In my journey I’ve learned if you are a human, I hope most of you are, you are wired to make stupid decisions about money.
Despite working in the financial industry most of my life, I’ve still made hundreds of terrible decisions about money – digital subscriptions I never use, paying for my ex’s health insurance (for more than a year) because I hoped he might come back, buying jewellery worth thousands of dollars in India to sell when I got home. I racked up credit card debt before I had a home loan, when I had my home loan and even after my home loan.
These decisions and bad debt have got really brutal on me – emotionally and physically. When I am financially stressed I become “narky Pete”, impulsive, snappy and even angry at the world and at others.
At my worst, I’ve considered suicide. I’ve battled IBS (or whatever name you want to call stress related gut issues) for more than 20 years. Just last week when my Dad called, I didn’t answer because I felt like a loser over money.
So why do we make stupid decisions about money? And what can we do about it?
1. We aren’t good at thinking long-term
Almost everything about our culture encourages and rewards the loss of self-control (from reality TV to Instagram). Self-control issues have been around since we started walking on two legs.
Not only is the temptation everywhere but it’s getting worse. Commercial interests want us to do whatever is good for them and do it right now. Stores, apps, websites and social media clamour for our attention, time and money in ways which are good for them but terrible for us.
And to make matters worse – because there are so many ways to spend, we are even worse when thinking about money in terms of opportunity cost.
We never think: “What am I not going to be able to buy later if I buy this now?”. For example, “Is this $4.50 coffee the best use of money?”.
2. We are reducing the “pain of payment”
Friction is important because it makes it easier for us to say “No”. There was a great study in 2011 when some people got one 400g bag of crackers, while others got the same quantity of crackers, but in four separate 100g bags. Which group did eat less in the end and save more crackers?
You guessed it: the one where the crackers were given in four bags. But what made them stop sooner?
You guessed it again: when crackers were divided into multiple bags, people stopped at the end of a bag.
Technology has been used to remove the friction to make it easier to spend. Banks love it, retailers love it. But we don’t.
3. Saving for the future is just hard
We used to see saving in terms of livestock or crops. So it was easy to see what the Jones’s were up to and it encouraged us to save. But with technology we no longer see how much we have saved – it’s invisible! But we can clearly see how much we have spent (unfortunately our spending has become extremely visible).
While thinking and planning for the future is not something most of us like or do, the positive benefit of social pressure (to save more) has gone and was replaced by a far worse demon – the social pressure to spend (damn you rich kids of Instagram).
What do we do about it?
Strangely, it all starts with connection, real human connection. I’ve learned that technology can’t solve the problem alone. In fact, it is technology that makes it far worse for most of us.
In this digital age technology is making us less “connected”. Just today I read that 27.6% of people say they feel lonely at least three days every week. We are less connected with ourselves, with nature and with others. The less connected we are, the more likely we are to use coping mechanism like spending (spending gives you the same endorphin rush as eating dark chocolate), food, drugs, etc.
So, what do we need?
Connection is the first step but we also need a few more things:
- A little bit of help (and a little bit of knowledge)
We all need accountability to keep us honest. There is a reason people floss more before they go to the dentist. Someone will be looking at their teeth!
And we all need a little bit of help and knowledge. And it isn’t another blog, book or app. It’s actually someone to talk to. Someone we trust who will listen to our questions and not judge us. We need someone to take all the information and turn it into useful actionable knowledge.
What is Best Financial Friend (BFF) and how can it help you?
Put simply, BFF is a one-on-one digital money-coaching service (think a Personal Trainer for your money) created to help women get out of credit card debt.
You are matched with your own personal BFF who you will meet every month. Your BFF will provide you a no-judgment zone which is designed to keep you accountable, walk you through a money management process (my Nan’s envelope system for the digital age), set you small money challenges and share practical steps so you can take control.
We always put your interests first and we want to make sure you trust us and the information we provide. So we are putting our money where our mouth is – we will never accept any referral commissions. Any referral fee paid by a third party will be refunded back to our member’s account.
Our No.1 goal is to help you, and we hope to get 10,000 people bad debt free by 2020.
Let’s build a movement
As much as we want to make a difference, for us to be successful we also need your help. We all want to help you make fewer bad decisions. To do this we need to harness the power of social pressure, because for many of us, we need to see something before we can believe it’s possible.
But to become successful, we need to build a movement of financially well Australians. There is no reason why Australia can’t be the world leader in financial wellness. In fact, I think it must.
Together we can help each other. And the best part of life is that we all need each other.
We want to turn the tide and use technology to help more people and show them what they are spending, help them make smart decisions with their money. We want to help them spend joyfully.
This is why we need you! Are you ready to join us? Are you ready to change? Are you ready to feel great about money?