Speaker 1: Welcome to How the Money. I'm Joel and I am Matt,
Speaker 1: and today we're talking making money changes that stick with
Speaker 1: Katie Milkman. That's right, man, We are going to talk
Speaker 1: about how we can make positive money changes in three
Speaker 1: and who better to have this conversation with than Katie Milkman,
Speaker 1: who is the author of How to Change the Science
Speaker 1: of Getting from where You Are to where You Want
Speaker 1: to be. Katie is a professor at the Wharton School
Speaker 1: of the University of Pennsylvania, where she explores ways that
Speaker 1: insights from economics and psychology how they can be harnessed
Speaker 1: to change consequential behaviors for good like exercise and vaccinations,
Speaker 1: but also behaviors saving more money, which is what we
Speaker 1: are we are all about here on the show. She's
Speaker 1: advised organizations ranging from the White House to twenty four
Speaker 1: Hour Fitness. She writes everywhere as well. Her op eds
Speaker 1: appear in The Times, uh and The Economist, and we're
Speaker 1: just lucky to have her here with us today to
Speaker 1: talk about how you can make some of these money
Speaker 1: changes that stick. Katie, thank you so much for joining
Speaker 1: us today. Joel and Matt, thank you so much for
Speaker 1: having me. We are pumped to talk to you today, Katie.
Speaker 1: So much to discuss, specially since the dawn of a
Speaker 1: new year. There's a lot of changes that we want
Speaker 1: to make, and our listeners of course are tuning in
Speaker 1: because they want to make money changes. But and we're
Speaker 1: here kind of with the money advice, but you're here
Speaker 1: with hopefully the here's how you can continue to do
Speaker 1: it over a longer period of time advice. But um,
Speaker 1: the first question we ask anybody who comes on the
Speaker 1: show is what they like to sport John and give
Speaker 1: us a little window into their world. And Matt and
Speaker 1: I we sported on craft beer while we're saving and
Speaker 1: investing for the future. But what's that for you? What
Speaker 1: do you like to spot? John? And some people might
Speaker 1: think here a little crazy for spending a lot of
Speaker 1: money in that one area. I don't know if anyone
Speaker 1: will think I'm crazy, But I like to splurge on vacations,
Speaker 1: for sure. That's my that's my big one. That's not
Speaker 1: crazy at all. But I like the I like it though. Yeah,
Speaker 1: there's actually a lot of research showing that when we
Speaker 1: spend on experiences rather than just buying stuff, we get
Speaker 1: more out of it. So I try to follow the data,
Speaker 1: and I take really nice vacations, very nice. So are
Speaker 1: you like a are you a quantity of vacations type
Speaker 1: of girl or like a quality? So do you go
Speaker 1: on like one really okay? So so you go on
Speaker 1: fewer really nice vacations as opposed to more of them
Speaker 1: throughout the year. Yeah, I will. I would say I
Speaker 1: try to have a healthy number. But I think the
Speaker 1: splurge part is the quality. Our best vacation you've had recently? Well,
Speaker 1: I have a six and a half year old, so
Speaker 1: that limits the exotic travel I do these days. I
Speaker 1: used to go all over the world, but we had
Speaker 1: a really wonderful vacation to Hawaii, um this summer that
Speaker 1: was truly spectacular. Looking forward to maybe finally making that
Speaker 1: trip happen maybe this year. We've got young kids too,
Speaker 1: so it's limited up and we're like where our kids
Speaker 1: are getting a little bit older, it feels like we
Speaker 1: can finally expand some of our destinations and to requate
Speaker 1: myself with the world. Yeah. Right, So before we talk
Speaker 1: about how to go about making change, like, can we
Speaker 1: just talk about how sometimes folks feel unable to change? Um, Like,
Speaker 1: what is it that's that's holding most folks back from
Speaker 1: believing that they just have the ability to to make
Speaker 1: progress in their lives at all. Yeah, that's a great question. Well,
Speaker 1: first of all, I should say there are lots of
Speaker 1: very real external barriers to change. Right. You might feel
Speaker 1: like your budget is just too tight to make the
Speaker 1: changes you want, or you don't have a family support
Speaker 1: that you need to make the changes, or um job stability.
Speaker 1: So there are very real external barriers that can block people.
Speaker 1: I don't study those. I actually study the internal barriers
Speaker 1: to change, and I think they're particularly fascinating because even
Speaker 1: when everything is lined up, which it rarely is, but
Speaker 1: even whenever reathings lined up in your favor outside, sometimes
Speaker 1: we're our own worst enemies. And the fascinating thing about
Speaker 1: the internal barriers to change is there's no one barrier.
Speaker 1: There's there's a laundry list, and some of us have
Speaker 1: multiple things we're fighting against. Some of us are just
Speaker 1: struggling with one. Diagnosing is really important to using the
Speaker 1: right solution. So barriers that are common include procrastination, lack
Speaker 1: of confidence forgetting, which I think we overlook often. But
Speaker 1: if it doesn't get to the top of your priority list,
Speaker 1: if it's not top of mind. We often don't take
Speaker 1: the actions that are important. Habits can get in the way.
Speaker 1: We tend to be creatures of habit. We tend to
Speaker 1: take the path of least resistance, um, which is, you know,
Speaker 1: following those those habits, and that can be a real
Speaker 1: barrier to change. So there are many many challenges, uh,
Speaker 1: And depending on which one a given person is facing
Speaker 1: when they're trying to make a change, the solution that
Speaker 1: will be most well suited to help them it is different. Yeah,
Speaker 1: what I will say forgetting used to be like at
Speaker 1: the top of the list for reasons I didn't get
Speaker 1: things done. And I swear Google Calendar has been a
Speaker 1: game changer for me in that regard, Like I get
Speaker 1: a lot more stuff done just because I'm better at
Speaker 1: putting stuff on the calendar to get it done. But man,
Speaker 1: nothing worked for me before that, and so I was
Speaker 1: just like a forgetful mess and the compus nearly as
Speaker 1: much as I wanted to. So that it's definitely one
Speaker 1: thing You're right that we don't put a give enough
Speaker 1: credit just so we're forgetting things because we're not putting
Speaker 1: them in front of ourselves. But one of the difference differences, Katie,
Speaker 1: between resolutions that we make and then the potential for
Speaker 1: lasting change, because I don't know, something like this is
Speaker 1: the staff that gets quoted all the time, but there's
Speaker 1: something like eight percent of people who don't actually follow
Speaker 1: through on the resolutions they make after a month or two.
Speaker 1: So we're in this period right now, with this fresh
Speaker 1: start period that you talk about, where a lot of
Speaker 1: people are ready willing and they're trying to move in
Speaker 1: the right direction when it comes to making change. But yeah,
Speaker 1: how do we make sure that it sticks around and
Speaker 1: isn't just a failed attempt a few weeks from now. Yeah,
Speaker 1: it's a great question. And as you know, this is
Speaker 1: sort of a magic moment. I've done research on what's
Speaker 1: called the fresh start effect phenomenon, where at the start
Speaker 1: of um new chapters in our lives, moments that feel
Speaker 1: like new beginnings, So the start of a new year
Speaker 1: being the best known, but there are many others actually
Speaker 1: as well. We pursue goals with extra vigor. But the
Speaker 1: funny thing about fresh starts is they're short lived, right,
Speaker 1: So they give you that little boost of motivation to
Speaker 1: begin something new, but a couple of weeks pass and
Speaker 1: that's gone, and now you need something to carry you forward.
Speaker 1: And that's where a lot of folks fall flat. And
Speaker 1: I actually think one of the biggest issues is that
Speaker 1: people aren't strategic about how am I going to achieve
Speaker 1: this school. They just say, oh, you know, I'm going
Speaker 1: to go to the gym this year, and I'll go
Speaker 1: now because I feel motivated, And then three weeks later
Speaker 1: they don't feel motivated anymore and everything falls apart. But
Speaker 1: an alternative way you could pursue a goal, and what
Speaker 1: research is better is actually by um following a bunch
Speaker 1: of best practices. So ideally, when you want to pursue
Speaker 1: a goal, first of all, you define a plan. And
Speaker 1: the plan isn't just I'm going to go to the
Speaker 1: gym once, right. The plan is I'd like to do
Speaker 1: this regularly for some hopefully very long term period of time.
