talked about holding a mug, right? That becomes part of your person.

44:02It becomes part of sort of who you are. And so the more you can think about whether it's retirement and how that affects me or decisions, how it might affect your children, if you have kids or how it impacts your life, the more you're going to connect to it and feel responsible to the good outcome. Oftentimes it's the bad outcome, the spending now, the emotionally tempting stuff that leads us to respond because we're emotionally connected to that. But if we can make that other choice more personal and more specific, it matters. And the final element that I think is powerful is making good decisions, making saving and investment decisions, making them visible.

44:40And what I mean by that is if you stop and think about spending versus savings as sort of the two sides of it, teeter-totter, I guess, but the two options. We see spending, right? We see our neighbors, new clothes and new car. We see the good food that we're eating. And by its nature, that drives us to be competitive, right? FOMO and keeping up with the Joneses. We compete on the stuff that we see. And that's stuff that feels measurable and tangible. We never really talk about or see savings or investing. That stuff is invisible. In fact, more than it being invisible, like when you save money for the future, what do you see now?

45:17You see less, right? Like, you know, if you're living in a scarcity, so if you're barely getting by and you put aside$50 a week, that's less food on your table, right? Maybe we don't feel it as much if we have a little bit more abundance, but we don't see the benefits of that. And there's some fascinating studies showing that when we find ways to make savings visible and tangible, to make the good choices obvious to us, it triggers like our identity. I think part of the success of like this fire movement, financial independence, retire early. Is that what it is? Is this identity, right? You've created this identity of like, I'm doing something now for my future.

45:56And if you can make the, find a way to make that visible and tangible, you're going to be more connected to making good financial decisions. The study that I often talk about, again, my co-author did this thing where they went to Africa and they had people save and it was a surprise result to them. But the device and made people save the most wasn't like text messages. It wasn't family triggering. It wasn't emotional. Maybe it was a little coin where each week, if someone saved money, they would scratch off this coin and they put it on their mantle. And what that did is it showed the family that, yeah, we have a little bit less food this week, but that's because of this thing that we're doing.

46:30And there's a survey that, the sort of thing that pushed me over the edge and made me decide I had to write this book, was a survey that said men in America were more willing to talk about whether or not they use Viagra than how much they've saved for retirement. And what's more embarrassing, your little teeny tiny ineffective savings account or this other issue? And it's just, it's so indicative of how the good choices, and this is a big social statement too, not just financial, but the good choices are often the ones that aren't rewarded and aren't part of our competitive culture and aren't seen.

47:04And so if you can find a way to make the good choices visible, whether that's about your discretionary spending or about not falling for brands or whatever it is to reward yourself by showing you're making the right thing, you're going to connect to it and your identity will slowly but surely change as someone who makes better financial choices. And also if you can just listen to me babble about financial decision-making over and over, just hit this repeat over and over again and support your sponsors and that's going to be the way to do it. There might be something to that. Repetition's going to really drill it into people's minds.

47:34Exactly. Especially because if you play this at two times speed, which some people do with audio stuff, I secretly make you all send me money via PayPal. So go ahead, do that. Hypnosis. I don't know if you realize that was a level that we were, oh my gosh, someday. I bet there's somebody doing that. There's some algorithm out there making people do that. Secretly send them money? Yeah, exactly. Yeah, well, and if the money is already just in your PayPal account, not in your checking account in the first place, then, or in your Venmo account, but not in your checking account in the first place, then it doesn't even feel like real money.

48:04It's not. It's play money. How many people send people Venmo, go out to dinner and then they Venmo send me some money and they say, hey, that's for the drugs I bought. That's fun, right? That's not real money. And that's what's fascinating about Venmo. It's almost like the casino poker chips of money. Yeah. I mean, that's another area we can get to this idea of mental accounting that our money, depending on the source and the account and the use of it, it feels different, right? People treat a bonus, year-end bonus differently than they do the same equivalent of a raise, right? Like a raise that you get every month, you treat like more responsibly, a bonus, you splurge.

