Photocopied picture of eyes makes people more honest

 

Have you heard about the bagel man?

Every morning, Paul F delivered some bagels and a cash box to a company's staff room. 

Then he went back later to pick up the money and the leftovers. 

It was an honour-system, people took a bagel and left a dollar, and it worked. Within a few years, he was delivering 700 dozen bagels a week to 140 companies and earning as much as he had ever made as a research analyst. He had left  corporate life behind. And he was happy.

As well as coming up with a great business model Paul F had also - inadvertently – created an elegant economic experiment. 

Comparing the takings with the number of bagels taken told him, down to the penny, just how honest people had been. And he noted that the most honest offices were those where people liked their boss and their work! He also got a higher payment rate (over 90%) from smaller offices than larger ones.

Now recent research tells us if he'd stuck a photocopied picture of a pair of eyes onto his cash box, people would have coughed up more.

Psychologists at the Univerity of Newcastle noticed that donations into an honesty box for coffee always fell short of the amount of coffee consumed. So one week they stuck a picture of a pair of eyes on the box. The following week they changed the image to pictures of flowers, then eyes and so on. 

People paid nearly three times as much for their drinks when eyes were displayed rather than a flower picture. The figure below shows how the donations fluctuated according to the image displayed. Read their paper here.

 People weren’t actually being watched, of course, but even a pair of photo-copied eyes was enough to prick their conscience. You might like to  see if this works with your children by sticking a pair of eyes onto their money boxes, if they're tempted to raid them a bit too often. Or, if you have a chocolate hob-nob habit, test it on yourself with a pair on the biscuit tin!

Hard Wired For Luxury

What does this new ‘age of austerity’ spell for luxury purchases like champagne?

Will people stop buying it and switch to a cheaper tipple? The government and economists would have us think so, but they’re forgetting one thing.

The human brain is hard-wired for luxury.

Yes, pleasure seeking is a key motivator when it comes to human behaviour. And hedonism doesn’t give a toss about the state of the economy.

This was the topic of a talk I gave today at a wonderful Champagne Assembly organised by G.H. Mumm and Perrier Jouet. The reason we’ll always love a bit of luxury lies deep in the emotional part of our brain. Neuoscience has revealed the subconscious roots of consumer behaviour. It shows us that luxury brands excite the emotional, feeling part of the brain that ordinary brands simply leave cold.

Recently in Germany a couple of neuroscientists (Schaefer & Rotte, 2007) scanned people’s brains as they studied logos of brands of cars. When looking at everyday brands, there was activity in the thinking part of the brain – (the dorsolateral pre-frontal cortex) – but when they saw luxury brands there was frantic activity in the feeling part of the brain (the ventral striatum).

The researchers say this brain area is where our ‘hot buttons’ are located. It’s where we feel pleasure, desire, passion and happiness. There may be an evoluntionary imperative for this, since people who feel happy are more likely to find a mate. And happier people even live longer, according to Dutch psychologist Veenhoven.

So our thinking brain may be telling us to cut back. But, because we’re hard wired for luxury, those top brands will continue to press our hot buttons every time.

A warning from Simonne about Payment Protection Insurance

Taken out a credit card, loan or mortgage recently?

Then there's a chance you've been sold payment protection insurance (PPI).

The insurance is designed to cover payments for a year or two if you're unable to work due to accident, sickness or unemployment. But it was widely mis-sold over the past 6 years. 

In fact there have been over a million mis-sellling complaints to date.

If you've bought a policy directly from your lender, at best you've paid an over-the-top-price for the insurance. At worst, it's possible they won't even pay out on a claim (for example, if you're self-employed).

Think you may be been mis-sold? Then act now. Because new rules about the way banks deal with PPI are being challenged by the courts. Like the ability to reclaim unfair bank charges, the courts may decide to put claims on hold.

 But for now it's still possible to claim compensation - so make sure you get your complaint in quickly.

The Consumer Association, Which?, tell you all you need to know on how to claim your PPI money back. Just click here  for more information. 

Simonne Gnessen

Note to self: Make a list

Are you a list-lover? 

My life seems to be organised around a scattering of post-it notes reminding me of what I have to do, get or even think about. 

I love the sense of control that writing a list gives me. And the euphoria of sheer smugness I feel every time I tick something off.

So I was intrigued to read that writing a shopping list can save me £520 per year. Of course that assumes I take the list to the supermarket with me (or slavishly follow it when placing my online grocery order) and make a concerted effort not to go ‘off-list’ when tempting offers pop up on my radar.