Speaker 1: If it's about getting in shape, if it's about um
Speaker 1: cutting back you're spending, whatever that is. Maybe you want
Speaker 1: to learn a new language this year. UM, you don't
Speaker 1: want to just say I'm gonna learn Spanish. You actually
Speaker 1: want to sit down and say, okay, how am I
Speaker 1: going to do it? Well, maybe those details look like
Speaker 1: saying it's going to be four hours a week that
Speaker 1: I spend on dual Lingo, and it's going to be Tuesday, Wednesday, Thursday,
Speaker 1: Friday at five pm right after work when I spend
Speaker 1: an hour on the app practicing uh, and I'm going
Speaker 1: to do that every week consistently. Now you're actually starting
Speaker 1: to um see the groundwork for the kind of plan
Speaker 1: that might carry for it. Now that might sound boring,
Speaker 1: but actually breaking down a big vague into bite sized pieces,
Speaker 1: whether it has to do with savings, volunteering exercise is
Speaker 1: one of the most important things you can do. And
Speaker 1: then figuring out when will I do it, where will
Speaker 1: I do it, how will I get it done? There's
Speaker 1: more to the magic as well. You have to make
Speaker 1: sure you won't forget so you can put it on
Speaker 1: your Google calendar. Um. Ideally you're thinking about accountability, So
Speaker 1: can you create consequences so that if you fail to
Speaker 1: follow through, it isn't just a shoulder shrug, but you're
Speaker 1: really gonna feel crummy about that. Um. The more the consequence,
Speaker 1: the more likely it is that you won't procrastinate or
Speaker 1: give up on yourself, so you can actually put money
Speaker 1: on the line for instance, that you agree will forfeit
Speaker 1: if you don't achieve a given goal. You can choose
Speaker 1: referees or some websites like stick dot com and be
Speaker 1: minder dot com which I am i should say, unaffiliated
Speaker 1: with just an admire of their product, that allow you
Speaker 1: to do things like that. And research shows that when
Speaker 1: you use these so called commitment devices basically penalize seeing
Speaker 1: yourself for future failures to fall throw on your goals,
Speaker 1: you dramatically increase the likelihood of success. Because nobody's nobody
Speaker 1: likes a fine. So those are a bunch of strategies
Speaker 1: you can take, and there's more we could get into,
Speaker 1: depending on what other obstacles you foresee, like making sure
Speaker 1: you enjoy the way you're pursuing the goal and so on.
Speaker 1: But that's a pretty good groundwork. Yeah, absolutely, like you
Speaker 1: kind of just you give it's just like a little
Speaker 1: sampler platter of a lot of different strategies that you
Speaker 1: talk about your book. Um. But essentially, I mean, all
Speaker 1: of these things can lead an individual to create processes
Speaker 1: that work for them and which makes me think of
Speaker 1: like my favorite new quote, which is process saves us
Speaker 1: from the poverty of our intentions, which I heard recently.
Speaker 1: I was just like, man, that is so stink and good.
Speaker 1: But that's what all of this does. It's about creating
Speaker 1: this plan because we've all got these idealized intentions at
Speaker 1: this point in the year where it's like, of course
Speaker 1: I'm gonna do this, like everyone has goals. I just
Speaker 1: turned over a new leaf. But if you don't have
Speaker 1: the processes to back that up, then inevitably it's gonna
Speaker 1: fall flat for most folks, right, That's exactly right, And unfortunately,
Speaker 1: too often we aren't focused on those processes. We're just
Speaker 1: focused on that short burst of motivation and we imagine
Speaker 1: it will carry us for it and we'll have no problems.
Speaker 1: But once you start recognizing no, there are barriers to
Speaker 1: success and to maintenance um and starting to set yourself
Speaker 1: up so that you can overcome them, you start seeing
Speaker 1: better results. And of course everyone resolutions get made at
Speaker 1: the beginning of the year, and so I feel like
Speaker 1: that's one that's a little more natural for for a
Speaker 1: lot of folks. But in your book you also talk
Speaker 1: about how there are different life events that can occur
Speaker 1: that folks can maybe take advantage of. Can you talk
Speaker 1: through maybe some different examples of maybe even disruptive life
Speaker 1: events that that folks are able to use to their
Speaker 1: advantage to basically put them on this path towards a
Speaker 1: new fresh start for them. Yeah. Absolutely, Well. One of
Speaker 1: the really interesting things about the way we think about
Speaker 1: time and the way we think about our lives is
Speaker 1: that we don't perceive it linearly. We actually think about
Speaker 1: ourselves like we're characters in a book. And um, our
Speaker 1: life is divided into chapters, and there are big chapters,
Speaker 1: and there are short chapters. There's even you know, subsections
Speaker 1: of chapters. Every time, um, something happens that feels like
Speaker 1: a book ends a chapter or a section of our life, UM,
Speaker 1: we feel this sense of discontinuity. So think about, you know,
Speaker 1: moving to a new city, and you could think about,
Speaker 1: you know, the years you maybe were in college or
Speaker 1: working at a certain employer. Those are sort of chapters
Speaker 1: in your life. Or a year is also a major
Speaker 1: chapter marker for many people in their lives, which is
Speaker 1: part of why New Year's feels like a fresh start.
Speaker 1: And whenever we cross one of those boundaries, close one
Speaker 1: chapter and open another, we have a sense that we
Speaker 1: are um further apart from our past. Self. Whatever you know,
Speaker 1: I didn't get done last year or last year I
Speaker 1: meant to get in shape, or I meant to get
Speaker 1: my portfolio under control and diversify better. Whatever it was, Uh,
Speaker 1: I didn't do it yet. But that was the old me,
Speaker 1: and this is the new me, and the new me's
Speaker 1: going to be different. So that discontinuity can be really
Speaker 1: productive for anything where you you haven't already achieved the
Speaker 1: goal and maybe you were feeling a little sad about it,
Speaker 1: and now you can say, well, you know that was
Speaker 1: the past and and this is going to be different.
Speaker 1: It also tends to lead us a step back and
Speaker 1: think big picture about our lives. So we have shown
Speaker 1: that this happens um not just with things that you
Speaker 1: might expect to be momentous like a real physical change.
Speaker 1: You have a new job or a new house, or
Speaker 1: um a new community or a new role of some kind. Right,
Speaker 1: there's actually really wonderful past research by Wendy Wood at
Speaker 1: the University of Southern California looking at these life disruptions
Speaker 1: and how they can break up our habits. But we've
Speaker 1: shown that even um trivial events on the calendar that
Speaker 1: truly do not matter and they they create the same
Speaker 1: psychological and choice effects where we pursue goals with greater vigor.
Speaker 1: So the start of a new week is a minor
Speaker 1: fresh start. We already talked about New Years, that's the
Speaker 1: big one we're all familiar with. At the start of
Speaker 1: a new month. Sometimes the celebration of spring, especially its
Speaker 1: drawn to your attention. The start of spring feels like
Speaker 1: a new beginning, the celebration of a birthday, and there
Speaker 1: are many minor holidays that feel like fresh starts to people,
Speaker 1: So think more Labor Day and less Valentine's Day. And
Speaker 1: different religions have different holidays that signal a fresh start
Speaker 1: for people who practice in that religion. So all these
Speaker 1: fresh start dates um when we sort of look at data,
Speaker 1: have this incredible ability to increase, just naturally how much
Speaker 1: people are doing things like searching for the term diet
Speaker 1: on Google, or visiting the gym, or setting goals on
Speaker 1: popular goal setting websites about everything from their health to
Speaker 1: their finances to their education. Uh. And we have also
Speaker 1: done experiments where we show that by highlighting fresh start
Speaker 1: dates that people might not otherwise be attending to, we
Speaker 1: can get people to pursue their goals more aggressively. So
Speaker 1: my favorite experiment involved trying to get more people to
Speaker 1: sign up for a retirement saving account with their employer.
