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THERE ARE THINGS CALLED EXTERNAL ROLES
How to Trick Yourself into Saving Tons of Money , No Hypnotist Required
IT ' S NOT YOUR FAULT THE HUMAN BRAIN WASN ' T BUILT TO BE THE PERFECT MONEY-SAVING MACHINE . SO WE ASKED A BEHAVIOURAL ECONOMIST HOW TO TURN IT INTO ONE , PAINLESSLY .
Author : Wealthsimple
Saving is hard . There are so many things to buy . So many reasons you feel like you just don ' t have enough this month to set aside . But unless you ’ re a hedge fund manager or the heir to a nose-hairclipper fortune or you never want to retire or buy a house , you ’ re going to have to figure out how to do it anyway . And if you think you can wait until you ' re older , then you do not understand the concept of compounding or that saving a little bit now is smarter than saving a lot later .
But there are ways to make saving money easier . We spoke to Hersh Shefrin , a behavioural finance guru and professor at Santa Clara University ’ s Leavey School of Business , and he helped us come up with five tricks to help you save money even when you don ' t think you can .
“ At their core , people are vulnerable to selfcontrol issues ,” Shefrin explains . “ The desire for immediate gratification often overwhelms the need for long-term planning . The most effective way of dealing with that is to use what are called external roles .”
What he ' s saying is that buying a nice bottle of rye feels far more thrilling than putting the equivalent forty-seven dollars into your retirement account . If you make it so that you have to decide to save money , then there ' s a chance you ' ll decide not to . Actually , 4,000 chances : you ' ll have to be strong enough to constantly resist splurging — on popcorn at the theatre or a fidget spinner or a snow blower on clearance in July .
To stay on track , there ' s a solution : make it so you have to decide to not save money . For example : when your employer takes money out of your salary every pay cycle to contribute to your retirement account . Your employer , in that case , is an external role . You never see the money , so you never have to think about spending it .
There ' s a caveat . The people who want you to spend your money know the power of external roles , too : online subscription services , cell phone carriers , the Bacon of the Month club — they all depend on pulling money out of your account monthly / weekly / every nanosecond while you ' re not paying attention . That ' s where some of our favourite budgeting tools can help : they ' ll help you suss out recurring charges and decide that you might not really need Tidal , Apple Music , and Spotify .
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