Personal finance and money management is often more psychological than anything else. The math is often simple, most understand the importance of saving for long term goals and retirement, yet most fail to do so. Earlier this week Peter at Bible Money Matters discussed how Managing Your Money Is An Exercise In Both Mathematics And Psychology and I agree, but I think it’s a little more psychological than mathematical. People often get into debt, fail to plan for retirement and miss financial goals because they lack the psychological discipline to delay gratification and follow through with long term goals. In the past I have found that teaching people psychological strategies to improve their finances is much more effective than doing the math, so we thought we’ll share some on this blog.

The Finish Line

The Finish Line


When it comes to behaviour modification one of the best strategies is reinforcement, if you want anyone to acquire a desired behaviour you can use this behaviour modification strategy to achieve the desired goal. How can you use this to improve your finances? Here are some self-reinforcement techniques you can implement to ensure you do not drift away from your goals.

Reward Achieving Small Goals

We all have big goals in life, including big financial goals such as having a large retirement nest egg or being debt free. Often it these goals are far away usually a few decades and it can be hard to stay motivated and on course when things are so far away, so set smaller sub goals and reward yourself when achieving them. The best way to do this would be attach something you really want to a smaller sub-goal, for example if you want to go on a weekend getaway trip and one of your major goals is to be debt free make the trip contingent upon reducing your debt level by a certain percentage. Ones you have reached that level you can reward yourself by taking that desired trip. Always try to make a desirable activity contingent upon a smaller sub goals towards your major goals and before you know it you will have reached your financial goal.

Place Reinforcers at Home and Work

Often one of the best reinforcers is verbal praise, try to place sticky notes and post it notes around areas you spend most time in. On these notes you should have praises and encouraging thoughts to remind you of the good job you have been doing and that everyday you are getting closer to your goal. This may not sound like great tool or idea, but you’ll be surprised by how much it helps. I have implemented it with several people and the results have been great. If you are married or live with someone else you can slightly modify this, have the other person post those notes and renew them every so often this will amplify the affects of this technique.

Reinforcing Buddy System

This is one of my favourite techniques and you’ll need someone as motivated as yourself to implement this. It could be your partner, a friend or a co-worker basically anyone that is working towards a goal (preferably a financial goal) can be your reinforcing buddy. You simply share your goals with each other, including the smaller sub-goals, and praise and encourage each other as you work towards your goal. When you reach a small sub-goal your reinforcing buddy should take you out for maybe a drink, dinner or a ball game etc. And in turn you do the same for your buddy, of course this has to be someone who is motivated and someone you feel comfortable. I have tried this in group settings as well and it works great in groups as well, it’s sort of an AA meeting but for finances.

Do it Often and Do it Consistent

Some of these, if not all, may seem very useless, unproductive and even unnatural but they can be very powerful if done right. In order for it to work you need to do it often and you need to do it consistently, as soon as you start changing things and decide to skip a day you will fail. Just do them on consistent bases and you will start noticing a change, actually make a note of your current behaviour and then review them in a few months after you have implemented some of these techniques, you should see the change.

Although all of the above techniques should help most individuals it will not help everyone, the only way you can determine if it is beneficial to you is if you do it consistently and keep a little record of changes. Reinforcement is a powerful tool and can help you tremendously in achieving your financial goals.

Have you tried any of these? Have you tried other strategies that you can share?