Speaker 1: UM That was you know, text beneficial. It was a
Speaker 1: four or three ban out of four oh one k,
Speaker 1: which is probably the most familiar. But this was when
Speaker 1: I do so I thought I could throw out some
Speaker 1: of that that fun stuff. Um So, so we UM
Speaker 1: partnered with four universities that had four or three B
Speaker 1: plans and we sent out mailings to employees who were
Speaker 1: not yet saving at the sort of match thresholds. They
Speaker 1: weren't taking advantage of all of their employeer benefits, or
Speaker 1: weren't saving at all. In fact, most weren't saving at all,
Speaker 1: and we invited them to start saving, either right away
Speaker 1: or in the future, because we know a lot of
Speaker 1: people would want to put off that that decision to
Speaker 1: start saving from past research. And what we varied is
Speaker 1: whether or not the date in the future when we
Speaker 1: invited people to begin saving, we said, we'll take care
Speaker 1: of it, just mail back this postcard. If that date
Speaker 1: in the future aligned with a fresh Start and was
Speaker 1: described in that way, or if it aligned with the
Speaker 1: Fresh Start but wasn't described So to be really specific,
Speaker 1: imagine your birthdays coming up in two months and you're
Speaker 1: in the six arm, and we would flip a coin
Speaker 1: and the coin toss would determine whether you got a
Speaker 1: version of the mailing that invited you to start saving
Speaker 1: after your upcoming birthday or in two months. Now, they're
Speaker 1: literally identical, but in one case we are highlighting an
Speaker 1: upcoming fresh start as the opportunity. So we tried this
Speaker 1: with birthdays, we tried it with a start of spring
Speaker 1: um and what we see is that inviting people to
Speaker 1: begin saving after a fresh start date and like literally
Speaker 1: calling it out as such, leads to more savings in
Speaker 1: the following eight months, uh than a literally identical invitation
Speaker 1: to save that doesn't name the fresh start date. Significant increase. Y. Yeah,
Speaker 1: it's pretty exciting. Humans are odd beings, right that we
Speaker 1: respond differently that, but it's cool to see that that's
Speaker 1: the case, and then you can tailor your marketing accordingly
Speaker 1: to help people make better decisions. And I'm curious to
Speaker 1: you write about Katie. You performed a lot of research
Speaker 1: that shows that we underestimate the discipline needed to make
Speaker 1: change in our lives, but that there are ways that
Speaker 1: we can make it more fun. So, yeah, I can
Speaker 1: talk about that because sometimes there are if we can
Speaker 1: make it more fun, we're more likely to stick to it. Yeah.
Speaker 1: This is a huge insight and and I think the
Speaker 1: best research on this comes from islet fish Buck at
Speaker 1: the University of Chicago and Caitlin Williott Cornell, who showed
Speaker 1: most of us, when we are left to our own devices,
Speaker 1: think the best way to pursue our goals is just
Speaker 1: to look for the most direct path to success and
Speaker 1: follow it. So let's take the example of getting in shape.
Speaker 1: What's the maximally efficient workout machine that will create the
Speaker 1: most pain and sort of benefits per minute. You're like,
Speaker 1: I'm going to get on that if I want to
Speaker 1: get in shape. Yeah, it means I'm gonna start running
Speaker 1: right this minute. Yeah, exactly, flailing your arms, carrying weights
Speaker 1: to all the things that are hard. A small minority
Speaker 1: of people, though, pursue their goals a different way, which
Speaker 1: is that they actually look for a fun way to
Speaker 1: achieve that goal of say getting in shape, so that
Speaker 1: that person might go to zoomba classes with a friend
Speaker 1: instead of getting on the punishing StairMaster. And what's really
Speaker 1: interesting is that the folks who into it they should
Speaker 1: find a fun way to pursue their goals. They're actually
Speaker 1: the ones that have it right. In randomize control trials
Speaker 1: where people are either encouraged to pursue their goals in
Speaker 1: ways that are fun or in ways that are maximally efficient,
Speaker 1: the people encourage to pursue goals and ways that are
Speaker 1: fun are the ones who actually end up sticking to
Speaker 1: them longer. And in most cases, it's not about how
Speaker 1: much progress you make percession. It's about sticking to it
Speaker 1: that leads to the real success. So that persistence difference
Speaker 1: between pursuing goals in a way that's fun and ways
Speaker 1: that are you know, slightly more efficient, we miss you know,
Speaker 1: we don't appreciate it, and we we make a mistake there.
Speaker 1: So I've done some research on different ways you can
Speaker 1: make it fun to pursue your goals, because there are
Speaker 1: strategies that systematically make it more enjoyable. Um one is
Speaker 1: whenever there's something that would feel like a chore. Otherwise
Speaker 1: you can actually try to link it with a temptation.
Speaker 1: So only let yourself say binge, watch your favorite TV
Speaker 1: show when you are working out at the gym, or
Speaker 1: only let yourself pick up your favorite beverage from a
Speaker 1: coffee shop, um, when you're heading to the library to
Speaker 1: hit the books. If you're a student, I talk to
Speaker 1: my students that weren't about that one a lot. Or
Speaker 1: you know, only let yourself listen your favorite podcast while
Speaker 1: you're doing household chores. And by combining those two things,
Speaker 1: something that's a temptation and source of pleasure with something
Speaker 1: that might otherwise not be super fun, that you might
Speaker 1: put off and dread, you can transform the experience so
Speaker 1: that you'll get your chores done and um, keep at it.
Speaker 1: And and there are other strategies to write. Selecting different
Speaker 1: types of activities as a way to pursue the same
Speaker 1: goal and also making it social can be really effective
Speaker 1: when you pursue goals with someone who you enjoy. That's
Speaker 1: another way to change the experience. But the key insight
Speaker 1: is when you're thinking about a goal, when you're making
Speaker 1: a plan, just something we already talked about a little
Speaker 1: bit earlier, how important it is to be strategic, think
Speaker 1: about pursuing that goal and anning to pursue that goal
Speaker 1: in a way you will enjoy, because ultimately that is
Speaker 1: a huge predictor of success. You've got to stick to it.
Speaker 1: And if you don't enjoy it, if it's no fun
Speaker 1: while you're pursuing the goal, you're going to quit. That's right. Yeah,
Speaker 1: that's where you can use that instant gratification which normally
Speaker 1: works against us. But then you're harnessing it. You're using
Speaker 1: that as like wind at your back. But so you're
Speaker 1: talking about temptation bundling, yes, yeah, yeah, I would love
Speaker 1: to hear, how like, how are maybe some specific ways
Speaker 1: that folks can apply temptation bundling to their financial habits
Speaker 1: to you know, whether it is for them to save more,
Speaker 1: whether it's them spending less at the grocery store. I'd
Speaker 1: be curious to hear if you have any suggestions for
Speaker 1: ways that folks can temptation bundle to get ahead with
Speaker 1: their money. Yeah. I think that's a great question. Um,
Speaker 1: And I do think there are ways that you can
Speaker 1: use temptation bundling when it comes to financial habits. Um.
Speaker 1: You know, one is just thinking about budgeting, which is
Speaker 1: not a task that everybody relishes and looks for too, um,
Speaker 1: and thinking about are there are there things you can
Speaker 1: bundle with budgeting that make it more pleasant, like maybe
Speaker 1: a favorite bottle of wine you only open once a
Speaker 1: month when you go through your budget, or a person
Speaker 1: you really enjoy spending time with and you both um
Speaker 1: get together when it's sort of time to make budgets
Speaker 1: and you get to chit chat and laugh a little
Speaker 1: bit while you're going through it. I will admit that UM.
Speaker 1: I was influenced very much on that one by my
Speaker 1: dad growing up, who used to uh do as taxes
Speaker 1: with an accountant who become became a very dear friend,
Speaker 1: and they made it a source of fun every year.
Speaker 1: It was basically a big party. They stayed up late,
Speaker 1: they drank a lot of great wine, UM, they had
Speaker 1: a really good meal when it was tax time. And
Speaker 1: so there's lots of ways I think you can make
Speaker 1: UM some of the things that feel like chores but
Speaker 1: are really important to healthy financial decision making UM more pleasant.
