2010 has seen a ton of books released already that I’d love to read, from The Politician by Andrew Young to The Immortal Life of Henrietta Lacks by Rebecca Skloot. (I happen to be passionate about books, of course – perhaps your passion is films or video games or gadgets or music or something else entirely.)

Five years ago, I would have rushed to the bookstore and picked up these titles in hardback. I would have been completely impatient to read them, so I would have just thrown down the $20 or so, picked up the hardback, and headed home with it. About twenty percent of the time, I would have read the book once, stuck it back on a shelf somewhere, and ignored it as it gathered dust. The other eighty percent of the time, I wouldn’t even have read it before it started gathering dust on the shelf.

Why did I do this? There were several factors – I didn’t have the time I wanted to have to read, for one – but the biggest one was what I like to call the “cult of the new.”

Simply put, the “cult of the new” is the willingness to pay a premium price for whatever the newest releases are. When something new comes out, you’re inordinately focused on it because it’s new. It pops up again and again.

If a new restaurant opens, you have to visit it even if the reviews are mediocre.
If a new book or album comes out, you have to pick it up.
If a new car is released, you can’t help but swing by the dealership to scope it out.

It’s a very expensive routine. You constantly overpay for things in terms of their actual quality – instead, you pay a premium for the “new.” You pay new release prices for DVDs and for film tickets. You pay hardcover prices for books. And, in the end, you get far less for your dollar – or you dig yourself into a financial hole.

Some people do it with some level of social justification – they need to keep up with (or keep ahead of) their friends. To them, I say that if your friends value you only because of what’s on your shelves or where you ate last night, there’s not much depth to the friendship.

Others do it to feel good about themselves, so that they feel current. This is perhaps even more dangerous, because you’re tying your self-esteem and happiness to material things and short-term experiences. Without a constant influx of these things, you begin to feel bad about yourself. True self-worth comes from within, not from external things, and it took me a very long (and painful) time to learn that lesson.

It took me years to break out of the “cult of the new.” Here are some of the things that really helped me.

I adopted a firm rule about buying such new things – I don’t. Excepting gifts for others, I simply don’t buy new releases, period. I don’t pick up books for myself until they’re in paperback. If I do happen to read a hardback I like enough to keep around for multiple readings, I still wait until the paperback comes out.

If I truly must read something that’s brand new, I visit the library. I’m a very heavy user of our local library’s book reservation system. Yes, sometimes I don’t get hot new releases in the first month they’re out. However, I do get them eventually and, quite often, I get them faster than I expect (because other readers check them out for much shorter periods than expected). You can do the same thing with movies – sign up early to rent a new release from Netflix, for example.

I also swap frequently with my friends. If I do receive a book as a gift that I think a friend will like, I loan it out. Similarly, they’ll loan their new releases to me. This way, a new release given to me as a gift is often like two or three of them, since I have friends with which I share interests and can trust in terms of swapping books. One’s social network, if filled with compatible, good people, can be a very valuable resource.

I learned to love exploring the archives. If I find an author I like, for example, it’s much cheaper to dig through his or her older books than it is to charge out and buy the new releases. Take Richard Russo, an author I discoverd a few years ago (and subsequently hooked my mother on). Rather than rushing out and buying myself his newest work in hardback, I used PaperBackSwap to read a multitude of his older novels. The cost for these older books was trivial, but I was still able to deeply and fully enjoy his writing without paying that “new” premium. I explored Douglas Coupland in a very similar fashion.

When I finish a book (or a game, or a movie…), I first turn to my own shelves. I don’t insist on finding the thing I want to read/play/listen to already on my shelf, but quite often I find it anyway. I’ll spy a book that just speaks out to me, saying “read me…” in its own special way. So I pick it up and I suddenly have free entertaiment that I’m deeply enjoying.

Some set of these techniques work no matter which form of the new you’re chasing, whether it’s restaurants or trading cards. Whatever it is, if you can seek out other avenues for your passion than the shiny new thing, you’ll almost always receive a big thank you from your wallet.

When I was a child, I went to the store with enough birthday money in my pocket to buy a new game for my Nintendo. After carefully thinking about the options before me, I whittled my choice down to two video game titles: Rampage and Castlevania II: Simon’s Quest. After hemming and hawing until my mother was getting quite frustrated, I finally settled on Rampage.

I took the game home, played it for an hour, and hated it. I mean, hated it. For some reason, the designers of the game made the choice to give all players infinite lives, which essentially meant that you could never lose. There was no real point to the game.

Even though it was obvious I had picked up a very disappointing game, I tried to make myself believe that it was a good choice. I would make regular attempts to play it. I would coerce my friends into playing it until they begged to play anything else. I even went so far as to play the other game I considered (Castlevania II) at my cousin’s house and tell myself that the game was awful, even though I actually liked that one quite a bit.

Although this is a very extreme example, we all do some form of this at various points in our lives. We buy something. It’s not up to the standards we expected at all. Yet, we want to believe that we didn’t waste our resources, so we try to rationalize the purchase.

I have three observations about post-purchase rationalization from my own life.

