I’m a Financial Planner: This Psychological Hack Is ‘Key’ To Avoid Living Paycheck to Paycheck

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If you have had trouble saving for retirement, putting money away for a down payment, creating a budget, saving for family vacation or other money goals, don’t feel too bad, said Brad Klontz, a certified financial planner, financial psychologist and co-author of “Start Thinking Rich.”

Why? Because it’s not your fault, exactly. You’re just not wired to save for the future.

Specifically, in a recent CNBC article, Klontz said humans have evolved to avoid risk and keep things the way they are.

“We have an aversion to making changes,” he said. “In general, it requires thinking, it requires energy and activity. And we are cognitively lazy, essentially.”

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That not only hinders our ability for mid- or long-term planning, but in addition, we have a very difficult time with delayed gratification. That makes it innately tough for us to save money for a future benefit rather than spending it on something that will make us feel good now. Enter impulse buys, credit card debt, no savings, and living paycheck to paycheck.

Fortunately, Klontz said these urges can be overcome, even if you’re not blessed with the will power gene. The trick to counteracting the financial inertia and, as Klontz said, to becoming rich, is to create simple systems that take the “evolved” you out of the equation. So, here are four simple steps to overcoming 6 million years of human evolution.

Have a Vision of Your End Goal

Every successful entrepreneur knows that without a vision of where you want to end up, you’ll never get anywhere good. Klontz said this is also true for a savings goal. So, the first step is to create an exciting vision to fuel your savings. Without this, success is much more difficult to achieve.

“You’re delaying gratification, which you’re not wired to do. So you have to have a compelling vision that you’re emotionally attached to,” Klontz said.

It doesn’t matter what the goal is — a retirement nestegg, a down payment for a home, zeroing out debt — as long as you can envision it in a way that excites you, it’ll work.

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Make a Spending and Savings Plan

Once you have an exciting vision of your mid- or long-term goals, it’s time to plan the route to get there. Basically, you’re going to make a budget. But with step one completed, the motivation to allocate money toward your goals should be easier to access.

Use Separate Bank Account for Each Major Goal

Putting together a separate bank account for each goal is an important hack in your road to a better financial future, Klontz said. Naming them gives them a clear purpose. And he means literally name them in your online bank interface: “2025 Family Trip to Europe,” “New Home Down Payment,” etc.

“It’s no longer just an account with money in it, since there is an emotional attachment to the goal,” Klontz said.

So it’s much more difficult to rationalize pulling money out of it. Psychologically, you are taking money from your exciting vision.

Automate Your Savings

Automation is basically a hack to protect yourself from yourself. Remember, if you rely on your immediate-satisfaction-loving self to set aside money for one or more future goals every month, eventually you’ll fail, Klontz said. It’s not your fault, it’s just your nature.

So, set up automatic transfers, either directly from your paycheck or from a checking account, and go on with your life. This way, your status quo is reset, and attaining your goals are safely hidden from your cognitive laziness.