Speaker 1: A lot of them are social choosing an advisor who
Speaker 1: you enjoy spending time with, maybe going out for a
Speaker 1: special meal at a restaurant you you reserve for only
Speaker 1: spending time with them. So those are a few ideas,
Speaker 1: but creative listeners may come up with others. And I'm
Speaker 1: always on the market for other temptation bundles. Yeah, no,
Speaker 1: I like it. I literally had a coworker who she
Speaker 1: would go to the gym, get on the StairMaster, and
Speaker 1: she would watch her favorite shows. And it was I remember, like,
Speaker 1: I think she would have given up her gym commitment
Speaker 1: if it hadn't have been for the fact that that
Speaker 1: she so deeply associated watching her favorite shows with working out,
Speaker 1: that it became this thing like, well, I'm gonna go
Speaker 1: watch my show, and but inevitably she was getting exercise
Speaker 1: at the same time. So I think that's brilliant and
Speaker 1: it's one of those things that not many people think about. Well,
Speaker 1: we've got a few more questions we want to get
Speaker 1: to with. You want to talk about overcoming procrastination and laziness.
Speaker 1: We'll get to some questions for Katie on those fronts
Speaker 1: right after this. All right, we are back from the
Speaker 1: break talking with Katie Milkman about these different money changes
Speaker 1: that you can make. Uh, and not only that you
Speaker 1: can make, that that you can stick with. And Katie,
Speaker 1: in your book, you talk about how, I mean, basically
Speaker 1: everybody procrastinates, right, everybody from folks like us all the
Speaker 1: way down to your students who you teach. But there
Speaker 1: are constraints or commitment devices you mentioned this just before
Speaker 1: the break that we can use, So can you explain
Speaker 1: how those work and maybe give some examples. Yeah. Absolutely,
Speaker 1: Commitment devices are fascinating because we're actually quite used to
Speaker 1: their sort of sister tool, which is being managed by
Speaker 1: other people. Right, if you have a UM, a boss,
Speaker 1: or you know, live in a country that has a
Speaker 1: functioning government, then you are familiar with the fact that
Speaker 1: sometimes you are incentivized to behave in ways that are
Speaker 1: good for your organization or your UM community. Right, So,
Speaker 1: think about speeding tickets. You are tempted to speed UM,
Speaker 1: but you get slapped with a fine if you give
Speaker 1: into that temptation or UM. Think about finishing a project
Speaker 1: at work. You probably are given a deadline by your boss.
Speaker 1: I know there will be some real consequence if you
Speaker 1: don't actually hit that deadline. Well, that's when someone else
Speaker 1: external to you imposes some cost for say procrastination or
Speaker 1: giving into temptation UM. But it turns out you can
Speaker 1: actually impose penalties on yourself in the same way. And
Speaker 1: that's when it's called a commitment device. And it sounds
Speaker 1: weird because The idea of imposing penalties on yourself for
Speaker 1: not achieving your goals is kind of counterintuitive, like why
Speaker 1: would I find myself or punish myself or set deadlines
Speaker 1: with consequences for myself? But there it really does. But
Speaker 1: the evidence shows that when you create those kinds of
Speaker 1: deadlines and penalties for yourself, it can be incredibly effective. Um.
Speaker 1: This is a podcast about finance, so or financial decision making,
Speaker 1: so it's a good place to talk about one of
Speaker 1: my favorite studies on the power of a commitment device,
Speaker 1: which actually was a saving study, and it involved giving
Speaker 1: people access to a very unusual kind of savings account.
Speaker 1: The study was done in the Philippines, and it was
Speaker 1: done um to give people access to an account where, uh,
Speaker 1: they actually wouldn't be able to take their money out
Speaker 1: unless they reached a predetermined date or predetermined savings goal,
Speaker 1: and it had no interest rate benefits over a standard
Speaker 1: account that was fully liquid. It's sort of crazy to
Speaker 1: think people would actually put money into this. View have
Speaker 1: sort of a strict um economic perspective. Somebody who doesn't
Speaker 1: like freedom or liberty, Yeah, like, why would you ever
Speaker 1: do that unless there's like a higher interest rate? Why
Speaker 1: would you ever want to put your money into this account?
Speaker 1: That's it's just strictly worse. You can't access your cash.
Speaker 1: But interestingly, in a randomized controlled trial, about thirty of
Speaker 1: those offered this kind of account chose to put money
Speaker 1: in it, uh, some of their money at least into
Speaker 1: that account. So that's sort of shocking. And then the
Speaker 1: most astounding fact is that two groups ran only selected
Speaker 1: we're compared to one another, one of which had access
Speaker 1: to this account that were told, hey, you can put
Speaker 1: some money in it if you want, and remember thirty
Speaker 1: percent did. So. We compare that entire group, everybody who
Speaker 1: had access to it, whether they put money in or didn't,
Speaker 1: to a second group, which is the control group that
Speaker 1: wasn't given access to this account. And the question is
Speaker 1: which group saves more of the group that can put
Speaker 1: money in an illiquid account or the group that can't.
Speaker 1: And what's fascinating is that having access to these accounts
Speaker 1: where you don't get any interest rate benefit, but your
Speaker 1: money is locked up until you've reached a predetermined saving
Speaker 1: school or hit a date that you selected, having access
Speaker 1: to it leads to eighty percent more savings year over year.
Speaker 1: And again only thirty percent of people are even putting
Speaker 1: money in these accounts. So just think, you know, imagine
Speaker 1: if a hundred percent or how how high the savings
Speaker 1: benefits would be for the whole additional dollar that was
Speaker 1: the average for the entire group. That's right, exactly, So
Speaker 1: eighty percent increase in savings for the entire population just
Speaker 1: offered the account, even though only thirty percent took it up.
Speaker 1: An incredible result. UM. So it highlights that when we
Speaker 1: take steps to constrain ourselves to prevent ourselves from giving
Speaker 1: into temptation, it's really beneficial. Another great studies showed that
Speaker 1: UM letting smokers put money into a an account where
Speaker 1: they would have to forfeit all that cash. So this
Speaker 1: is a different way of imposing a commitment. Here we're
Speaker 1: finding people instead of constraining access, but smokers who have
Speaker 1: a way to put money on the line theft of forfeit.
Speaker 1: If they don't quit smoking six months later, they quit
Speaker 1: at a thirty percent higher rate than otherwise identical smokers
Speaker 1: who UM just get standard smoking cessation tools. So if
Speaker 1: we can find ourselves or constrain ourselves, that's the way
Speaker 1: we can sort of bully ourselves into achieving goals at
Speaker 1: a higher rate. And again we're used to others doing
Speaker 1: this for us, our manager who sets a deadline and
Speaker 1: says there's a penalty if you don't turn this in
Speaker 1: on time, or or our government that says I, you know,
Speaker 1: I'll find you for the behaviors that I don't want
Speaker 1: to see. But if you do it for yourself, you
Speaker 1: can reap all the benefits. And I just, uh, I
Speaker 1: think this has everything to do with why I've been
Speaker 1: so successful at going to the gym three times a week, Katie,
Speaker 1: is because I pay a lot of money at the
Speaker 1: beginning of the month automatically gets deducted. Well. It was
Speaker 1: also a fresh start thing, Matt, because you and I
Speaker 1: started working out when we moved moved over the summer, Katie,
Speaker 1: and like we thought of it kind of and we
Speaker 1: didn't connect the terminology because we hadn't read your book
Speaker 1: at that point, but we were connecting it to this
Speaker 1: like ability start effect to start some fresh things. And
Speaker 1: so the move so basically combined with that, I'm never
Speaker 1: going to stop working, right because I got I got
Speaker 1: the double way. Yeah, that's great. And it is funny
Speaker 1: that by reducing the marginal cost of a gym visit
Speaker 1: to zero, you're essentially pre committing. Um, there's also a
Speaker 1: bit of fun psychology. You know, it is a sunk cost,
Speaker 1: right once you've spent it, you can't recover it. So
Speaker 1: in a sense, you sort sort of be making a
Speaker 1: decision that ignores that about whether you're going to go
Speaker 1: to the gym this afternoon or not. But that's not
Speaker 1: the way our mind works. We tend to feel guilty
Speaker 1: about expenses even if there's sunk costs, if we're not
Speaker 1: sort of taking full advantage of them. So there's, um,
Speaker 1: there's a behavioral bias you're leveraging to get yourself to
Speaker 1: the gym there too. Yeah. Yeah, well, so for so
Speaker 1: many elements of our financial lives, we're not just trying
Speaker 1: to incentivize something positive. We're trying to discourage something that's negative, right,
Speaker 1: Like reckless spending is one of those things. And so, yes,
Speaker 1: some studies have shown that using cash is more painful
Speaker 1: for people, which helps us helps people spend less overall.
