Are you hardwired to be bad with money?

I’ve found it’s actually our basic psychology that pushes us to make bad decisions with money. But you can hack the system…

The more research and work I do with people around money, the more I realise we’re actually hard wired to be unsuccessful. We’re destined for failure from the start and actually have very little hope of doing what’s needed to make good money decisions.

Young professionals want it all. We all have a burning desire to maximise every moment and cram as many experiences as we can into our lives. Our bucket lists are long. Our patience is short.

Can we really have it all?

Hardwired to be unsuccessful

Our basic psychological drivers push us to be bad with money. The desire for short term satisfaction is in direct conflict with our goal of getting ahead. Our desire to ‘live life’ now often results in slower progress towards the things we want for our future.

This is hard-wired into our DNA. We make decisions to avoid pain, experience satisfaction, and get the things we want right now.

But all is not lost here. There is hope. You can prevail.

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Hacking the system for success

There are some things you can do hack the system and make it easier to get the things you want, but you need to know the rules of the game.

So how do you do this?

You need to know the basics of money psychology. Understand it’s impact and learn to recognise when it’s happening. But, most importantly you need to know how to game the system.

We’re driven to take actions that will maximise our short term pleasure, often at the expense of our future wants. This is why it’s so easy to become unhealthy and put on weight, because it’s much more enjoyable to feast on delicious food than it is to exercise.

Money is no different. It’s much more pleasurable to spend all our income (and sometimes more than our income) on things that will give us pleasure. Things like travel, eating out, a big night out, or sometimes just frivolous online shopping.

So what does all this mean for you?

You need to actually rewire your brain here. Don’t stress, this sounds hard but there are some simple things you can do to help.

Reset your targets

The main goal here is to reset the way you think about your money. You have to have some targets, otherwise this step will be impossible. Once you’ve set your targets, the next step is a subtle change in the way you think about what you’re doing with your money.

I was working with a client who really wanted to go on a big trip around Asia (we’ll call her Lara). Now, Lara had done the backpacker thing when she was younger and was keen for a little more comfort on the trip she was planning. So Lara knew this wouldn’t be a cheap trip done on a shoestring budget. She’d need a decent amount of savings to do the trip the way she wanted.

When I met Lara she had been thinking about this for around a year, but hadn’t really made much progress. When we talked about why, Lara said she had done a budget but struggled to stick to it because she was enjoying her lifestyle. She didn’t like to say no to things.

When Lara’s mates were planning a weekend away or a big night out, Lara didn’t want to say no. So she often went along for the ride.

Here we see our basic money psychology at play. Where Lara didn’t want to go without something she’d enjoy in the short term, even though she knew these things were slowing down her progress towards the trip she wanted.

Short term versus long term

I chatted with Lara about some of this psychology stuff and our approach to hacking the system. We guided Lara through the process of setting a clear target for her trip. We then made a clear plan to get her there with some timeframes around it.

This is where the psychological shift kicked in.

Once we had the clear plan set with a timeframe for this holiday, Lara was no longer just saying ‘no’ to things. After the plan was set, instead of saying ‘no’, she was choosing the trip she really wanted over the other things that came up.

Lara now knew that every time she deviated from the path she had set, she was delaying getting the money for her trip. Can you guess what she chose?

Lara smashed her targets. The plan started working and the milestones were being ‘ticked off’. This gave Lara a huge motivational boost. The closer Lara got to her target, the more momentum she built. She even managed to find some extra money to add to her holiday budget to splurge a little more on some of those extra comforts she wanted.

This simple shift in thinking, with the help of a solid plan behind Lara’s strategy made simple something she had been failing at for a year.

Clear focus makes choices easier

You can do this just as easily.

Trying to save or make sacrifices without focus on exactly what you want and by when is tough going. You might make progress, but it will be hard fought.

Whether you’re planning your next holiday, trying to hit another savings target, or saving for your first property or investment, the same principle applies.

That one, simple, straightforward, basic psychological principle that holds us back, is nothing more than our desire for short term satisfaction.

Shift your thinking so you can see how every action you take is pushing you toward the things you want and away from bad decisions.

Hack the system here and you’ll put yourself ahead of the pack and make it so much easier to get what you want.

This is an edited version of an article that was originally published on Pivot Wealth and is republished here with permission. This article contains general information only. It should not be relied on as independent finance or tax advice. If you are after specific professional advice, speak to your registered tax agent/financial advisor or reach out to Pivot Wealth.