9August 2018avoid trying to complete with today's temptation and instead appeal to people's ideal self in the future. This drives us toward more aspirational and optimal decisions.4. Money is about opportunity cost. "Every time you buy coffee, the money comes from something else. What is this something else? We don't envision it. With money, the trade offs are really unclear. Every time we buy something, it's about what we are not going to be able to do in the future" -- Dan Ariely. Because money is about opportunity cost, our real goal should be not just to spend less but to spend on things that can make us the happiest.5.Financial incentives to save are best used to motivate a one-time behavior but not repeated behaviors. There is little evidence to show that financial incentives for repeated behaviors -- like saving or health behaviors -- have a lasting impact after the financial incentive is removed. There is stronger evidence to suggest financial incentives can help move the needle on one-time behaviors like signing up for a credit card, adding direct deposit or filling out an auto-savings form. In addition, the presence of a financial incentive matters more than the specific amount (i.e., a 2x vs 3x match) unless the amount is incredibly high. There is little empirical evidence that incentives help build habits, in fact, theoretical work suggests it may have the opposite effect.6. To facilitate savings, people will need to reduce expenses or increase earnings. Sadly, there is little evidence to support the rational approach for expense reduction. People underestimate their expenses, think they spend less than others and show low enjoyment and persistent with budgeting. Instead, we believe we should rely more on rules of thumb (easy heuristics) to help decrease and control daily spend.7. The people who are most struggling financially are the least able to spend time, effort, and attention to address their financial life. Resource scarcity places a cognitive tax on people's bandwidth. Some studies have equated the cognitive cost of scarcity to be equal to the cognitive cost of a night without sleep. Therefore, we are more skeptical of solutions that require significant time and effort from LMI households, as they have the least of it to give and it's likely not widely scalable. $Money is about opportunity cost, our real goal should be not just to spend less but to spend on things that can make us the happiestKristen Berman
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