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I Will Save More Money…Tomorrow

Posted by Carrie Rattle on Feb 11, 2015 12:00:00 PM

People tend to overestimate their skills and ability to control their own success.  This is called the Overconfidence Bias.  It is natural to assume the future will only get brighter and we’ll be better off tomorrow if we just work hard enough.  Hope is powerful, but is it realistic?

Climbing Mountains or Saving - Steady Preparation

Let’s talk about trekking in high altitude as an example of the Overconfidence Bias.  Reputable companies like Mt. Travel Sobek and Backroads want to ensure you’re in shape before you tackle activities like Behavioral_Cents_kilimanjaroclimbing to the top of Kilimanjaro (19,341 feet).  And they don’t take your word for it – they give you examples of what you should accomplish in the gym to ensure you’re ready. You may have to provide a doctor’s certification on your heart fitness level. And they will likely examine your clothing before you start the trek to ensure you’re prepared for the cold at the top. 

Overconfidence Loses. Fate Wins.

Travel companies do this because they have experience with customers who have suffered from Overconfidence, and had to be carried out halfway up these strenuous climbs because they had no idea what they were getting into. It’s hard to imagine how walking slowly with one foot in front of the other up a mountain could be tough, especially when thinking about it in the comfort of your own home.  But bad weather,  injury, or illness are not always predictable. And these elements are a lot more unpleasant when feet are your only mode of transportation and you’re breathing air 50% thinner than sea level.  Lots of people overestimate their skill and control of the external environment.

 I Will be a Better Saver Tomorrow

The same concept applies to saving money.  With Overconfidence, we assume we have more control over our life and future than we actually have.  It’s natural to assume that our career will continue on an upward trajectory, that we’ll stay healthy, or that the tomorrow version of you will be better at saving than today

In reality, the future is up for grabs and fate likes to throw curve balls at us. But you CAN control your own behaviors. You can successfully save money to have choices – when problems or opportunities arise. Take just 5 minutes on the train, in the car, or over coffee and do some simple thinking. How much do you save a day?  If it’s a $1, can you make it $2?  If it’s $10, can you make it $15?  Take that cash now and tuck it away in an envelope. When you look at that envelope tomorrow, do the same again. Repeat. There, now you're a little better prepared for climbing that mountain than you were yesterday!

This blog is for all money profiles.

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Information shown is for illustrative purposes only and is not intended as investment, legal or tax planning advice. Please consult a financial adviser, attorney or tax specialist for advice specific to your financial situation. Behavioral Cents, LLC and any third parties listed, linked to or otherwise appearing in this message are separate and unaffiliated and are not responsible for each other’s products, services or policies.

BehavioralCents.com is a web site for women focused on how the mind naturally drives money behaviors. We hope to inspire women to understand their own automatic and emotional reactions to money, and better prepare them for financial independence. Thoughts always welcome: carrierattle@behavioralcents.com.

 

 

 

 

Topics: Money Behaviors

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