The £520 a year saving statistic comes from the Tesco Greener Living campaign website. It shows you how much money you can save by going greener, including:

• An estimated £365 a year if your home is well insulated
• £30 a year if you remember NOT to leave appliances on stand-by
• £55 a year if you turn your heating thermostst down by just 1degree C
• £200 from recycling your old mobile phone with Tesco 

Have a go at Tesco’s online quiz and test your own green money-saving credentials. 

Or at least put it on your list as something you should get round to.

P.S. Making a list is just one way to help you keep to a budget. If you need more tips download our Tip Sheet "How to Curb the Urge to Splurge" here.

Do you have a high tolerance for low pay?

Simonne tackles the low-earners:

Are you someone who doesn't live up to your earning potential? Try our quiz to find out. 

As women, we often undervalue our worth and dread asking for pay rises or increasing our rates. We happily give away our time and skills at bargain prices because we don't trust that we're worth more. 

If you can identify with this, here's a trick to help you convince yourself that you’re worth whatever you want to earn:

Take yourself off into a room alone for five minutes. Then, say out loud the amount you want to earn. It’s important to actually speak, rather than just think. Shout out your ideal annual salary, your anticipated profits or your daily or hourly rate. 

Maybe you’re aiming for a salary of £60,000. Start by saying ‘I earn £60,000 a year’. Then double it and say, ‘I earn £120,000 a year’. Then keep doubling it again and again, until you reach a ridiculous salary that even David Beckham wouldn't sniff at.

When you reach that silly figure, practice saying aloud that you earn this whopping amount. Keep it up until you can say it in a neutral way, just as you’d reel off your own phone number. This tricks your subconscious mind into believing what you’re saying. 

Then, when you talk to your manager about a pay rise or quote a higher daily or hourly rate, it’ll seem like peanuts. You’ll come across with real conviction. 

Try it - it works! 

We've also got a great tip sheet -  'How to ask for money'  - for you to download.

By Simonne Gnessen Wise Monkey Financial Coaching 

Pay more into your pension to save your child benefit

Here's a fantastic tip from Simonne if you think you're going to be hit by Cameron's cutting child benefits:

The government's just announced that parents who are higher rate tax payers (currently those earning more than £43,875 a year) will have their child benefit axed from 2013. The benefit will be stopped even if only one parent falls into that tax bracket. This will affect families with only one parent working the most. Hmm... I can see this affecting lots of women.

But ... wait for it, there's some good news.

These higher rate tax bands are based on the amount of income you pay tax on and there are ways to reduce your taxable income.  One brilliant way is to make a contribution into a private, or company, pension scheme. So, let's say you earn £46,000, and you pay £300 a month (or £3,600 a year) into a pension plan before tax, your taxable income would be treated as £42,400 (£46,000 less £3,600) which is below the higher rate tax limit. So, hey presto you still qualify for child benefit. The other great thing is that you'll be putting away money as a gift for your future self (the way Sheconomists think of saving for retirement!). Even better, the pension company would only actually collect £240 a month (£2,880 a year) because you automatically receive 20% tax relief on any pension contributions you make. 

Psychology of the investor

Girls, did you know you have what it takes to be a successful investor? 

That's because there are the three key psychological traits that, when it comes to making the savviest investment decisions, trip men up every time. If you'll excuse some over-generalising and stereotyping, these are

Attitude to risk
Men are less risk averse than women and will back portfolios that are more uncertain. They’re more likely to put all their eggs in one basket instead of opting for a safer, more diverse portfolio. Men’s higher earnings and greater net worth also makes it easier for them to take greater risks than women. A US study by Wang in 1994 also showed that women are more likely to be offered safer options than men, by advisors who expect them to be risk-averse.

Overconfidence
Overconfidence is consistently found in more men than women, research shows. And this is especially true in male-dominated arenas such as finance. They overestimate the returns their investments will bring and the certainty of the return. They also have a misjudged overconfidence in the accuracy of their own knowledge and over-rate their own ability. In a Gallup study, both men and women expected their portfolios to outperform the market but men expected theirs to outperform it by a greater margin.

The herd instinct

Constantly monitoring the market can fuel men’s over-activity and cause them to act irrationally. Men are more likely to get drawn into financial follow-my-leader games and information cascades. They also fall foul of being too well informed, instead of tuning out the endless stream of news and financial information and sticking to an annual portfolio review.

