I started writing this post and very quickly ended up going down many (necessary) side alleys. Self-control, procrastination and instant gratification are not easy subject matter. So I’ve divided them into three separate posts. This is the first one, focusing on how to improve self-control.

1. Self-control
2. Don’t blame others
3. Less of an excuse if you have the means
4. How to improve self-control

Self-control is the ability to manage your impulses, emotions and behaviours to achieve long-term goals. It’s what separates humans from the rest of the animal kingdom. Self-control sits in the prefrontal cortex, which is the part of our brain that deals with problem-solving, planning and decision-making.

How many of us set grand plans for ourselves at the start of the week which just don’t materialise? Even though the plans were realistic? We periodically fall short of the expectations we place on ourselves because we have limited willpower and are thus unable to exercise self-control to the same degree in all areas of our life. Just think of all those New Year’s Resolutions you didn’t stick to. Fear not: you can learn how to improve self-control.

Even more concerning is that you would expect that once a member realises that they’re not going as often as to warrant the monthly fee, that they would then either start going more or drop to the pay-per-visit contract. But that did not happen.

The interpretation of this behaviour speaks directly to self-control problems. I want to go to the gym. I sign up expecting to go frequently (naiveté and overconfidence). But then today, I don’t feel like going. This creates a form of tension between what we plan to do and our actions later.

An important thing to consider here is how we make our credit decisions. Clothing retailers make high profit margins off what is referred to as ‘teaser-rate’ offers. As an example, you’re offered a store card which doesn’t charge you interest for 6 months. I’d be surprised to hear if you even asked what the interest rate is after those 6 months? We generally don’t ask that question because we’re focused on the fact that we can buy now and its interest free. And we expect to pay the debt back within the 6 months. The reality though, is quite the opposite.

It’s easy to blame a multitude of things for mindless spending or inadequate savings – economics, politicians, banks, globalisation, capitalists, financial advisors, bad luck… But the only person who is truly responsible is the one whose name is associated with that subscription. Or that investment. If we want to adult when investing, then we need to learn how to take personal responsibility.

Don’t fall under any illusions: the only person who can look after our own selves is ourselves. Financial education on its own doesn’t solve this problem. Learn how to improve self-control!

(Of course – some events our outside of our control. But learn to manage the ones that are within your control before making excuses.)

Now is where I really start coming down hard on those of you that know you have the means to be doing better. Let’s consider the following dynamic:

What would you say if someone offered to double your monthly salary – forever – if you agreed to abstain from your favourite treat for a month? No alcohol? No coffee? I’ll leave the other examples to your imagination…

Would you take the deal?

It sounds like a no-brainer, doesn’t it? But these are the exact types of deals that we are unable to make a success of because of our lack of self-control. This has been found in some innovative research regarding financial access and poverty action. A study on micro-entrepreneurs noted the following:

“Consider the case of a vegetable vendor in Chennai: Nearly every morning, she takes out loans to buy vegetables from a wholesaler, and in the afternoon she pays the loan off with her daily sales. She does this every day, paying an interest rate of 10% per day. Fruit vendors, flower vendors, and other vendors of perishable products take out similar high interest, short-term loans to finance their working capital.”

The study shows that if these vendors saved 1% of the working capital they were borrowing (equivalent to the cost of two cups of tea), they would be debt free and doubling their profits in 28 days! Knowing how to improve self-control and the power of compound interest! Borrowing at 10% a day is foolish if you don’t have to. It guarantees a perpetual cycle of poverty.

You’re not off the hook yet: replace donut with “Playstation” or “luxury spa weekend”. The lack of self-control isn’t any more prevalent among the poor than it is amongst the rich. It’s often just less obvious when you’re rich(er). Not anymore though… take inspiration from the following extract which illustrates that this kind of discipline also has a positive impact on your mental health:

We need to build good implementation intentions. Continually remind yourself that successful habits can change behavior over time and help you reach your long-term goals. That’s how to improve self-control. Step up!