Speaker 1: And although I've heard anecdotal evidence from younger folks that
Speaker 1: that's not the case, that they actually think of cash
Speaker 1: as of its burning a hole in their pocket literally
Speaker 1: and they don't feel the pain associated with it. And
Speaker 1: so maybe some of these older studies need to be updated.
Speaker 1: I'd be curious to see if that like still holds.
Speaker 1: But but how else can we create pain points to
Speaker 1: help us curb some of those negative habits, some of
Speaker 1: those ways maybe in the realm of money that we're
Speaker 1: using it kind of like in ways that we don't
Speaker 1: want to be using it anymore, ways that are really
Speaker 1: working where we're working against ourselves. Yeah, Well, accountability to
Speaker 1: other people can be an important way of sort of
Speaker 1: punishing yourself if you want to avoid a bad behavior.
Speaker 1: So we talked a little bit about UM accounts that
Speaker 1: are a liquid so you can you know, you're literally
Speaker 1: not able to touch it. That's one way of penaltizing yourself.
Speaker 1: You can literally find yourself. But that's sort of counterproductive.
Speaker 1: You're trying to save more money and then you find
Speaker 1: yourself for not saving enough, right, you can see how
Speaker 1: that becomes a vicious cycle. UM. But another tool is
Speaker 1: just UM giving visibility to someone so that you'll be
Speaker 1: ashamed if they find out that you don't achieve a goal.
Speaker 1: That's another kind of penalty UM. And and so uh,
Speaker 1: having having accountability to someone else, giving them visibility into
Speaker 1: a financial goal in whether or not you're achieving it.
Speaker 1: Um that could be a you know, still somewhat painful,
Speaker 1: but less painful way that you could achieve success, kind
Speaker 1: of like announcing on social media, Hey, I'm gonna run
Speaker 1: run a marathon at the in November or something. I like,
Speaker 1: if you don't actually make it happened, you kind of
Speaker 1: like set yourself up. All your peer group is expecting
Speaker 1: you to accomplish this, and there is some sort of
Speaker 1: a level of public failure if you don't hit it
Speaker 1: and hit that goal. So yeah, I can see that
Speaker 1: being working in your favor to even as like a
Speaker 1: negative kind of motivation. Yeah, absolutely, Although I would say
Speaker 1: one important thing about any sort of public accountability is
Speaker 1: generally it's more effective to define small sub goals that
Speaker 1: you want to achieve and give some visibility into that
Speaker 1: rather than a big end goal. So you talked about, oh,
Speaker 1: I'm going to run a marathon, uh next year, you
Speaker 1: know in the fall. That's a really big end goal.
Speaker 1: The ideal would be to say, you know, I'm going
Speaker 1: to run a marathon next fall, and I'm starting with
Speaker 1: a five k next month. Uh, and then you know,
Speaker 1: the month after that, I'll do a half marathon and
Speaker 1: so and so. You sort of work your way up
Speaker 1: and there's visibility at each point along the way. Um.
Speaker 1: When it's a big goal that's distal, then even with
Speaker 1: that penalty and shame, you may not take the steps
Speaker 1: in between. You may sort of put it off and
Speaker 1: put it off, and then it it's too late to
Speaker 1: actually train for the marathon by the time you realize
Speaker 1: how embarrassed you'll be. So. Um, smaller, bite sized goals
Speaker 1: with visibility to others and accountability are a better approach. Yeah.
Speaker 1: I mean you talk about putting that plan together and
Speaker 1: how that's probably one of the most most important things
Speaker 1: you can do because literally, like what you start planning
Speaker 1: things out, you start tackling the problem. It's not like
Speaker 1: it's just this device that sits on the shelf until
Speaker 1: it's needed. Like literally the process of planning starts. You
Speaker 1: start to implement the very next steps that you need
Speaker 1: to take. It kind of like gets you started on
Speaker 1: that setting things in motion at that point. Exactly, Yeah, exactly,
Speaker 1: got it. Okay, Automation. When it comes to defining laziness,
Speaker 1: I think that that's a device that can be used.
Speaker 1: How important do you think automation is when it comes
Speaker 1: to creating lasting change and specifically fighting against laziness. Automation
Speaker 1: is such an amazing tool for changing for good, particularly
Speaker 1: in the domain of financial decision making. If we could
Speaker 1: have automation and every part of our lives, I think
Speaker 1: we would have far fewer problems. Uh if you if
Speaker 1: only I could just automate rejecting dessert for the next month,
Speaker 1: can you can you imagine? Or I could automate today.
Speaker 1: I'm just gonna put it on autopilot that I will
Speaker 1: show up at the gym every day at five pm. Um.
Speaker 1: The amazing thing about automation and your finances is that
Speaker 1: you really can, sort of, in the words of Nobel
Speaker 1: right at Richard Taylor, set it and forget it. You
Speaker 1: can say, I'm gonna take this amount of money. I'm
Speaker 1: gonna auto deduct it from my paid check every month
Speaker 1: when it arives and send it straight to a retirement
Speaker 1: savings account or straight to an emergency savings account, or
Speaker 1: whatever it is I need to save for. You do it.
Speaker 1: Once it happens automatically, you literally don't have to think
Speaker 1: about it. Again and then that money isn't sitting there
Speaker 1: for you to spend. It's a really incredible tool and
Speaker 1: there have been a lot of studies showing just how
Speaker 1: useful these kinds of auto deduct settings are for increasing savings. Frankly,
Speaker 1: I do a lot of work. I do work on savings.
Speaker 1: I also do work on health, uh and education, and
Speaker 1: it is frustrating that we cannot automate um, you know,
Speaker 1: study habits, healthy eating and so on everyday behavior that
Speaker 1: we're still take some sort of willpower. That's right, And
Speaker 1: of course you can't automate resisting the temptation every day
Speaker 1: to splurge spend, But but it sure is helpful that
Speaker 1: some of that money has disappeared in your account balance
Speaker 1: is limited in terms of the splurge spending because you
Speaker 1: automated those deductions and sending money to savings. Yeah. I mean,
Speaker 1: when you look at the results of automatic opt ins
Speaker 1: when it comes to like four one K contributions, the
Speaker 1: amount of people that contribute to their four one K
Speaker 1: when the default position is that they are like, it's
Speaker 1: so much higher when it's left up to the individual choice. Right. Yeah,
Speaker 1: So this is this is a classic study that was
Speaker 1: done and I guess two thousand and three by um
Speaker 1: Bridget Madrian, and what she and her collaborator showed is
Speaker 1: that when this single employer switched from having new employees
Speaker 1: fill out paperwork UM where they had to check a
Speaker 1: box to opt in to be a part of the
Speaker 1: employers for a one K to having new employees check
Speaker 1: a box to opt out, they saw about a thirty
Speaker 1: percentage point increase overnight in how many people were saving
Speaker 1: UM for retirements. Just extraordinary. And this has now been
Speaker 1: replicated many times. The effects aren't always necessarily thirty percentage
Speaker 1: point increases, but they're large increases. Uh. And it's really
Speaker 1: powerful and and lots of companies now have smart defaults.
Speaker 1: And in fact, I think the two thousand six US
Speaker 1: Pension Protection Act legislated that its tax advantaged for your
Speaker 1: employer to automatically enroll you in their in their savings plan.
Speaker 1: That's when good process design or I don't know what
Speaker 1: they call it, all the software engineers who designed the
Speaker 1: different software that when you're on boarding employees, but just
Speaker 1: some of the right tweaks to the system can make
Speaker 1: a significant impact on the ability for folks to say
Speaker 1: for future years UM. But Katie, we've got a few
Speaker 1: more questions for you that we're gonna get to here
Speaker 1: after the break, including we want to talk about the
Speaker 1: impact of the people we hang out with. We're gonna
Speaker 1: talk about peer pressure and more. Right after this all,
Speaker 1: we're back from break, still talking with Katie Miltman. We
Speaker 1: want to make money changes in most of us, at
Speaker 1: least unless you're just already crushing it, but most of
Speaker 1: us want to make money changes this year. We want
Speaker 1: to get better with our finances. But we don't want
Speaker 1: to just make empty gestures in this new year and
Speaker 1: then find out that we fall flat on our face
Speaker 1: weeks from now. And so Katie, I'm glad. We're glad
Speaker 1: to have you here talking about how to make money
Speaker 1: changes that are going to stick around stand the test
Speaker 1: of time, creating, initiating and incorporating some of these tactics
Speaker 1: to do that. You give an example in your book
Speaker 1: about a way that high school students were able to
Speaker 1: boost their performance. Uh, can you share that story? I
Speaker 1: think I found that one fascinating. Yeah. Absolutely so. One
Speaker 1: of the most interesting studies I've gotten to be involved
Speaker 1: in UM was a study led by Lauren S. Chris
Speaker 1: Winkler at the Kellogg School at Northwestern University, showing that
Speaker 1: when students are invited to advise their peers on how
Speaker 1: to study more effectively, the invitation to give that advice
Speaker 1: to others and the act of doing so improves advisor's
Speaker 1: own grades. So let me just say that again, it's
Speaker 1: not the students getting advice who are getting better grades.