48:41Well, thank you, Jeff. Where can people find you if they'd like to learn more? A few places. One is I would invite them to check out peoplescience.com. It's a website that I run that's about this behavioral science. And it's not just about financial decision making, but it's about habits and loyalty and design and motivation. And it takes what I was lucky to write about in the book and it expands it and applies it more broadly. And I share the ideas of people a lot smarter than me. And I'm really proud of the work we do there. And the other thing is you can always check me out, Jeff Kreisler, K-R-E-I-S-L-E-R, jeffkreisler.com.

49:14My Twitter is Jeff Kreisler. All my social stuff. I don't do Instagram. I'm too old for that, I guess. But just Jeff Kreisler is a good way to track me down.

49:25Thank you, Jeff. What are some of the key takeaways that we got from today's conversation. I'm going to review five common ways that we make money mistakes, followed by four solutions that can help us save ourselves from ourselves. Here we go. Number one, beware of falling for sales prices. I see this frequently with people who are new to frugality or who are new to the financial independence movement, and they're thinking about various ways to save money for the first time. It can be easy to jump to the conclusion that, oh, if I shop deals and discounts, if I only shop sales, if I never buy anything at full price, that means that I'll be saving money.

50:05Not necessarily. Sometimes a sale or a deal or a discount can give you the thrill of winning, the thrill of a good deal. And that thrill either prompts you to spend more than you otherwise would by buying items that you otherwise would not have bought. Or it gives you that dopamine rush, that excitement of having scored a great deal. So you keep going back to the same retailer, not realizing that you could get that same comparable item at the same price or maybe even less from a different retailer that doesn't give you an advertised sale. Instead of sitting there and looking at the$6 sweater and saying, what's the opportunity cost, right?

50:50What's this really worth to me? And doing this hard calculation. Instead, you look at it and say, oh, the$60 sweater is a much better deal than the $100 sweater it used to be. And so right there, in a snap of the fingers, you get your choice. You make a value judgment based just upon 60 versus 100 instead of 60 versus anything else in the world. And that's what we love. We love the easy solution that feels good. Every November on Black Friday, when all of the, basically every company out there is advertising some type of a deal or a discount or some Black Friday, Cyber Monday special, I always put up a post on Instagram where I say, hey, you know what?

51:26You can save 100 % by just not buying anything. So don't forget, there's nothing frugal about saving 50 % on an item that you wouldn't have purchased in the first place had it been full price. So beware of overvaluing sales and discounts and deals. That is key takeaway and money mistake. Number one. Number two, beware of ignoring the opportunity costs of a particular purchase as a result of mentally earmarking a certain batch of money to go towards a certain type of purchase. So for example, you might mentally earmark 30 grand as the money that you're going to spend on a car. And then you start comparison shopping between different types of cars, overlooking the idea that if you only spent 20 grand on a car instead of 30, then that$10 ,000 difference could fully fund your Roth IRA and your HSA, and you'd still have money left over.

52:21You're about to spend$30 ,000 on a Honda. What else could you spend that on, right? Like the opportunity costs. And people couldn't think of anything. And so they pushed them and they pushed them. And the most they got is people would say, well, if I don't spend$30 ,000 on a Honda, I could spend$30 ,000 on a Toyota. And that's not spending your money on something else. It's just a different brand. Likewise, let's say you're negotiating on a car or on a house and you're thinking in terms of tens of thousands or hundreds of thousands of dollars. In that type of a negotiation, it can be easy to let 200 bucks slide because what's 200 bucks in the context of spending 20 grand or 30 grand on a car?

53:01Proportionately, it seems like a small amount. And yet you might on that same day carry coupons into the grocery store in order to save$7 off of your$75 grocery purchase because proportionately that feels large. But framing these expenditures as proportions distracts us from the fact that there is real opportunity cost in that$7 or that$200. And that opportunity cost exists regardless of our feeling about that amount based on its relative value. So as you are making negotiations, as you're shopping for a better mortgage rate, as you're negotiating on a home or a car or furniture or thinking about any other big ticket purchase, remember to keep that in mind as well.

