Money Rehab with Nicole Lapin - Train Your Brain to Save More Money in 2024

Episode Date: January 1, 2024

What if we told you that the key to unlocking the next level of wealth is already programmed in your mind? Nicole gives you five research-backed hacks to wire your brain to save more money.

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To get started, visit bofa.com slash newprosmedia. That's B-O-F-A dot com slash N-E-W pros, P-R-O-S, media. Bofa.com slash newprosmedia. I'm Nicole Lappin, the only financial expert you don't need a dictionary to understand. It's time for some money rehab. John Lennon knew all about mind games, and you know what he said? They're not all that bad. Today I'm talking about mind games. Kind of. I'm talking about how psychology affects your spending habits, how your head doesn't always seem to be on the same page as your bank account, and yet, how you can harness the power of your big, beautiful brain to actually save money. It's time for some truly mind-altering money rehab. But not exactly in the way John Lennon

meant it. I'm talking about practical, research-based, psychological tricks that you can play on your own mind to finally get your financial shit together and save you all the money you know you need to be saving. And as a bonus, these money mind games will not only make you wealthier, but also mentally healthier. Here are my five faves. 1. Be yourself. Number one, be yourself. I know this isn't though as cliche as it sounds. According to a recent study published by the American Psychological Association, people tend to save more money when their savings goals match their dominant personality traits.

The personality traits studied were agreeableness, conscientiousness, openness, extroversion, and neurotic. I know, no one likes to be described as neurotic. Thanks, American Psychological Association. So instead, let's just think of this last category as someone who is likely to be a worrier. And if you fall in this category, all good, because same. The research suggests that agreeable people should set savings goals related to helping other people, like a family member or a friend, perhaps. Conscientious people like to do the right thing and tend to be dutiful and self-controlled. They're often really good at planning far into the future and following through so that they

can set long-term savings goals. Open-minded people can find success saving for travel and new experiences. Extroverted people are likely to be more successful in saving goals related to holidays, social things like going out to dinner, and overall leisure spending. And people who have a tendency to worry can reduce their anxiety by setting a savings goal related to preparing for unforeseen circumstances. Hello, emergency fund. While leveraging your personality type is an awesome strategy, you don't want to only save for one thing. Like if you're an agreeable personality type, you don't just want to save for other people, right? Otherwise, when it comes time to retire, you won't have

anything for your sweet old self. But what you can do is set a recurring invite on your calendar reminding you to deposit money into your savings account and set up sub savings accounts so that a certain percentage of what you contribute goes to vacation, dinner with friends, whatever your goal you find most motivating these days is. And there's a larger contribution going to your end game. Number two, break up with biases. A number of studies recently presented in a New York Times feature suggest that certain psychological biases get in the way of people making the best financial choices. One phenomenon called present bias leads

us to overvalue the present at the expense of the future. If you have present bias, you're probably a wonderfully spontaneous person who lives large and has a really hard time saving any money. Some people have the opposite problem through optimism bias. Optimism bias gives you the sense that the future is going to be a lot better than the present. You know, rainbows leading to pots of gold, margaritas leading to beach vibes. Folks with a sunny disposition tend to be a little more happy-go-lucky with their saving strategy, putting it off until they get a big break, you know, the one that they're certain is just around the corner. So how do you break the spell if you're a hopeless romantic optimist? Research says focus on believing the future will be just like the present. Hopefully not too shabby, but not without its hiccups or heartbreaks either. And last but not least, there's the bandwagon

effect. And this can lead you tumbling fast down a bumpy road and straight into credit card debt, buying everything you see others have just to keep up with the Kardashians. To escape the bandwagon, set a meaningful savings goal specific to you and yours. This will help you drown out the unproductive discouragement that comes from comparison. Number three. Time travel. I told you mind games would be fun today. Researchers at Stanford University found that when people viewed images of their faces that had been digitally altered to make them appear older, they were more likely to save for retirement. According to the study, interacting with an image of your future face or self helps you

care more about your future financial self and less about spending on things that you don't really need in the present. Just be careful with those age progression tools if you get easily sketched out about data privacy. Some people don't like the idea of having a face reading app, saving their face to a database, and totally fair. So if you're not a fan of these apps, just get your Canva on and make a digital mood board and copy and paste like a white wig onto a picture of yourself. It's almost as good as a filter. Number four, rewrite the script. Whether you're conscious of it or not, we all have a script in our head that plays out in our thoughts and our actions when it comes to money. Studies show that our childhood experiences, including how we saw

our parents behave with money, have a huge impact on those money scripts replaying over and over in our minds and our financial lives as adults. And we don't need scientists to tell us this, right? I'm sure you have core money memories that tie back to your childhood. I certainly do. If you can build awareness around your money script, where it came from, and how it drives your behavior today, then you can begin to rewrite the script by replacing old habits with new helpful ones. For example, if you buy yourself a present every time you get a paycheck because that's just what you do, maybe you could rewrite the script and reward your future self instead by saving 10% of your paycheck toward a specific goal that you feel strongly

about. Number five, gamify it. How much more fun would savings be if you heard a satisfying cha-ching sound and watched a gold coin explode in pixelated sparkles every time you made a deposit? Yeah, you'd be so rich already, you wouldn't be listening to this, right? Well, it turns out you can make the process of saving just as fun as playing a video game, thanks to gamification. You know, the gratifying cycle of motivation and reward that you get from progressing through the video game world, like defeating opponents and reaching checkpoints. Gamification takes those delightful little dopamine and oxytocin responses from video games and applies them to other life experiences like

closing the rings on Apple Fitness by hitting your daily steps, or like starting a savings habit. Try gamifying your savings with personal finance apps like Mint or Long Game and see how it feels to level up your money game. Actually, once you start to crush a few levels of gamified savings, my guess is that it's going to start to feel way more fun than an old Xbox, since you'll have actual stacks of cash in the bank to keep building on that motivation momentum. For today's tip, you can take straight to the bank. When you look at your savings, ask yourself, how many weeks of freedom does this buy me? This will put your savings goal into perspective and help you adjust and refocus your efforts as necessary. How many weeks of freedom do you actually need? Maybe you're saving to be able to change careers or take a trip or simply fill your

emergency fund. Thinking of your savings in tangible real-life scenarios will help motivate you to get where you need to be. Money Rehab is a production of Money News Network. I'm your host, Nicole Lappin. Money Rehab's executive producer is Morgan Levoy. Our researcher is Emily Holmes. Do you need some money rehab?

And let's be honest, we all do. So email us your money questions, moneyrehabatmoneynewsnetwork.com to potentially have your questions answered on the show or even have a one-on-one intervention with me. And follow us on Instagram at Money News and TikTok at Money News Network for exclusive video content. And lastly, thank you. No, seriously, thank you. Thank you for listening and for investing in yourself, which is the most important investment you can make.