Think About How Much Money You'll Save To Pay Off Debt

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There’s no shortage of tips on how to save money and pay down debt: Think about how your savings will benefit your future self, make it automatic, use an app to streamline the process and so on.

But a new study called “Amount and time exert independent influences on intertemporal choice”, published in Nature Human Behaviour — indicates that an easy way to save is to simply focus on how much more money you’ll have on hand, rather than the amount of time it will take to save it.

Researchers from Duke University studied the eye movements of study participants presented with two different monetary rewards: A smaller amount available now, and a larger amount available at a later date (for example, they could choose between $5 today or $10 in a month). They found that participants who chose the larger amount did so quickly, rarely taking into account the amount of time when selecting a reward.

Savers “essentially screen out the noise by ignoring the element of time and focus solely on the factor that’s most important to them — the higher dollar amount,” notes a press release about the study. “And in the most patient people, information about monetary amounts actually entered the decision process much earlier than information about time.”

The study notes:

High-patience individuals showed striking – and potentially counterintuitive – pattern of behaviour. Rather than exhibiting a slow and analytic comparison process that integrated all available information, they tended to employ a heuristic strategy of directly comparing amounts and choosing the larger. In contrast, low-patience individuals showed a more balanced process of examining both amounts and times, as evident in gaze tracking and model parameters. This combination of results – with “good” decisions arising from heuristics, and “bad” decisions arising from a more analytic comparison process – seems counter to rational choice models. However, it echoes previous findings in other choice domains that point to the use of heuristics as a characteristic feature of effective decision making.

The researchers say that this could be used to improve savings methods. Rather than focusing on “how to resist temptation”, as many financial experts recommend, it could be more helpful to emphasise “the dollar amounts people will receive by saving”.

“The way a decision is approached matters,” says study co-author Dianna Amasino, a Duke graduate student in neurobiology, in the press release. “Focusing on the long wait to accumulate savings can feel overwhelming. Focusing on the returns to savings and investments can be motivating.”

When you’re focused on your earnings, you can be more patient and ultimately save more. CreditCards.com notes this isn’t the first study to indicate that “keeping your eye on the prize” can be helpful in overcoming a confusing or overwhelming situation.

“A 2014 study published in Motivation and Emotion, for example, found that people were more likely to meet an exercise goal when they focused their attention on the goal itself rather than the work it would take to get there,” they note.

So, if you have a savings goal, focus on how much you’ll be able to put away each month, and what that will add up to over time. Write the number on a sheet of paper and pin it to your refrigerator, or keep it pencilled into your planner each week.

“If you have a lot of credit card debt, you could use an online calculator to help pinpoint just how much money you’d have left over for other purchases if you paid down your card more aggressively,” suggests CreditCards.com. It could help you save more by focusing on the outcome.


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