Speaker 1: It's the students giving advice who are getting better grades,
Speaker 1: which I think is just absolutely fascinating. And the psychology
Speaker 1: there is that um when you're invited to coach someone
Speaker 1: else on how to achieve a goal that you also
Speaker 1: are trying to pursue, like boosting your grades in school. One,
Speaker 1: it improves your confidence. If somebody's asking me for advice,
Speaker 1: I must not be such a dufous. There must be
Speaker 1: something I could say that's you're right, Like, Okay, I
Speaker 1: guess I'm not. I'm not going to be a straight
Speaker 1: sea student forever. I've got something to offer somehow you've
Speaker 1: figured out how to money. You guys are making such
Speaker 1: such great decisions now that you're giving advice. No, so
Speaker 1: that there's magic there. And then the second ingredient is
Speaker 1: you have to introspect now deeply about what might work
Speaker 1: for someone else. You're gonna think about things that would
Speaker 1: work for you too, of course, because that's what you
Speaker 1: have access to. So you're gonna think deeply because now
Speaker 1: I have to tell somebody something, so I've got to
Speaker 1: come up with some answers and then um, then you're
Speaker 1: gonna say it out loud to another human. And when
Speaker 1: you do that, there's something called the saying is believing effect,
Speaker 1: where you know, I wouldn't be giving this advice if
Speaker 1: I didn't think it was good advice, and it would
Speaker 1: be totally a po critical if I didn't take it.
Speaker 1: So all those things combined are a really powerful force
Speaker 1: to help people achieve better results when they give advice
Speaker 1: to someone about a goal they too hope to um
Speaker 1: succeed on. Absolutely, I mean and truly this is something
Speaker 1: that has had a positive impact on both your mind
Speaker 1: and those finances the ability too. There's a there's a
Speaker 1: degree of responsibility. Not only are we just posting it
Speaker 1: on social media that we've got these goals, it's like
Speaker 1: we've got a podcast that's you know, that is also
Speaker 1: documenting all these different strategies and tips, and we're talking
Speaker 1: about don't revised funds in November, and I was like, Man,
Speaker 1: I know about these things and I believe that they're good,
Speaker 1: But now I'm gonna open my own. Yeah, exactly. And
Speaker 1: when it comes to our listeners as well, I think, like,
Speaker 1: what's so great about this is we often are encouraging
Speaker 1: our listeners just to start talking about money. That's the
Speaker 1: biggest reason why we started the show five years ago.
Speaker 1: We just wanted it to be something that did not
Speaker 1: feel like was unspeakable. And even with our listeners, as
Speaker 1: do you start hearing about what you should be doing
Speaker 1: with your money, but just taking this first steps and
Speaker 1: talking about it with somebody else gets the conversation started
Speaker 1: pretty soon. Yes, they They might ask you a question
Speaker 1: and all of a sudden, it sort of feels like
Speaker 1: you're a teacher and you always you hear the saying
Speaker 1: that there's no faster way to learn something than to
Speaker 1: actually teach it, And just like you said, the saying
Speaker 1: is believe in effect, I think the same thing applies.
Speaker 1: And that's I mean, we love seeing that that happened
Speaker 1: with our listeners as well. Yeah, and I want to
Speaker 1: know to Katie because like some of us are are
Speaker 1: inevitably going to fail at some of the goals we set, right,
Speaker 1: none of us is ever perfect. We just accomplish everything
Speaker 1: we set out to do in record time. So so
Speaker 1: how do we recover from from failure. Let's say someone
Speaker 1: set their goal to max out their roth IRA last year,
Speaker 1: but they fell short, Like, how should they approach that
Speaker 1: goal moving forward now? In Yeah, it's a great question.
Speaker 1: There's a couple of things that research has to say
Speaker 1: about that. One thing that I think is really important
Speaker 1: is an insight about the way we code failure and
Speaker 1: it comes from work by Carol Dweck at Stanford University.
Speaker 1: She's studied something um called growth mindset and she compares
Speaker 1: it to a fixed mindset, and they're basically two extreme
Speaker 1: ways of thinking about failure and success. In a growth mindset,
Speaker 1: the way you perceive the world, or the way you
Speaker 1: perceive your skill at anything, whether it's investing or your intelligence,
Speaker 1: is that it's not a fixed set of abilities you're
Speaker 1: born with that you can learn and grow and develop
Speaker 1: over time. But if you have a fixed mindset, you
Speaker 1: think about things just the opposite that you're sort of
Speaker 1: born with some innate abilities and whatever they are, they are.
Speaker 1: And so these two perspectives that people can take on
Speaker 1: the world lead to really different ways of interpreting failure.
Speaker 1: If you have a if you have a fixed mindset
Speaker 1: and something goes badly for you, you fall down on
Speaker 1: a goal, you're going to interpret that as diagnostic of
Speaker 1: your capabilities, and it's gonna be really discouraging. But if
Speaker 1: you have a growth mindset and you recognize the truth,
Speaker 1: which is that in almost everything in life, maybe the
Speaker 1: exception of your height, you have the ability to improve
Speaker 1: over time with learning, then you're going to interpret that
Speaker 1: failure as input and an opportunity to learn and grow
Speaker 1: and do better next time. And it turns out these
Speaker 1: which mindset you use, it's it's malleable. There's research showing
Speaker 1: that we can teach people to have a growth mindset
Speaker 1: by pointing out that basically everything in the world you
Speaker 1: can get better with practice and and effort and and learning,
Speaker 1: and to the extent that you can be deliberate about
Speaker 1: adopting a growth mindset. Then when you fall short of
Speaker 1: your goals, which inevitably that's what goal. If you're setting
Speaker 1: goals correctly, by the way, you should be falling short
Speaker 1: of some of your goals. You want to always stretch
Speaker 1: yourself with your goals. That is what the research shows.
Speaker 1: If you're setting wimpy goals and you always succeed, you
Speaker 1: are not pushing yourself enough and you're not you're not
Speaker 1: getting enough out of yourself. Um. So when you stumble though,
Speaker 1: think about it with a growth mindset and say, what
Speaker 1: did I learn from this? Not like, oh no, this
Speaker 1: means I could never do it, but rather you know,
Speaker 1: what can I do differently next time? What was the
Speaker 1: obstacle that tripped me up? How could I adopt a
Speaker 1: new strategy so that in the future when that same
Speaker 1: obstacle gets in my way, I'll have a better outcome.
Speaker 1: So I'd take growth mindset approach to all goals is
Speaker 1: really important. And then the other thing is based on
Speaker 1: research by my colleague Merca Sharif at the Wharton School,
Speaker 1: who's shown that when we set stretch goals for ourselves,
Speaker 1: which is the ideal, right, you know, I want to
Speaker 1: go to the gym seven days a week is better
Speaker 1: than I want to go to the gym two days
Speaker 1: a week. Um, it's we're motivating, You're more likely to
Speaker 1: push yourself. But when we do that um anticipating that
Speaker 1: we're gonna need to have the ability to give ourselves
Speaker 1: some get out of jail free cards. She calls them.
