A friend and fellow financial-planning-firm owner forwarded an email to me recently. It was a promotion from Google Ads, promising $300 in free ads if he first spent $300 of his own money. He wanted to know if I thought he should do it.
I said he shouldn’t do it, mainly because it wasn’t free. He would still have to spend $300.
As I thought about this later (because I like to spend way too much time ruminating on the tiny details of life, it turns out), I realized what was the real reason to say no. What was the real problem with this offer from Google.
It was that the choice was being externally driven, not internally.
My colleague hadn’t considered placing Google Ads until this email promotion showed up in his inbox. And now, all of a sudden, he was considering spending his hard-earned money on it, changing his marketing plan, and throwing a little extra chaos into his world. All for the sake of a free-ish $300.
[You should know that I am mildly obsessed with advertising and the effects on our consumption habits. I really fundamentally dislike advertising because I think it makes us consume things that we don’t truly need or want…with the follow-on negative effects to our finances, physical health, and the environment. I read the book Can’t Buy Me Love in the early 2000s, and it permanently affected how I view advertising and consumer behavior. While its message is still meaningful, the examples are laughably outdated. Hello, Jordache jeans! Here’s a TedX speech by the author entitled “The dangerous ways ads see women.”]
My musings then led me to realize that the “external vs. internal motivation” notion applies to almost everything in our financial life. And wow…that could be really bad if we’re letting external motivations dictate our financial life. And also wow…how amazing and powerful it would be if every decision we made were truly, or at least more, ours.
Externally Motivated Financial Decisions
I’m sure you could come up with a bunch of examples from your own life of how you made a financial decision based on external motivations. I know I can. My past is littered with clothing that didn’t quite fit or feel good or look good but that was inexpensive. And we all know what looks best: Cheap! <cough>
Here are some examples that I frequently see in my practice:
- Getting an Amazon credit card because it gives you money back…which you have to use on Amazon’s website. Or getting an Alaska Air credit card because you get points or a companion ticket.
I know there are people out there who really do manage to work the system and use these benefits to fund spending choices that they would have made anyways. But for most of us, these “rewards” simply induce us to consume more. You buy more, not because you had a real reason to, but because you have those airline miles or Amazon dollars burning a hole in your pocket.
- Any sort of sale: BOGO, 50% off, etc.
If you didn’t already have plans to buy that thing, you’re letting external factors (the company running the sale) dictate your choices, dictate how you use your own damn money.
- Exercising stock options because your co-workers have done it.
Even if your co-workers aren’t explicitly pressuring you, you likely feel pressure from the herd mentality. But the best choice around stock options is the one that takes into account your personal factors: how big a cash cushion you have, your attitudes towards risk, your goals, your cash flow, how much you’re able to save. Those internal factors should be the driving force in making this decision, not your co-workers’ behavior.
- Investing in a stock (or the stock market in general) because it’s done so well lately.
It’s reasonable to invest in the stock market when it’s been going up…but don’t let that be the reason you’re investing in it. (You’ll be more likely to “buy high, and sell low.” Which is backwards.) You should invest in the stock market because you understand your goals, how much money you need for them, when you’ll need the money, and how you feel about the risk of losing your money.
Once you start paying attention, you see that almost every decision you make can be viewed through this “external vs. internal motivation” lens.
Take Time to Align Your Choices with an Internal Motivation
If we agree that we make many of our financial decisions without much thought, and oftentimes motivated by factors outside of ourselves, and that this isn’t the ideal way to make decisions, what can we do about it?
I am reminded of the advice we often give our young daughter when she is busy flipping the f*ck out (a.k.a. having a tantrum). We encourage her to take deep breaths before trying to explain to us what is wrong. And on the occasions when she doesn’t immediately screech, “I don’t want to take deep breaths!” and she does in fact take those breaths, she often calms down enough to tell us what we can do to help. And all is better.
What if we did something similar for making financial decisions? Take some time, dedicate some thought in a calm state, to question why we’re making this choice. Maybe have this discussion with a friend or partner. (I find it much easier to hash through my thinking when I do it outside my own head.) If the answer is anything like “because everyone else is!” or “because it’s so cheap!” then I really hope you will rethink.
I can imagine this will slow you down in making decisions. And you know what? Good! If you can’t afford to wait five minutes to do something, then something is wrong. My husband even has a policy that if someone tells him “Buy in the next 10 minutes and you get 50% off!” or gives him some sort of time-pressured offer like that, he automatically walks away.
If you’ve already worked to understand what your values are, what it is you truly want in life–which you don’t need a financial planner or coach or therapist to do, but it certainly is a lot easier to have a trusted, impartial third party help guide you–then this process gets easier. You can ask yourself whether this decision aligns with the goals or values you already know you have.
Don’t let outside forces determine the path in front of you. If you’re not intentional, they will. Why? Because there’s a hell of a lot of money in it for whoever convinces you to make a decision in their favor.
I am not a psychologist. And perhaps I have a penchant for Thinking Too Much. I also know there are studies out there to support various things I’ve talked about above, studies I haven’t made the effort to find and link to. (Good lord…I am not sounding good right about now.)
But ultimately, I don’t care about the details. What I most desire from you is to be more intentional with your financial choices. Take time. Think through things. I predict your choices will be better, you won’t wonder as often where the hell all your money goes, and your money will bring you more happiness.
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Disclaimer: This article is provided for general information and illustration purposes only. Nothing contained in the material constitutes tax advice, a recommendation for purchase or sale of any security, or investment advisory services. I encourage you to consult a financial planner, accountant, and/or legal counsel for advice specific to your situation. Reproduction of this material is prohibited without written permission from Meg Bartelt, and all rights are reserved. Read the full Disclaimer.