53:49And so that is key takeaway number two. Key takeaway number three, and the third example of how we often trip ourselves up, is that we try to numb the pain of paying. If you take cash out of your wallet to pay for something, you feel the loss of that money. That pain response is present because that loss is so visceral and tangible and right there in your hands. The pain of paying reflects this finding that when we pay for something, When we hand over a$20 bill at a counter, it stimulates the same region of our brain as physical pain does. By contrast, if you use your Apple Watch to quickly tap for payment, you don't even feel it.

54:35The payment doesn't feel real and therefore doesn't hurt as much. Because now it's not cash out of your wallet. It's just an electronic buzz. It's just numbers on a spreadsheet. sheet. You're just moving around a few electronic digits, and that doesn't hurt as much, and so you're likely to spend more. What ends up happening in our modern world is instead of feeling that pain, we numb the pain. We use devices that make it so we don't actually feel it. So making that purchase more visceral, whether that means manually typing in your credit or debit card information when you're making an online purchase, rather than using an autofill feature, or whether that means compulsively checking your credit card balance and being hyper aware of what that number is so that any type of credit card payment that you make feels like an immediate loss of money rather than a promise to pay later.

55:28Or whether that means literally paying in cash, at least for a day or two as an experiment, be aware of when you feel the pain of the loss of money versus when you don't and how that impacts the number of items that you buy and the amount that you spend on those items. So that is key takeaway number three about ways that our brains just trip us up. And key takeaway and example number four is closely related. And it's the idea that we don't feel it as much when we separate the time that we make the payment from the time that we receive the service. Jeff illustrates this perfectly and succinctly in his example about Amazon free shipping.

56:09We just went through the shopping season, and I'm sure plenty of listeners used Amazon.com because they had free shipping. Well, no, they didn't have free shipping. They paid for Prime. They paid$100 a year for shipping. And even if you bought 100 items on Amazon, that's still a dollar an item, but it felt free. We see this with a lot of the spending decisions that we make in our daily lives. With a pay-as-you-go a la carte pricing model, you'd think carefully about each individual purchase. But the more distance that you create between the time that you make that payment and the time that you actually get that Amazon free shipping item, the greater that time distance, the more it reduces our visceral feeling of the cost.

56:54And so when we notice that this is a tendency that we all have, well, then that makes us evaluate those types of purchases in a new light. And it allows you to reframe your spending decisions so that instead of saying, hey, my gym membership is$40 a month, you would instead say, hey, for the last six months I've been going to the gym on average four times a month, would I be willing to pay$10 per visit? And when you reframe the question like that, it can often change the answer. So that is key takeaway number four. Finally, key takeaway number five with regard to ways that we make money mistakes is that we often overvalue the things that we're already familiar with.

57:36You're a Starbucks coffee drinker, but you could save a dollar a day if you started drinking Pete's that's right next door and even closer to your office than the Starbucks is. But you're not going to give up because the value just by being connected already is great. It's why loyalty programs work, because you become connected to a product or service. We overvalue the items that we already own or even the items that we're already holding. And that can lead to two major consequences. Number one, if you list your home for sale, you might overprice it because you are overvaluing your emotional experience of living in that home.

58:11And as a result, you think that your house is worth more than it is. And the consequence of that, overpricing your home when you list it on the market, could lead to ultimate net loss if it results in a delayed sale or frequent price reductions that may signal to a buyer that you are an easy negotiation target. So that's one of the negative consequences that can come out of this. And then the other one is that you might be more prone to spending money on brands that you're loyal to, even when that brand loyalty no longer makes sense. So those are five ways that we trip ourselves up. But what are some of the solutions?

58:44Here are four. Number one, be specific and personal. When you think about the specific date of retirement, as opposed to retiring 40 years, you think about where you want to live and if you have kids and what your health might be and what your hobby is going to be. And, you know, what are your different items? The more you can make the future concrete, the more you connect to it and the more you're going to behave in a way that is responsible for that future self. When you're thinking about the future that you're planning for or saving for, make it incredibly concrete. So, for example, instead of saying, I'm going to retire in 12 years, try saying, I'm going to retire on September 18th, 2032.