Speaker 1: Emergency reserves can be really useful. So when you set
Speaker 1: tough goals, that is ideal, but it's also ideal to
Speaker 1: make sure that you let yourself off the hook not
Speaker 1: a lot. Because if you say, like, oh, you know,
Speaker 1: I'm gonna go to the gym seven days a week
Speaker 1: and I have six emergencies that I can take then,
Speaker 1: but that's not going to get you very far. But
Speaker 1: it's better to say I'm going to aim for seven
Speaker 1: days a week of this this behavior and I give
Speaker 1: myself a little wiggle room to to get out of
Speaker 1: jail free than to say I'm going to try to
Speaker 1: go five days a week. And the reason is you're
Speaker 1: not gonna want to take those get out of jail
Speaker 1: free cards if you can avoid it, So you're likely
Speaker 1: to put yourself really hard. But if you do have
Speaker 1: a miss um, you won't give up and you'll still
Speaker 1: keep pushing to do quite well. Nonetheless, don't scrap it
Speaker 1: all together. It keeps you from throwing everything out the window,
Speaker 1: to having those those doovers or those Mulligan's like you're
Speaker 1: sick for a few days, and like it gives you
Speaker 1: the grace to say, Okay, that's cool, Like that's a
Speaker 1: reason to miss a Jim, it's a decent reason to
Speaker 1: not be able to make it. And I mean, I
Speaker 1: don't think we're gonna have time to touch on it.
Speaker 1: But you talk about elastic habits and how not being
Speaker 1: overly rigid, how important that is to keep us on track.
Speaker 1: I think the same thing applies with sort of these
Speaker 1: doovers as well. But Katie, what yeah, what about using
Speaker 1: peer pressure? Peer pressure social relationships? I think that there
Speaker 1: are different ways that we can use those to our
Speaker 1: advantage as well, because it's it's not just middle schoolers
Speaker 1: that feel that kind of pressure, you know, like we're
Speaker 1: we're all social animals, and so how can we harness
Speaker 1: that reality to propel us forward with our financial goals? Yeah?
Speaker 1: I love this topic. It's so important. UM. So we
Speaker 1: are incredibly influenced by the people who surround us. They
Speaker 1: show us what's possible. UM. They shape our beliefs about, um,
Speaker 1: how we should be behaving. When my favorite studies showing
Speaker 1: this is just looking at the college roommate you're randomly
Speaker 1: assigned as a freshman, and shows that if you end
Speaker 1: up with a roommate who is basically a better student historically,
Speaker 1: you get better grades than if you end up with
Speaker 1: roommate who had sort of less less studious nous historically. So,
Speaker 1: you know, think about the logic of it. Your your
Speaker 1: roommate goes out and parties every Thursday and Friday. You think, well,
Speaker 1: that's the thing to do in college. I should be
Speaker 1: partying all the time, versus your roommate every Thursday and
Speaker 1: Friday stays in with a book, makes um, you know,
Speaker 1: flash cards. You're thinking, gosh, I guess the succeeding college,
Speaker 1: I should be staying in Thursdays and Fridays and making
Speaker 1: flash cards. So we're in. My roommate is a nerd,
Speaker 1: and I gotta get a new one. In the extreme,
Speaker 1: that also happens. But on average, Um, you're right, it's yes,
Speaker 1: there can there can be. There could be situations where
Speaker 1: you're like, God, you're so crazy that you don't aren't
Speaker 1: influenced by people. But on average, if there is two
Speaker 1: much of a disparity, it turns folks off that way, Yeah,
Speaker 1: I mean, in that way, it can kind of backfire.
Speaker 1: And so it's it's so important to surround yourself with, like,
Speaker 1: you know, individuals who have something in common with you,
Speaker 1: but who who aren't, like at the very top of
Speaker 1: their game, because when there is that gulf, it can,
Speaker 1: like if I'm working out with, it can prevent you.
Speaker 1: It's going to be it's gonna be dispparenting, right, it's
Speaker 1: gonna make me. So you want someone who stretches you
Speaker 1: a little bit because they are a little bit ahead
Speaker 1: of you, but it's not hopeless. It's not a hopeless golf.
Speaker 1: And that's also what this research on college roommates showed
Speaker 1: was you want somebody who is, um was a stronger
Speaker 1: student than you, ideally as your roommate. But you don't want,
Speaker 1: you know, the valedictorian if you were a straight A student,
Speaker 1: because now there's there's such a gulf that you can't
Speaker 1: even relate. And like you said, you say, hey, this
Speaker 1: person is a nerd. I'm going out every night. I
Speaker 1: gotta get away from them. Um. So that but it
Speaker 1: is important to cultivate, if you if you have big
Speaker 1: goals in any part of your life, trying to cultivate
Speaker 1: social relationships with people who share those goals and who
Speaker 1: are frankly a little bit ahead of you and from
Speaker 1: whom you can learn is incredibly valuable. UM. They can
Speaker 1: be a support group. You can also offer them advice,
Speaker 1: which we already talked about the power of advice giving. Right,
Speaker 1: you can talk about those shared goals and you'll find
Speaker 1: you actually do have something to offer. UM. But you
Speaker 1: can do what my collaborator Angela Duckworth and also Katie
Speaker 1: Mayor and I'll call copy and paste, which is actually
Speaker 1: we show that when you deliberately coach people to go
Speaker 1: out and look for friends who are using clever tactics
Speaker 1: to achieve a goal they too want to achieve, and
Speaker 1: say go find what they're doing and try to emulate it,
Speaker 1: there's benefits to that people somehow, even though they naturally
Speaker 1: soak up some of what's around them, there's still something
Speaker 1: left on the table because just that nudge to copy
Speaker 1: and paste leads people to go looking for um mimicable behaviors.
Speaker 1: And that is really important and valuable because other people
Speaker 1: have approached and tried to pursue most of the goals
Speaker 1: that you want to achieve, and some of them have
Speaker 1: found a degree of success. And particularly people in your
Speaker 1: social net work. They have more in common with you,
Speaker 1: their lifestyle might resemble yours in many ways. Um so
Speaker 1: they probably the things that they're trying maybe quite effective
Speaker 1: for someone like you too, So ask and try to
Speaker 1: figure out. What can you learn from others who have succeeded.
Speaker 1: No need to reinvent the wheels. Start from scratch, not
Speaker 1: rocket science. But we often forget it right, like we forget, hey,
Speaker 1: somebody else already did this, and I should go collect
Speaker 1: that data like we're used to, you know, trying to
Speaker 1: learn from experts and so much of life I you know,
Speaker 1: I teach it to business school people go look at
Speaker 1: an accounting textbook when they have to figure out accounting.
Speaker 1: But sometimes with goal setting, we forget that there are
Speaker 1: other people who've come before us, and that there's expertise
Speaker 1: there too, for sure, and you don't have to just
Speaker 1: figure it out all on your own, and other people
Speaker 1: are a great resource. Katie, thank you so much for
Speaker 1: joining us today. Not only do you have your book
Speaker 1: How to Change, which you've also got a podcast, You've
Speaker 1: got a newsletter in addition to all your work being
Speaker 1: a professor. So where can folks learn more about you
Speaker 1: and what you're up to. Yeah, thanks for asking and
Speaker 1: thanks for having me. Um, best place to find more
Speaker 1: about me is that Katie Milkman dot com. It's Katie
Speaker 1: with a while like Katie Perry, and you can subscribe
Speaker 1: for Milkman Delivers if you so choose to get monthly
Speaker 1: tidbits or yeah, listen to my podcast, check out my
Speaker 1: book or read the nerdy research papers. If that's your thing,
Speaker 1: that's definitely my thing. You love it all, Katie, thank
Speaker 1: you so much for joining us today. We really appreciate it.
Speaker 1: Thanks for having me. It was a blast. Well all right, man,
Speaker 1: I only wish we just had more time to actually
Speaker 1: talk with Katie. Yeah. Well, maybe our new goal in
Speaker 1: three is that our interviews are more Joe Rogan from
Speaker 1: even going one hour, I think sometimes as long, but yeah,
Speaker 1: maybe we should take it to like two four hours long. Now,
Speaker 1: this this really was an awesome conversation though, that we
Speaker 1: had with Katie. What was your your big takeaway from
Speaker 1: this conversation? And she's smart, She's got a depth of
Speaker 1: knowledge that's fascinating. But she also researched all the different
Speaker 1: examples and stories as you and I were talking about
Speaker 1: before we started chatt with Katie, she just she not
Speaker 1: only has the head knowledge, but she's done all this
Speaker 1: practical work with companies that give us the ability to
Speaker 1: connect to to everyday human actions, which I think is
Speaker 1: super helpful. But you get from consulting like you have
Speaker 1: to make that connection. Otherwise you're not really a consultant, right,
Speaker 1: You're just a professor. You're just a research exactly. They're like,
Speaker 1: I would have taken your class if that's what I wanted.
