We all know that automating savings and instituting spending rules can help us save money. But a new report from the Common Cents Lab at Duke University’s Center for Advanced Hindsight offers new insight into how to hack behavioral finance to put more money into our pockets (or rather, bank accounts).
There’s plenty to read through in the report, which details all of the Center’s 2017 experiments and focused on elderly, low-income and hourly workers, but here are some key takeaways you can apply to your own life.
Leverage Age Milestones to Accomplish Your Goals
According to the report, elderly people can be encouraged to change habits if they’re reminded of upcoming age milestones. The center partnered with Silvernest, a service that matches older homeowners with potential renters, to try to increase the number of homeowners using the site. They found that by targeting ads at people that included information on a specific age milestone (“You’re 64 turning 65. Are you ready for retirement? House sharing can help.”) rather than more generic language, they were able to increase click-through rates from 2.46 percent to 5.49 percent.
This is in line with past research that’s found that people are more likely to make big changes in their behavior/lives when they’re approaching a new decade (i.e., when they are 29, 39, etc.). You can apply this to your own life by making a list of what you want and need to accomplish, finance wise, in the months leading up to your own milestone birthdays. Commit to actually completing the tasks by setting reminders in your calendar and telling people about your goals.
Limit How Often You Do Something Rather Than Focusing on a Budget
In an experiment in which they analyzed over 30,000 transactions with Qapital, a personal finance app, Common Cents found that consumers regretted spending money on restaurants, coffee and fast food more than other categories. To curb that, they tested different ways of limiting those purchases.
Their takeaway: People who limited the number of times they could eat out (in this case, to two outings per week), rather than the amount of money they had to spend, were more successful. So in your own life, consider setting a frequency on expenditures rather than X dollars.
Lessen the Sting of Bills by Putting Them on Autopay
In another partnership with Qapital, Common Cents found that millennials were less likely to regret recurring transactions as they became used to seeing the transactions on their monthly statements. In fact, they were “10 percent more satisfied with recurring transactions compared to non-recurring ones.”
“One reason for this is because humans are great adapters,” reads the report. “Our first experience of something is novel and interesting, but after several similar experiences the novelty and our attention wanes until we no longer have the same response. Rip off a Band-Aid once and it hurts. Rip it off multiple times and we begin to discount the pain.”
Automatic payments can make consistent transactions like rent, car payments, etc., less financially painful. “On the other hand, they make the payments we’re likely to regret (another round of drinks or fast food) more obvious and novel because the latter are more likely to be paid for in cash.” In that way, automating your recurring payments is sort of a win-win: Rent hurts a little less each month, and when you overspend you’re more conscious of the spending (and how it made you feel).
Pick Up the Phone and Be Prepared to Wait
Based on observing 20 people negotiate their credit card interest rates and a survey of 5,000 people on bill negotiation, Common Cents found that the biggest barrier to a lower APR is simply picking up the phone and waiting. Once consumers did that, their negotiation skills really didn’t affect whether or not they received a lower rate—all they had to do was ask.
“The most crucial step is calling the credit card company,” reads the report. “Once participants got on the phone, their likelihood of continuing to complete the task was very high.”
So yeah, you’re probably busy, but consider: You get a lower rate simply by asking, no negotiation needed. Considering the average credit card debt among households carrying a balance is $15,654, that could save you a lot of money in the long run.