How a ‘self-nudge’ could help you make better money and life decisions

These past 18 months at home, staring blankly into Zoom windows while my dogs stare blankly at me, I found myself pondering that age-old philosophical question: What really is the difference between humans and animals?

Several Nobel prizes have been awarded for proving this point. The subtitle of every work of behavioral economics could be: “How dumb are you? Let us count the ways.” Giants of the field, like Daniel Kahneman and Richard Thaler, have identified hundreds of cognitive biases that trip us up over money and life decisions.

“Almost all the tools that work to nudge other people, you can use to change your own decisions,” Milkman told MarketWatch. “As soon as you have insight into these things, you can structure your own life in a way that you’ll have better outcomes.” The most famous example of a commitment device is in Homer’s Odyssey. If you remember, the Sirens’ sultry, but deadly, singing would entice sailors to smash their ships into the rocks. Our hero, Odysseus, wanted to stream their song without dying, so he had his crew put noise-canceling wax in their ears and ordered them to tie him to the mast and promise not to release him no matter how much he begged. If that seems masochistic, it is—in fairness, this was a guy who had a 10-year commute.

Hal Hershfield, a professor at UCLA, conducted a series of fascinating experiments on our perception of our future selves. His work suggests that one doesn’t need a DeLorean charged with 1.21 gigawatts to send more wealth back to the future, but the far simpler technology of a pen and paper or Google doc.

How we frame money and time can also improve our financial behaviors. In one experiment, Hershfield gave people the option to invest $150 a month, $35 a week, or $5 a day. Which would you pick? “This is why I’m more optimistic when it comes to nudging ourselves to make longer-term changes,” Hershfield said. “And, I’m somewhere between agnostic and pessimistic about changing the day-to-day ones.”

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