Speaker 1: I want the practical application to this. But I think
Speaker 1: my biggest takeaway was when she talked about making it
Speaker 1: fun and that you know, even if progress takes longer,
Speaker 1: you're gonna be more likely to stick to it. And
Speaker 1: I think, yeah, when we're talking about budgetings, she said,
Speaker 1: do it over a class and wine or something like.
Speaker 1: That's kind of advice we've given over the years, like
Speaker 1: incorporate something fun into that money management. Set little rewards
Speaker 1: for yourself as you do make gains, as you do
Speaker 1: accomplish those smaller goals that you've set out for yourself.
Speaker 1: It doesn't need to be all drudgery, and ultimately the
Speaker 1: goal is that you're you know, hitting on all cylinders
Speaker 1: your your budget reflects the biggest goals that you have
Speaker 1: for your life, and so that when you achieve those things,
Speaker 1: it's like it's fun and it's energizing. But the more
Speaker 1: that we can make what seems boring to be fine.
Speaker 1: Like when I thought about working out, Matt, you decided
Speaker 1: for CrossFit, I said, you don't what sounds fun to me?
Speaker 1: A water rowing that splashy, splashy. Yeah, I wanted to
Speaker 1: sound fun while I was working out, and I was like,
Speaker 1: this is gonna be like kind of a whole body thing,
Speaker 1: but it's also there's something enjoy I find enjoyable about it,
Speaker 1: or riding my bike on the path and then up
Speaker 1: our local mountains like that kind of thing. I was curious, though,
Speaker 1: did you Did you make it fun though, in the
Speaker 1: way that you were able to um temptation bundle, Like,
Speaker 1: I assume that's well, actually I do. I listen to
Speaker 1: a podcast for music typically when I'm working. But like,
Speaker 1: I just tried to set out instead of signing up
Speaker 1: for the most hardcore workout I could, I found something.
Speaker 1: I was like, I know this is gonna be less intense, right,
Speaker 1: and I'm not going to see results as quickly but
Speaker 1: it's going to be the thing that I find enjoyable.
Speaker 1: I feel like I can stick to seem more appealing
Speaker 1: to you. Yeah, and I think that's really important. I
Speaker 1: think if it allows you, it's like playing the game
Speaker 1: of basketball versus going for a run. I'll sign up
Speaker 1: for a game basketball any day of the week, but
Speaker 1: I'm not going to go on to find out run
Speaker 1: like just not gonna happen. I hate it, and so
Speaker 1: find the things that's gonna stick to know yourself a
Speaker 1: little bit. That's so true, man, This is like one
Speaker 1: of the ways where you are so different. I guess
Speaker 1: for me, like hearing a five mile run like up
Speaker 1: the mountain or something, I'm like, oh, yeah, that sounds awesome.
Speaker 1: Basketball not so much jammed way too many fingers playing basketball.
Speaker 1: But so my big takeaway, I'm gonna do something completely new,
Speaker 1: which we've never done with an interview before. But I
Speaker 1: want to say something like literally entirely new. This is
Speaker 1: something we didn't get to but in her book as well,
Speaker 1: I just want to be able to present more information
Speaker 1: because Katie has so many great ideas, but she talks
Speaker 1: about how these different strategies, these different tactics they're not
Speaker 1: something that you can awesent times just do once and
Speaker 1: then completely forget about it and have your problem solved.
Speaker 1: And oftentimes some of these strategies that they may not
Speaker 1: work as well as they used to maybe when you
Speaker 1: first started. And so she had talked about when you
Speaker 1: do see some growth stalling out, just considered new ways
Speaker 1: to reach your goals, because a chore for one person,
Speaker 1: like running five miles, that might be fun for somebody
Speaker 1: else like me. And so I know that that really
Speaker 1: stuck with me as well, because she was encouraging folks
Speaker 1: to think about these different problems we're faced with more
Speaker 1: as a disease rather than a rash. So, for instance,
Speaker 1: like doctors wouldn't give insulin to a diabetic for a
Speaker 1: one month and then be like, all right, you're set
Speaker 1: you now, that's not how it works. It's something ongoing
Speaker 1: that you have to revisit. Uh. And so in the
Speaker 1: same way that is how you would treat a rash,
Speaker 1: you know, something that is more temporary. But oftentimes with
Speaker 1: some of these larger goals, especially the financial goals that
Speaker 1: we have in our lives, think about it like a disease.
Speaker 1: It's this thing that is going to be with you
Speaker 1: for a really long time, and it is up to you,
Speaker 1: like you said, Jill, to know yourself and to adapt
Speaker 1: and figure out how it is that you're going to
Speaker 1: accomplish that goal because oftentimes there isn't somebody outside of you.
Speaker 1: There isn't that external pressure who is encouraging you to
Speaker 1: reach that goal. Oftentimes, like I mean, this is what
Speaker 1: you should try to thank that happen, because that's a
Speaker 1: helpful way. It is helpful, but oftentimes, like these are
Speaker 1: internal things that we have to figure out ourselves, and
Speaker 1: so I just found that really helpful. The disease of
Speaker 1: money management will be with you forever, but we want
Speaker 1: you to be able to implement some of the things
Speaker 1: that Katie talked about on this episode, so you can
Speaker 1: stick to the goals that you have just created. Like
Speaker 1: now is a brilliant time. It's the the fresh start
Speaker 1: effect that Katie talked about. Now is the best time.
Speaker 1: And one of the things that I've heard Katie say
Speaker 1: before too, she didn't say today, but like like so
Speaker 1: many New Year's resolutions fail, but there's a huge percentage
Speaker 1: something stick to it. We should take the positive side
Speaker 1: of that and say, you know, what, There's no better
Speaker 1: time of year that more people make lasting change than
Speaker 1: right now, and so hopefully you can incorporate some of
Speaker 1: the things Katie talked about and make some lasting change
Speaker 1: moving forward when it comes to your personal finances, because
Speaker 1: focus on the brighter side of things for sure. Well,
Speaker 1: let's mention the beer that we had speaking of the
Speaker 1: brighter side of things that we enjoyed on this episode.
Speaker 1: This one was called half of Vised Guy by Mutation Brewing.
Speaker 1: It's a helf of vising and yeah, Matt, what we
Speaker 1: your thoughts on this beer? It was great? Yeah, this
Speaker 1: was another delightful beer by the guys by Jack and
Speaker 1: friends over there at Mutation. But yeah, light, pillowy wheat beer.
Speaker 1: It had a little bit of sweetness. I feel like,
Speaker 1: maybe maybe for a half of Eisen, it was a
Speaker 1: touch sweeter than some of the ones out there, Like
Speaker 1: we've had some that are quite dry. But this is
Speaker 1: the kind of beer I would drink with a pizza
Speaker 1: in particular, one that's got maybe some some spicier sausage
Speaker 1: on it. And if you're looking for something to cool
Speaker 1: you down, Yeah, this is if you're normally in the
Speaker 1: pilsner crowd, like if you're like Budwise or bud Light,
Speaker 1: that's what I drank occasionally blue Moon. This is like
Speaker 1: the better version of Blue Moon kind of thing, right, Like,
Speaker 1: if you want, if if you want to helf of
Speaker 1: vising moving too that craft beer realm and you haven't
Speaker 1: really gotten there, find a good helf of Vising from
Speaker 1: a local brewery. That's a good thing to to start
Speaker 1: off with. I still remember one of my first craft
Speaker 1: beers was win were Brothers in Portland oregan helf of Easing.
Speaker 1: They make one of the better ones out there. This
Speaker 1: one wasn't shocked top No, it was not. This one
Speaker 1: rivaled it though, I think I really like this beer.
Speaker 1: Even though helf of Visins or not my go to style,
Speaker 1: this was a good version of it. So exactly, that's
Speaker 1: gonna do it for this episode. For show notes links
Speaker 1: to some of the resources that we mentioned that Katie
Speaker 1: mentioned on this episode, you can find those up on
Speaker 1: our website at how to money dot com. Right man,
Speaker 1: So that's going to be it until next time. Best
Speaker 1: Friends Out, Best Friends Out,