Can the Eiffel Tower Help You Make Better Financial Decisions?

Our brains are really facinating.  We often feel like we’re in control, yet we can see ourselves making decisions that we know we will regret tomorrow.  Yet thinking about that regret, and knowing that it’s a bad decision still does almost nothing to change our behavior.

Why is that?  Perhaps the problem is what we are focusing on.

A recent study by Deborah MacInnis, the vice dean for research and strategy at USC gives us some insights on how what we focus on can help us act differently.  In the study, they placed subjects alone in a room, with a large piece of chocolate cake, utensils, and water.  (Why they didn’t use milk, I don’t know.  Maybe it would have made the cake even more irresistible.)    They told them to eat as much or as little as they wanted, but first they were told to focus on the pride they’d feel when they resisted the cake.  Another group was told to focus on the shame they would feel if they ate it, and the third group was given no instructions at all.

The results: those that focused on pride ate far less than those that focused on shame.  They also ate less than the control group.  Why might that be?

In the early stages of my relationships with clients, I often tell them “You can’t say no until you have a bigger yes.”  In this study, focusing on yourself and thinking about how good you’ll feel when you make the right decision led to better results.  In your financial life, you’ve got to say no to lots of small things every week in order to meet your goals.  Focusing on the thing you’re resisting just makes it harder.  If not going out to eat is what allows you to have money for that big vacation you’ve been dreaming about, it gets easier to do the right thing.

 Get detailed to make your vision even more compelling.  Traveling to Italy is a good goal, but traveling to Venice, Florence and Rome is better.  It’s easier for your brain to be motivated by specifics than generalities.  I encourage clients to clip photos from magazines, or browse and save some from sites like Picasa, Flickr, or other online photo services.  Looking at pictures of the Eiffel Tower can be a great motivator if Paris is your dream.  You’re not saying no to dinner, you’re saying yes to the adventure that you truly want to have.

Like the study suggests, don’t focus on resisting a great dinner out, focus on having an incredible experience, walking along the Seine, viewing the Eiffel Tower in the distance.  Small steps every week, focused on that long-term goal, will get you there.

What other tips could you recommend to those struggling to make better financial decisions?