This is where women truly have the edge, We have a healthier attitude to risk, are not ridiculously over-confident and don’t play herd games.

Sadly though, lamentably few women are seriously into investing. Male investors outnumber females by eight to one. A mere 3% of hedge funds are headed by a woman. 

Simonne, who has a predominantly female clientele, says women could do with borrowing some of that male over-confidence. “Many women have exactly what it takes to reach dizzy financial heights,” she says, “the only thing holding them back is knowing that they have it and acting on it.” 

Perhaps it really is time for the Sheconomists to step forward?

Tall, attractive, left-handed man with tidy home wanted.

Cor, what a nerve! The indignation in the voices of the people answering the radio interviewer’s question was palpable:

“I’d prefer not to say”

“That’s confidential!”

“It’s not appropriate to discuss that”

“I’m not prepared to tell you”

............................

     

Is money the great taboo?

What topic had Daniel Finkelstein probed them about for his programme Can Pay Will Pay? 


That brazen broadcaster had the nerve, the sheer bare-faced gall to accost complete strangers - and ask them how much they earned. 


The responses that could be broadcast consisted of polite but firm refusals.
Why is money such a great taboo? 

Actually, as DF pointed out, it’s the great British taboo. A Polish girl was quite happy to reveal all and was shocked by the anal Brits’ secrecy over the size of their pay packets.

Here are 10 fascinating facts about people’s earnings that you always wanted to know but were afraid to ask:

1.       The UK earnings average is just under £26,000 p.a.
2.       Most people earn between 15k-35k
3.       If you earn over £51,000 you’re in the top 10%
4.       Women make up the majority of the paid less group
5.       Ethnic minority groups and people with disabilities are overrepresented in the low earners group
6.       Taller people earn more  than shorter people (an extra inch of height results in an extra 2.5% of earnings)!
7.       Ugly people earn 10-20% less than the average
8.       People with tidy homes earn more than messier people
9.       Lesbians earn more than heterosexual women while gay men earn less than heterosexual men
10.          Left handed people earn more than right handed

So if you’re a short, ugly, right-handed, messy, heterosexual woman from an ethnic minority group your pay-prospects don’t look too good. But one consolation is you’ll probably hush up your low pay. Unless you’re Polish of course….

One research finding that might console the low paid is that you’ll only be unhappy about your low pay if you discover that someone is earning more. Relative earnings, rather than absolute earnings, are what make people happy, apparently. Perhaps that explains the pay-talk taboo. If someone else is earning more, we'd just rather not know thank you very much.

Do Something Different with Money

When did you last Do Something Different? Let's face it, we’re all creatures of habit at heart. I know I feel I can’t start the day until I’ve had my tea in the morning. Earl grey. With soya milk. One sugar. In my Billy Childish mug. Then I can sort out my tasks for the day while I sip it.  

Psychologists estimate that up to 90% of what we do and think every day is a repetition of what we’ve done before. That’s  because the brain operates on an efficiency principle. Why waste precious energy, it says, coming up with new ideas and re-inventing ways of doing things? Might as well bring out the old ones that we know and like.

No surprise then that when we're asked to come up with a decision or get something done, we act in a ‘here’s one I made earlier’ kind of way. Because fresh ideas take a huge effort. And new behaviours require that we knock ourselves off autopilot and get in the driving seat.

Do Something Different (DSD) is a powerful technique to change behaviour. It now underpins all the behaviour change work I get involved in and brings about some amazing transformations. Put simply, DSD works because to change we first have to become unstuck. Unstuck from our old ways. Unstuck from our usual habits.

That applies to financial behaviour too. Our attitude to money will have become ingrained over years and years. There will be areas of finance with which we’re comfortable (maybe managing the family budget or settling bills on time). Then, lurking deeper, those which are outside our comfort zone (perhaps dealing with taxation or pension issues).

Doing Something Different (DSD) is a way of dipping a toe into the discomfort zone of your finances. That’s why we have lots of DSD exercises in Sheconomics. 

Here are just a few:

Scared or intimidated by financial jargon?

DSD and look at a website that demystifies the world of finance e.g. www.moneymadeclear.org.uk for just 10 minutes every day. Or make a habit of flicking through the financial pages of the weekend papers. Get comfortable with money talk and money facts. It's not rocket science, honest.

Held back by a contempt for money or feeling you don’t deserve it?

