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  • Northeast Wisconsin
  • July 2018
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Understanding and changing financial behavior

Do you wish you could save more money or had less debt? People often wish things could be better but fail to take action to make their dreams come true. Sometimes, we know how to make our lives better, but we don’t change our behavior. What stops us from making changes?

Spending influences

Experts say each of us receives between 600 and 3,000 advertising messages daily. Advertising is everywhere: billboards, TV, radio, newspapers, catalogs, emails, texts, gas station pumps, bathrooms, direct mail, shopping channels and more. These messages encourage impulsive and emotional spending. Compare the deluge of spending influences with the trickle of saving influences. It’s no contest. Spending influences dominate.

We are creatures of habit

Would you believe that forty percent of our spending is habitual? We often spend because it is a habit and don’t notice how much these habits add up.

In a 2015 survey by Sun Trust, people earning at least $75,000 were asked, “How are you doing with reaching your goals?” Thirty-three percent of people said, “A lack of financial discipline sometimes prevents me from reaching my goals.” Forty-four percent said, “Spending on lifestyle purchases causes me to save less than I should each month.”

We overestimate how much we make

Some people think, “If I’m grossing $75,000 per year, why can’t I afford to do more?” While rising prices and inflation can reduce our buying power, the bigger culprit may be the difference between gross and net income. With pre-tax deductions for 401(k) plans, child care, health savings accounts, the employee share of health insurance premiums, state and federal taxes, and Social Security, it’s no wonder that paychecks have shrunk. Making pre-tax payments is nice, but we need to be realistic about how much money is available to spend.

Countering strategies

To counter spending influences, minimize media and images that encourage spending rather than saving. Get rid of that pile of glossy catalogs next to your favorite chair. Delete “favorite” websites where you longingly browse and spend on lifestyle purchases. If shopping is a habit or a social activity, substitute other activities. Call a friend, take a pet for a walk, get in a workout or go out for coffee.

You can build new habits

We have all developed new habits. Remember learning how to drive? At first driving took a lot of very conscious thought. “I’ve got to slow down, check the right lane, signal my turn, etc.” But through practice and repetition, driving became routine.

To make positive financial changes, try talking with a nonprofit credit counselor or financial coach.

 

Alan Prahl

Alan Prahl is the Education Leader with FISC, the Financial Information & Service Center. He has an undergraduate degree from the University of Wisconsin in Madison and law degree from Hamline University. A nonprofit program of Goodwill NCW, FISC provides financial counseling and coaching, including a no-cost, no obligation 30-minute consultation with the “counselor on call.” To learn more, call 920-886-1000 or visit www.fisc-cccs.org.

Website: www.fisc-cccs.org
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