We need to acknowledge that we struggle with self-control. I’m not against setting high goals for oneself but we do need to be realistic when those goals and decisions are related to any monetary payment. We can’t begrudge marketers for doing a good job of using our biases to their advantage, but there is a way to ensure the company AND the consumer wins.

There have been some innovative programs that succeed in doing this. Think of programs where you are paid a refund at the start of the 2nd month based on your performance/attendance/behaviour in the preceding month. And including incentives to better that in the months thereafter. Those self-control exercises are a win-win!

• Heuristics and biases in decision making – This was the first post in the series which shares some behavioural economics research. Specifically, the heuristics and biases that influence our relationship with money. It uses System 1 and System 2 thinking examples from Daniel Kahneman’s New York Times best selling book, Thinking Fast and Slow, to help us be more conscious of the workings of our brain. 

• Mirror, mirror, on the wall, stop telling me I’m wonderful – This post focuses on the impact of overconfidence bias in decision making. It introduces the illusion of knowledge bias and the illusion of control bias to illustrate the difference between confidence and carelessness. It also discusses the better than average effect, the self-serving bias and fundamental attribution error. You’ll learn how to confront some unpalatable truths and get out of any false sense of comfort (if you’re up for the challenge?).

• Why you can’t argue with a vegan – Ballsy title, we know. But if you read the post you’ll (hopefully) understand why. We’ll be discussing confirmation bias. It’s one of those psychological biases that you can see everywhere. We’ll also touch on cognitive dissonance theory. We all struggle with these biases. They’re both humorous and serious. But because of that, it’s useful to know how to avoid confirmation bias when you need to.

• Size does matter… when it comes to framing – This post uses framing effect examples to show how framing bias influences the way we interpret information and make decisions. We discuss glossing, the compromise effect, and how the size of the frame can influence the volatility of your investment portfolio.

• Loss aversion vs risk aversion – Once you understand framing, you’re ready for this post. It introduces an incredibly powerful bias known as loss aversion. It also touches on prospect theory, the disposition effect and impression management.

• Anchors pulling you down? – Anchoring bias is a straightforward behavioural bias that causes us to focus on a certain initial value and then make decisions with reference to it. This post looks at some examples of this anchoring effect.

• The danger of the default – Default options nudge us to make better decisions. The option of opting out also respects freedom of choice. This post unpacks this notion of libertarian paternalism and the perils of status quo bias.

• Regret, it’s not a nice feeling – Regret influences the decisions we make and pushes us to conform to social norms. Examples of regret avoidance show us how this makes complete sense yet no sense at all.

• When the past influences the future – The Concorde effect is a famous example of sunk cost investment. Too often we invest time, money and energy into something we should’ve just abandoned. This post looks at some examples of how sunk cost fallacy affects our human decision processes.

• What’s mine is more valuable – In this post, you’ll learn why you place extra value on things you own. The endowment effect has implications for our investment portfolio, bonuses and consumer behaviour.

• Procrastination is the enemy of success – We know procrastination is the enemy of success. But while it looks like laziness, it’s often just mental exhaustion at play. Learn how to overcome procrastination.

• The problem with wanting it now – When you delay instant gratification, you will experience long-term satisfaction. It’s the hyperbolic vs exponential discounting debate. Don’t let present bias win!

• The power of first impressions – The order of information influences your decisions. First impressions matter! It’s all got to do with primacy and recency effects.

• We prefer wrong information to no information – Availability bias and survivorship bias influence our decision-making. We make decisions based on the information available to us.

• Learn to deal with uncertainty – Risk and uncertainty will always surround us. Gambler’s Fallacy, the hot-hand effect, the law of small numbers & ambiguity aversion are just some of the biases that arise because of it.

• Stop stereotyping – Representativeness heuristic refers to the fact that we stereotype. It’s a mental shortcut. But beware of making unfounded comparisons.

• Mental Accounting – Money is money! Or is it? Mental accounting says we place different values on different money which leads to irrational decision making.

• Money Illusion– Money illusion is a sneaky bias. It causes us to focus on the amount of money in our hands, rather than it’s purchasing power.

• Home bias – We invest close to home and in what we know. But this lack of diversification results in missed opportunities. Say hello to ‘home bias’.

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