It happens much more often with impulse buys than with carefully-planned purchases. Let’s roll back to that video game analogy, above. My game purchase was pretty impulsive. I didn’t have access to a wide range of reviews of the two games. In fact, I mostly made the purchase on the spur of the moment. My choice resulted from remembering a fun afternoon at an arcade with my cousin in which we played several games of Rampage together. Today, I make most of my purchases in a vastly different way. I usually research the choices into oblivion. I read reviews. I ask myself if I really need this item and, if I do, whether or not this particular item gives me adequate bang for my buck. That doesn’t mean I’m immune to impulse buys. They strike me still with some regularity, most often in a bookstore or in a grocery store. Sometimes I’ll be happy with my choice; at other times, I’ll read the book or consume the item and feel pretty disappointed.

I often try to forget about those poor purchases. Rather than thinking about them, I usually try to sweep them under the rug. I’ll toss out the remainder of an awful food item just to get it out of my eye. I’ll quickly trade away a disappointing book. My method for “rationalization” of those purchases often comes in the form of simply getting them out of my sight – and thus, often, out of my mind.

When I can’t get rid of the purchase, I usually try to “break” it. I don’t mean that I attempt to smash the item or anything. Instead, I try to use it heavily to force the item to either prove itself or to fail in some distinctive way so that I have a reason to replace it. Think kitchen items, for example; if I buy a knife that doesn’t “click,” I’ll try using it all the time until I discover a true use for it or I discover so many flaws that it’s replace-worthy. In its own way, this is a justification mechanism, as I’m forcing myself to either justify the purchase or justify a replacement for it.

These three observations lead straight to a few solutions to keep post-purchase rationalization from ever becoming an issue.

First, simply curb those impulse buys. Instead, write down the item and research it a bit. If you still want it and can still afford it, buy it later on. Walk away from it, though, if you don’t know anything about it other than what’s on the shiny packaging.

Second, if an item doesn’t work for you, admit it. Don’t try to beat yourself up over it, or stubbornly use it while making a mess of everything else (which can often happen with a kitchen implement, for example). If you made a mistake, admit that you made a mistake. Then, ask yourself how to deal with that mistake.

Finally, once you recognize the mistake, focus on a good solution for it. Can you trade away the item for something you actually will use? Does the item still have resale value? Turn that mistake into something more positive by quickly turning it into some form of a gain in your life. For example, if I read a book I don’t like, I almost always trade it away quickly on PaperBackSwap and then get a book that I will enjoy. This way, I at least wind up getting some value for the money I spent.

Don’t rationalize your mistakes. Instead, face them and look for ways to improve on your choices. A mistake is an opportunity to improve yourself.

Every other Sunday, The Simple Dollar reviews a book of interest.

Over the last few years, I’ve come to believe that the biggest key to personal finance success is controlling your own psychology and impulses.

Our entire lives are filled with quick decisions we must constantly make – and, for the most part, we’re good at it. We commute to work without getting in an accident. We make constant little decisions at work – and at home, too. We’re able to effectively take several pieces of information, combine them together, and make a pretty good choice based on the result – and we do it over and over again.

Unfortunately, that same ability often doesn’t serve us well at all when it comes to personal finance. The ultra-quick decision making process that leads us to making great little choices in everyday life often leads us to making disastrous financial decisions. Very rarely do snap decisions work out well in the financial world.

This concept is the central focus of Snap Judgment by David Adler. He makes a two-fold argument. First, such snap decisions fail us financially and, if we’re able to get control over them, we’re much more likely to find financial success. Second, understanding how people make such snap decisions can help us to predict and prepare for the choices that other people will make, pushing us to further success.

Sound interesting? Let’s dig in.

I: The Psychology of Financial Decisions
The basic rule of thumb for success in any financial arena is “buy low and sell high.” It rings true in everything from stock investing to grocery shopping. The problem is that most of our normal financial cues tell us to do virtually anything but that. For example, we often believe there must be value to be found if everyone else is buying something, but quite often that means that it’s the opposite of a bargain – the price is overinflated.

Similarly, we are often wired to overlook what we view to be small amounts of risk – if we didn’t, we’d never leave our house in the morning. However, when we apply the same philosophy to investing, we overlook those seemingly small risks and chase what looks like the biggest returns – and then we get bitten by those risks. That’s why so many people got caught losing big chunks of their retirement in 2008?

II: The Track, the Stock Market, and Other Types of Gambling
Our brains are wired to see patterns in our lives, from traffic to grocery shopping to financial markets. Most of the time, when we act based on how we think things will go based on those patterns, we guess right.

The problem is that the stock market and most forms of gambling present false patterns to us, ones that have nothing to do with what happens next. People stare at charts and sit at slot machines because our minds are convinced there’s a pattern in the chaos and that a big winner is about to emerge. Quite often, though, it’s not coming down the pipe.

III: Personal Decisions, Personal Safety, Personal Finance, and Health Choices
Another method in which people falsely assess risk is in our own health and mortality. Many, many people don’t have life insurance because they simply see the risk of their own death as being too minute to really concern themselves with, whether in a conscious or subconscious way. For the same reason, many people don’t bother with annual checkups at the doctor.