DSD and go somewhere that feels out of your league. Maybe have a coffee in a posh hotel, tell yourself you've every right to it.  Test drive a top-of-the-range car and see how it feels.

Head-in-the-sand and then hit by big expenses?

DSD and divert a sum via direct debit every month into an emergency fund. Folk who are financially savvy have at least enough stashed away to cover three month's living expenses. Then if a job-loss or big expense hits, there's less chance you'll dive into debt to deal with it.

Trapped by salary creep (earn more-spend more)

DSD and pretend you didn’t get your next pay rise- divert the difference into a savings account. Use the human habitual tendency to your advantage and automate savings and funds. You won't miss what you haven't had and it'll grow without you doing anything.

Living for today and ignoring the future?

DSD and get a current value on what your pension will bring you. That's all, just call up your provider and ask for the estimated annual amount payable. Divide it by 52. Then try living on that amount for a week. How does it feel? When you've recovered from the shock go and talk to an expert about how you can boost your pension.

Overwhelmed by the financial tasks left untackled?

DSD and organise your paperwork into neat orderly files. You’ll find you start feeling in control immediately. Those big problems won't seem anywhere near as overwhelming.

Whenever you're feeling stuck or that you're not getting what you want from life, just ask yourself 'What do I usually do?' Then try doing the opposite. As Einstein said, it's crazy to keep doing the same thing and expecting a different result. To get something different you have to do something different. That applies to your financial behaviour as well as to other areas of your life, like health, relationships or work.

The Do Something Different journal contains a hundred ways to DSD (see panel on the right). For a daily DSD you can follow it on twitter (http://twitter.com@DSDjournal).

8 tips for money smugness

Men are from Mars but sadly that doesn't make them all chocolate-flavoured.

Someone asked me again today about the differences between men and women. Money differences that is. It's not that women are worse than men with money. Just different. That's why we wrote Sheconomics in a female-friendly way. 

We know that women have different money emotions to men. That many women find money boring. Scary even. 

We try to cut through all this in Sheconomics. We even suggest that the high that comes from a good money workout is on a par with chocolate. Well nearly.

It's not about who's best, just about accepting differences.

I thought I'd repeat the 8 most common mistakes that women make with money. These are the ones that come up time and again in our Sheconomics research. 

Here are the mistakes and some advice about how to get over them - so you can feel smug about your money.

1. A misplaced sense of loyalty. 

Whether it’s a mortgage, bank account or mobile phone contract, women are often reluctant to switch. 

We say: Be loyal to your friends but as promiscuous as you like with financial providers. If they don't give good service, or good rates, it's OK to move on. You don't have to please them or be a loyal customer.


2. Fear of financial products. 
Liking tangible investments, such as property, over stocks and shares can mean women miss out on money-making opportunities.

We say: It's not rocket science. Don't put up with people who over-complicate products and hide behind jargon. Insist on plain-speaking and straightforward explanations.


3.
Being money martyrs. Putting the needs of others first. Helping out the young ones when we should be providing for our own financial future. 
We say: OK, look after the children. But it doesn’t help anyone in the long run when women sacrifice their own needs for others. Develop a selfish streak.


4. Low self-belief. Not asking for money – pay rises/fee increases/better deals – often means women don’t get what they’re entitled to. 
We say: Don't wait for someone to notice how hard-working you are. Tell them. Then ask them to pay you what you're worth.

"Shoes? I popped out for a pint of milk."

5. Letting shopping become an emotional habit. OK, this is where women can out-do the men with a need for regular retail fixes. 
We say: Shop because you need the goods, not because you need the buzz. Find other non-materialistic ways of getting your kicks. Do something different.


6. Not managing career break finance. Women lose out because taking time out to have kids often means they make fewer NI or pension contributions.
We say:  A career-break needn’t mean a pension break. If your partner’s salary can cover two pensions, it’ll ease the strain in later life. Having a family is a joint responsibility.

"Where did you say you've hidden the savings again darling?"

7. Allowing others to make the big financial decisions. Women are great at day-to-day budgeting but can sometimes suffer from decision paralysis when it comes to bigger financial decisions. 
We say: Get involved in the decision-making and share the financial management. Why give someone else control over something as important as your finances?


8. Indulging in rescue fantasies. You know, the voice in your head that says "I'll just carry on like this, something will get sorted out."
We say: Don’t kid yourself. What if that someone doesn't come and save you? What if, when he does, he's got his own debts? Be a big girl and take control.

It's OK to look this smug if you're in control of your money.