University of Toronto’s Lisa Kramer outlines some ways our best-laid financial plans can go awry and offers this handy trick to help get your inner planner and doer in sync.
Originally published June 2019
It's 11:00 PM and you've made a plan to go to the gym before work in the morning. You diligently set your alarm clock for 5:00 AM. When 5:00 AM rolls around, you hit the snooze button. 10 minutes later, you hit it again. Maybe you'll skip the gym for one more day.
Whether it's going to the gym or attending to our finances, the person who makes a plan and the one who actually executes it can be two very different people. The planner tends to recognize the need. The doer, well, they'd likely prefer to do it tomorrow. The planner and doer also knock heads over your money. For years, the planner in you has probably intended to come up with a financial strategy for your retirement, to save more money, pay down credit card debt, invest wisely. But the doer in you may not be very good at, well, the doing.
In behavioral economics, the way we make financial decisions is based on how we perceive time, money, or context. In this case, the way we consider time is crucial. In the heat of the moment, we may be inclined to live for the moment or hit the snooze button rather than make sacrifices for the future. So how do you get your planner and your doer in sync?
In the case of your alarm clock, you might place it across the room so that you have to get out of bed to turn it off. In the case of your finances, it could be as simple as setting up pre-authorized transfers to your retirement savings account or increasing your rate of saving any time your salary is raised. There are ways to align the planner and the doer by setting up sensible nudges in advance that will spring your doer into action, or at least make it harder for them to hit the snooze button.