Motivation and Personal Finance
If you are having a hard time finding that push to get your finances in order, maybe you have not found the right recipe for motivation. Since self-discipline has a lot to do with how motivated you are to work towards your goals, it’s important to give time to understand what really motivates you. If motivation theories sound alien to you, here are some examples how you can apply them immediately to your finances.
Extrinsic and Intrinsic Motivation
In psychology, extrinsic motivation occurs when a person performs an activity to get a reward or to avoid punishment. For example, paying your debt to avoid stressful collection calls or paying bills on time to improve your credit score. On the other hand, intrinsic motivation is performing an activity because it is personally rewarding because you find it enjoyable, interesting, or challenging, as in playing a game or a sport. In most cases, intrinsic motivation is better but it is not always applicable in certain circumstances.
Extrinsic motivation may be used to stimulate interest to an uninteresting activity. If you dread going to the bank because of the long queue and waiting time, pack your favorite book next time you go or save an episode of your favorite show in your smart phone. If you feel that punishment will work for you better, resolve to pay a “fine” to your emergency fund or retirement fund every time you incur a late payment charge when you forget to pay your bills on time.
If you find that no amount of extrinsic motivation works for you, you might be the type of person who responds best to intrinsic motivation. If you are building up an emergency fund or a retirement fund, post a colorful height chart and put your target amount on top. Then stick a marker every month how much you have saved toward your target so you can monitor your target at a glance. If you are saving up for your child’s college fund, stick a picture of your child in your wallet to remind you of your goal before you spend. Turn shopping into a game – hide your cards in a separate bag pocket so it won’t be easily accessible to you, then challenge yourself not to use it for a week or two.
Extrinsic motivation may work for you in the short run, but work towards moving to intrinsic motivation once you’ve met your short term goals. Set personal and financial goals and turn it into a vision board. Write key words of your goal and stick it to your credit card so you can think twice about spending.
If you are buried in debt and you find that your only goal is to pay it off, try approaching it the other way around. Consult a financial counselor to help you formulate a plan to pay off your debt, then set an amount each month for this purpose. Automate your payments by bank deductions then forget about it. Set your goals high – like saving for a dream vacation after you have paid off your debt, and use this as an inspiration. Do not focus your thoughts on the problem. Instead, focus your thoughts on your skills and what you really want. Explore your hobbies and skills and how you can make additional income from it, doing what you really love.
The power of writing
In a study conducted in 1979 on the Harvard MBA program, only 3% of the class had written their goals. 18% of the students had goals but were not written down, and the remaining 84% had no goals at all. After ten years, the students were interviewed again and the 3% who had written goals earned far more than the rest of the class!
After you have set positive goals, write it down. Writing clarifies your thoughts and helps you focus on what you want, instead of having only a vague idea of where you want to go. Alternatively, if you are not a writing person you can use pictures and stick them in a vision board where you can see it every day. Make your goal measurable, then set benchmarks for each month or year. If you can see that you are meeting your benchmarks on time, this will motivate you even more to work towards your financial goals.