59:26too. And instead of saying, when I retire, I'm going to travel, try saying, when I retire, I'm first going to rent an Airbnb cabin on Lake Michigan for exactly three months. And I will start my mornings by waking up, going on a run, and then making a big breakfast from scratch and reading the news while I eat a long, luxurious breakfast. The more specific, the more personal, the more concrete those details, the more you know what your future self is striving for. And the more that can motivate you to change your decisions now for the sake of future you. So that's number one. Number two, hide money from yourself.

1:00:09Lower your own limits. If you think that you have X amount of money to spend because that's what's in your checking account, there's a decent chance that your spending will rise to the level that you think you're able to spend. By contrast, if you hide money from yourself by setting up automatic transfers from your checking account into investment accounts, retirement accounts, health savings accounts, regular savings accounts, and ideally if you place these accounts in different institutions so that when you log in to your checking account, you don't see the balance in your savings account, you don't see the balance in any other accounts, you see purely checkings and that's it.

1:00:47That's a way that you can hide your money from yourself. And by extension, you're likely to not spend as much. Suddenly, we've hidden$200 a week from ourselves. And when we look at our spending each week, when we look at our ATM receipt that's on our checking account or our debit account, we're going to think we have less money to spend and we're going to slow down our spend and we're going to only hit that limit. And what we found is that people then don't spend as much. So that is solution number two. Solution number three, make your savings and investments as visible, as tangible, as visceral as your spending.

1:01:27We see spending, right? We see our neighbors, new clothes and new car. We see the good food that we're eating. And by its nature, that drives us to be competitive, right? FOMO and Keeping up with the Joneses, we compete on the stuff that we see. And that's stuff that feels measurable and tangible. We never really talk about or see savings or investing. That stuff is invisible. In fact, more than it being invisible, when you save money for the future, what do you see now? You see less. Keep a Post-it note on your bathroom mirror in which you track your savings or your investments. Create a chart that shows the growth of your net worth and place it somewhere in your home where you can see it or make it the wallpaper on your phone or make it the photographic background on your laptop.

1:02:14Make the balance in your retirement account as visible as right there in your face as that fancy dining room table that you bought. And so making your smart decisions visible is solution number three. And finally, solution number four is to create an identity around saving and investing. And if you are part of the FIRE community, the financial independence early retirement community, then you are already doing this. There's some fascinating studies showing that when we find ways to make savings visible and tangible, to make the good choices obvious to us, it triggers our identity. I think part of the success of this FIRE movement is this identity, right?

1:03:00You've created this identity of I'm doing something now for my future. And if you can find a way to make that visible and tangible, you're going to be more connected to making good financial decisions. And if you are not yet part of the community, or if you haven't interacted very much with other people in this community, you can head to affordanything.com slash community, where you can interact with other people in the community. You can form identity around shared goals, like if you want to start a side hustle, or you want to retire early, or you're trying to pay off debt, or you're trying to cross the seven-figure net worth mark.

1:03:36You can build tribes around these shared goals. You can talk about specific topics. All of that. you can access for free at affordanything.com slash community. It's a great way to form a sense of identity around saving, investing, and building financial independence. And it's a great way to keep your head in the game and get encouragement from your peers. So again, that's affordanything.com slash community. I'll see you there. So those are nine key takeaways that we got from this conversation with Jeff Kreisler, five common mistakes, and four ways that we can save ourselves from ourselves. If you want a written list of everything that we've talked about, detailed notes that can jog your memory and serve as a reminder and help you implement this stuff and take action on it, you can get that for free by going to our show notes at affordanything.com slash episode 238.

1:04:29That's affordanything.com slash episode 238. While you're there, you can sign up for our email list. Head to affordanything.com slash episode 238. You can check out our show notes and sign up for our email list. Thank you so much for tuning in. If you enjoyed today's episode, please share it with a friend or a family member. That's the single best way that you can help other people improve their financial situation as well as spread the message of financial independence. Make sure that you hit subscribe or follow in whatever app you're using to listen to this podcast so that you won't miss any of our upcoming shows.

1:05:03That's our show for today. My name is Paula Pant. You can find me on Instagram at Paula Pant, P-A-U-L-A, P-A-N-T. Thank you so much for being part of this community and I will catch you next week.