Wednesday, 15 December 2010

The future's bright. The future's orange or banana... but not chocolate.

You know you’re into the festive season when you find yourself sitting down to a meal you ordered back in September. 
Often at one of those works ‘dos’ where the restaurant needed the order for your table of 68 people ahead of time.
And you find yourself wistfully wondering ‘Why?’.
Why did I think I would want steamed fish and a side salad, you wonder, as you eye up the juicy roasts, mountains of potatoes and pillow-size yorkshire puds arriving at other tables.
mmm...wish I'd ordered what they've got...
Here's the reason. We all have really good intentions for our future behaviour. But we’re less sensible when it comes to present, on-the-spot desires. That’s the Jekyll and Hyde nature of our Future Self and our Present Self (and the dilemma in the story of Ulysses and the Sirens if you want to get all mythological).

Would you choose a healthy snack or junk food for yourself next week?
In a psychology experiment carried out by Leeds University Business School in 1998 experimenters asked people what snack they would like to have in a week’s time - a banana or a chocolate bar. Most people made a banana their advance choice.

The following week the experimenters returned and offered the same people a snack to have straight away. No mention was made of their previous choice. Most people, especially women, opted for the chocolate.

People are saying ‘at the moment of consumption I can’t resist vices
But some time in the future I’ll have what’s good for me’.

We have difficulty delaying gratification because pleasure-seeking is such a strong motivator of human behaviour. We’re much better at exercising self-control when thinking about the future. But not so good at the moment of choice. 

That’s why we join gyms we don’t go to, and think we will eat healthier food in the future. It’s why half of all people surveyed last year said they would go to church, whereas in fact 90% stayed on the sofa. And why we don't care for the planet as much as we should.
So next time you want to make a sensible economic decision, try to make it ahead of time. 
Because prescriptive savings programmes, like Save More Tomorrow (devised by behaviour economist Richard Thaler and adopted by firms like AXA) are a brilliant idea. 

They capitalise on this natural human tendency by getting people to decide in advance to allocate a portion of their future salary increases towards their retirement savings. 
Consider which you would do:
a) Commit now to putting 10% of a future pay rise towards additional pension or mortgage payments?
b) When you get your next pay rise will you then make those additional contributions?

Healthy diet and healthy finance decisions have a lot in common! Pass me the chocolate.


  1. Wow! Really insightful! I Have got your book but I like to keep up to date with the blog too. Esp seeing as I did get my finances under control a while ago so things are going good but I sometime slip up. This is great to keep me on track!


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