How to Build Better Financial Habits | Part 4
Eliminate external triggers and get closer to your goals with Nir Eyal, Wall Street Journal bestselling author of
Next, learn how to prevent distraction with pacts:
In this episode, learn:
- The external triggers preventing you from reaching your goals
- The difference between good and bad triggers
- 3 ways to avoid bad triggers
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Or read it in 7 minutes:
External triggers are all the things in our outside environment that can lead us towards traction or distraction. And they’re not always bad. An external trigger that reminds you to do something you plan to do, like pay a credit card bill, can be incredibly helpful.
Where an external trigger is harmful
External triggers can be harmful when they lead you away from traction and towards distraction. For example, that can happen when we get notified for a big sale or a deal we can't miss, and make a financial purchase we later regret.
So ask yourself: is the external trigger serving us or are we serving it? If the external trigger is serving us, then great, let's keep it in our life! But if the external trigger is taking us off track, then we need to remove it from our life.
3 tips to removing external triggers
Tip #1: Remove technological triggers
If you have a bad habit of compulsively buying things online, you may consider removing the external triggers that prompts you to make decisions that you later regret. For example, you can turn off the notification settings for certain shopping apps from your phone. Or consider deleting those apps altogether, and promise yourself you'll only checkout online on your desktop at home.
Another source of financial distraction can come from apps that tell us about the gyrations of the stock market or cryptocurrency, when really what we need to do is to stay invested for the long term. Some people find a compulsive tendency to look at the gyrations of the stock market because it plays with this variable reward mechanic just like a slot machine. Watching the stock market go up and down can be very engaging - even addictive.
So if you find yourself constantly checking your stock market portfolio when it doesn't actually change your decision-making, or maybe leads you to bad decisions, consider removing these apps from your phone.
Tip #2: Create systems
Some forms of external triggers aren't about the technology we use, but they can actually come in the form of other people, specifically, our kids. Every parent knows that kids can be incredibly distracting, especially when it comes to all the money we have to invest in our children's future.
My wife and I found that our daughter was causing us to make decisions that we later regretted from a financial perspective. Constantly hearing “Daddy, buy me this, Mommy, get me that” was really mentally taxing.
So here's what we did. We instituted a fun-fund. A fun-fund is a small account that we put a few dollars in every week so that when my daughter wants to buy something, she no longer has to ask us for it. She has dominion over that fun-fund, and she can spend it any way she wants - like an allowance that we control.
That fun-fund has certain requirements: She can only spend it on certain things. For example, she can't buy candy with it or other unhealthy things. However, she can use it for entertainment with her friends if she wants to go out. That's a good use of the fun-fund, so my daughter no longer has to ask my wife and I for permission. She knows that she can use this fun-fund without creating these unnecessary external triggers and without going outside our budget.
Tip #3: Make logical, not emotional, financial decisions
We can remove some external triggers from our life, but not every external trigger is so easy to remove. For example, many external triggers in our outside environment prompt us to want more and things we don't need.
In fact, we often want things simply because other people have it. This is called memetic desire, and it was first proposed by the psychologist, Rene Girard. Girard posited that most of what we think we want, we want simply for the fact that we've seen other people desiring it.
For example, when we see an ad of a model holding an expensive item, we don't necessarily need that item, but we want it because of the influence of memetic desire.
How do we fight memetic desire? It starts by looking at objective metrics of quality rather than subjective feelings about what we think we might want. For example, let's say you've been coveting a luxury car. Well, instead of going out and just buying that car based on a feeling, look for objective metrics of that car's quality. You'll often find that the best quality cars as rated by third parties are not the luxury brands. So by looking at objective metrics of quality, we’re less likely to succumb to memetic desire.
By understanding which external triggers serve us and which we are serving, we become much more likely to stay on track and become financially indistractable.
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