How to Build Better Financial Habits | Part 2
Master your internal triggers and get closer to your goals with Nir Eyal, Wall Street Journal bestselling author of
Next, learn how to plan for traction:
In this episode, learn:
- Why we do things against our own best interest
- The 4 techniques to master your internal triggers
- How to overcome hedonic adaptation – the urge to want more – to help you realise your life and financial goals
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Internal triggers are uncomfortable emotional states that we seek to escape from. Why is it so important to understand our internal triggers so that we can finally master them? Fundamentally, it's about understanding human motivation.
“Why do we do things against our best interest?”
To answer Plato's 2500 year old question, we need to understand the nature of why we do what we do.
If you ask most people: What's the nature of human motivation? They'll going to give you some version of carrots and sticks: that everything we do is about the pursuit of pleasure and the avoidance of pain.
Neurologically, we know this to not be true. In fact, everything you do, you do for only one reason, and that is the desire to escape discomfort. This is called the homeostatic response.
Think about it: if you feel cold, your body will tell you to put on a coat. If you feel hot, your brain says, “Ooh, this is an uncomfortable situation, take off your jacket”. If you feel hungry, you feel hunger pangs, so you eat. And if you eat too much, you’ll feel stuffed, so you’ll stop eating. So physiologically, this makes perfect sense.
The same holds true psychologically. When we feel bored, lonesome, stressed, anxious, uncertain, we look for things to provide relief for that emotional discomfort. So the first step to becoming financially indistractable is to learn to identify those internal triggers that prompt us to do things that we later might regret.
4 techniques to master your internal triggers
Technique #1: Improve your emotional awareness
The first thing you can do is to bring awareness to those sensations. Try thinking of a time where you got distracted and did something financially that you later regretted.
Maybe it was that splurge purchase? Or getting out of the markets when you felt fearful?
What was the emotion you felt at the time? What did you feel before you took that action? Were you feeling lonesome, and maybe needed an emotional pick-me-up? Could that be why you went online shopping and splurged?
Were you feeling fear or greed when you made that bad mistake in the markets? What did you feel right before taking that action? Now, before you criticise and beat yourself up, take a moment to explore these sensations with curiosity rather than contempt.
Technique #2: The 10-minute rule
The 10-minute rule says that you can give in to any temptation not now, but in 10 minutes.
Try this when:
- You’re about to splurge on a purchase
- You’re about to have that piece of chocolate cake you're trying to avoid
- You’re about to check your phone when you know you want to be fully present
- You’re about to withdraw your investments from the market our of fear
Action the 10-minute rule by “surfing the urge”. This practice acknowledges that cravings, desires, and urges tend to crest and subside. Our emotions are transitory. So if we can ride that sensation - ride that urge like a surfer on a surfboard for just a few minutes - that sensation will crest and then subside.
So if you have that impulse, just take a few minutes to pause, set a timer for 10 minutes, take a deep breath, and just surf that urge. When those 10 minutes are up, that craving will no longer exist.
Technique #3: The 72-hour rule
Financial experts say that it's a good idea to give yourself more time to process a decision the larger the financial decision might be.
Try this when you want to:
- Buy that designer bag or sunnies
- Book that impulse holiday
- Upgrade your phone to the latest model
Waiting 3 days before you make any drastic financial decision can be a good way to cool down those internal triggers so you're not making a decision you'll later regret.
Technique #4: Visualisation
There's a right way and a wrong way to use this technique.
The wrong way to visualise involves putting your dreams on a poster or pinterest board, and visualising what the perfect life might look like. For example, if you want to retire early, maybe you'll think of yourself sunning away on a beach with a strawberry daiquiri. That’s actually not helpful. In fact, studies find that when we visualise an outcome, it actually makes us less likely to do the hard work of achieving that goal. Visualising outcomes gives this little squirt of happiness that makes us feel like we've already accomplished the endeavour.
The right way to visualise is to imagine what you’ll do when you’re distracted from your goal. A big mistake a lot of investors make is to sell out during a market correction. Remember, stock markets go through bear phases and bull phases, and they oftentimes will have these market corrections of 10% or more. Financial experts tell us that the correct way to ride out a market correction is to sit still, not panic. Make sure that we're on the straight and narrow, and don’t let our emotions get the best of us.
However, most people tend to sell their investments when the market is tanking, and buy when the market is rallying, reducing their long-term gains. So by recognising these internal triggers and making sure that we master them, we can make sure that we take the first step to becoming financially indistractable.
Be careful of hedonic adaptation
Hedonic adaptation is our tendency to return to a base level of satisfaction, no matter what really happens to us in life. Studies have found that when people win the lottery, they're happy for a while, and then they drift down towards their base level of happiness.
The same goes for amputees who might lose a leg and are very disappointed for a while, and then somehow miraculously go back to their base level of satisfaction after a period of time.
This tendency serves us, but can also hurt us: Because as life goes on, we always maintain a base level of dissatisfaction. This means that our core human condition is to always want more. We constantly adapt no matter what we have in life, and we always seek to have better, and bigger, and more. No matter what we have in life, we always seek to improve our lot.
But if we're not careful, that tendency towards dissatisfaction can lead us towards escapism. Escapism can look like drinking too much, scrolling too much, or splurging to escape those uncomfortable internal triggers.
How do we make sure that hedonic adaptation doesn't get the best of us?
Keep a gratitude journal to help you stay grounded. Take a few minutes every week to recognise all the blessings that we have, whether that's having food on the table, having good health, or living in a country that's not in war. Keeping a gratitude journal can help us appreciate what we have and make sure that hedonic adaptation doesn't get the best of us.
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