Automatic Nudges

If you are human & you are reading this, you likely have some hang-ups around money. Our brains are wired in ways that make money management difficult. In order to take control of your finances, it helps to understand the unconscious beliefs that underly your decisions. Understanding money is easy but handling it is very hard because the psychological phenomena heavily weigh our money making decisions.

The cognitive biases discussed before reveal secret motivators that influence our decisions. We may be running on a hedonic treadmill, fruitlessly feeding hungry ghosts, living for the present at the expense of our future (thanks to our scarcity mindset), or underestimating the effect of our own emotions on our behaviours in the name of empathy gap. Like this there are 100+ biases in our human nature.

Understanding the pathways of the brain enables us to identify patterns during times when our brains are working against us. With awareness we can skill-fully navigate our way to happiness and financial freedom.

We are irrational beings. We are sloppy and biased. That doesn’t mean we are doomed. We have nudges to save us. We can design a nudge in such a way that our default option is better and right decisions are made every single time.

As a behavioural architect, I was thrilled by the concept behind Automatic Millionaire by David Bach.

I built nudges for myself that automatically trigger when the money comes in. The order matters.

• pay yourself automatically (12.5%).

• pay your debts and bills automatically(50%).

• pay your emergency fund automatically (5%).

• pay your credit card bills in full automatically(10%).

• pay your dream fund automatically(5%).

• pay your investment account automatically (10%).

• Optional but highly valuable if you are an impulsive buyer like me: pay your urges when it occurs (feel like having a latte, take INR 230 and put in your urges account and avoid the latte). You have about 7% to play with.

I am not saying you must follow this but you can make an auto system without giving in to your behavioural flaws.

🥂to automatic!