Tuesday 30 May 2017

Candy, Decision Fatigue & Habits

Ever wondered why most candy products are placed near the cashier? Well there is a psychological explanation behind it and that is "Decision Fatigue". The idea is simple: During a consumer's journey through the supermarket, he/she would have made numerous decisions such as the items to buy, product to choose etc, this in turn reduces their mental willpower making the subject susceptible (tempted) to temptations. Aided partly by the colorful visuals of candy packages (stimuli), the consumer succumbs to the temptations and we engage in impulsive buying which harms our financial health.

This blog is not going Psycho!

So how does decision fatigue affect one's personal finance? Well, as one gets mentally drained from the daily decision making process, causing us to make faulty decisions or fall for temptations; which results in the frequent indulgences on treats/gifts that hurts both the wallet and perhaps waist line. Simply put, being mentally fatigued on a daily basis hurts our personal finances. Imagine the amount of money you can save and use for investment if you just had that extra mental capacity to stop yourself from having a daily bubble tea drink in the afternoon from LiHo (formerly known as Gong Cha), hint think $3.

So how can we steel our willpower? Well, it revolves around forming good habits which improves decision making and essentially, personal finance. The key is to form habits which helps eliminate the need to make simple decisions. This is because these small decision makings made everyday also saps your brainpower. After all, your brain is like a battery and every decision you make that day, saps the brain's energy. Your brain gets "weaker" lacking the willpower as the day continues; this probably explains why we tend to feel lethargic towards the afternoon.

Work and Home

There are two domains where we do make small decisions frequently and that is Work and Home. Hence these are areas where good habits can be formed:

At Home

One good habit is automating the decision of having similar outfits to work (or supermarket). This practice has been done by others such as Former President Barrack Obama etc. In an interview, he mentioned why: 

"You’ll see I wear only gray or blue suits. I’m trying to pare down decisions. I don’t want to make decisions about what I’m eating or wearing. Because I have too many other decisions to make.” - Barack Obama

On a personal level too, I have felt the difference in my thinking at the start of my day. At my previous workplace, work attire was something we could choose on a daily basis and for me, I definitely had to think a bit on the attire I had to wear. On the contrary, at my present workplace; there is a certain work uniform. Decision making now is easier because all I need to do is wear the same bottom design (which I have numerous pairs), shoes and shirt to work. It avoids the daily agonize of what to wear, sparing me mental anguish and allowed my "brain battery" to be put for more important mental tasks.

At Work

The work place is another area. Often we are swarmed by mundane daily tasks which we have to do. Why not prepare a short mental checklist the night before on what you need to do. It eliminates the need for us to decide what to do in the morning, leaving us refreshed for the daunting tasks that may appear in the later part of the day.

Another alternative way is to apply MS outlook rules to automate the removal of those unimportant emails to your line of work. Why agonize when MS outlook can automatically archive for you in some far flung area of your hard disk. The automation of decision rules has saved me time and mental capacity.

To note, the road to financial freedom sometimes lies beyond that of frugality or becoming an investment guru. It also revolves around building strong habits such that you are conserving your mental capacity to make sound decisions be it, in investments or avoiding impulsive expenditure.

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