In each case, the concern isn’t the chance of the risk, but the severity of the event when risk comes to call. We assess the chances themselves quite well, but we’re poor at assessing the consequences of the bad event actually occuring and whether or not a small cost now is worth covering that big bill later on.

The latter three sections of the book are much shorter and focus on very narrow issues, mostly ones that have really popped up as a result of the 2008 financial crisis.

IV: CEO Behavior
CEOs rise to the top of the corporate ladder by taking risks and having those risks pay off. That’s how a future CEO stands out from the pack – they stick their neck out and succeed. When they get to the top, they often have huge confidence in their abilities, whether it’s warranted (Jack Welch) or not (Bob Nardelli). Often, one sign that a company is either going to succeed wildly or utterly fail is in the behavior of the CEO: are they full of their own hubris? Do they hold onto stock options too long? Good signs include a laserlike focus on their company. Bad signs include self-promotion, like writing books and going on book tours.

V: Psychology and the Credit Crisis
Investment bubbles happen for the reasons outlined above: people see others rushing in and making good money and decide to rush in themselves. Inevitably, though, any market eventually runs out of buyers, at which point the bubble pops and people lose big. The opposite is also true – think of someone shouting “fire” in a theater or a bank run. Quite often, that kind of trampling panic can cause far more damage than is warranted in the situation.

VI: Debiasing
How can you avoid all of this stuff? First of all, slow down. Very few financial decisions have to be made in a “snap” context. Second, communicate. Talk it over with others. Have a “money buddy” or even a group of people to talk decisions through with. Third, cover your risks. Don’t invest in stocks unless you can afford the losses and have insurance unless you’ll be fine without it.

Is Snap Judgment Worth Reading?
Snap Judgment is a thorough and interesting review of how psychology affects investment and financial choices. It’s written approachably and thoughtfully and does a good job of covering the 2008 crisis in the latter sections of the book.

The only real drawback with the book is that the topic area has been covered by a lot of other books, many of which are very, very similar.

If you’ve read a book on financial psychology, Snap Judgment probably isn’t a necessary read, but if you’ve never read one, you ought to, and Snap Judgment is a pretty fine place to start.

Christmas has always been a challenging time of the year for me.

During various years, within a week or two on either side of Christmas, my grandfather (who I cherished) died of cancer, a great uncle that I was very close to also died of cancer, and one of my cousins who was exactly the same age as me committed suicide.

The Christmas season is thus bittersweet for me. There are so many positive feelings and memories I have about this season, but the memories of the final days of loved ones and of funerals and of people I dearly miss also fill the season. There are a few Christmas carols that, when I first hear them during the Christmas season, whack me in the stomach like a two by four.

Because of all of this, I often get really obsessive about trying to ensure that the Christmas season is really great for all of those around me – my parents, my children, my wife. The emotional mix of the Christmas season, for me, often results in me making spending choices that I wouldn’t otherwise make. I’ll choose wonderfully frugal gifts for some people, then I’ll spend far too much on a gift for someone else.

By the time Christmas finally rolls around, I almost feel relieved that it’s all over for another year. I also feel a lot of guilt and shame because I feel as though I spent far too much on gifts for others during the season. By February, I’ve resolved to not do it again this year.

Then November rolls around and the first snow of the year, for some reason, always makes me think of my grandfather. Then I’ll hear Hark! The Herald Angels Sing and the same cycle of feelings always returns.

I think many of us share a lot of conflicting feelings about the holiday season. It’s often an emotionally charged time of the year, with relatives coming together and sometimes exposing very raw nerves. It’s often also connected with a lot of memories of childhood and of people long since past. Add on top of that the fact that December contains the shortest amount of daylight of any month of the year (contributing to a bit of the winter blues in everyone) and it can be a very challenging mix.

For all of us, there are lots of emotional triggers in life (mine just happens to be Christmas). Emotions can flood out from an innocent phrase, the thought of a long lost friend, or any number of other things.

The trick is to remember that when your emotions are running rampant, it is very easy to make very poor choices with your money.

Over the last few years, I’ve really come to recognize how challenging the Christmas season can be for me. The biggest step I’ve taken to keep my finances under control this month is to simply do as much Christmas shopping as I can before the month even begins.

In other words, I do everything I can to separate my wallet from what I know will be an emotional surge for me. I minimize the reasons I might possibly have to go shopping for gifts – and for other things – as the Christmas season approaches, lest I wind up with a pile of poor spending choices brought about by a psychological crest.

What things are hidden in your psychology that cause you to make poor choices? Is it certain people? Is it a certain time of the year? Is it a certain thing? Whatever it is, there are many rewards – financial and otherwise – from stepping back, recognizing that you’re affected strongly by this thing, and doing everything you can to keep your money as far away from the situation as you possibly can.

Yes, it will still be a merry Christmas for me. The light in my children’s eyes helps quite a lot, and it’s a light that I’ve come to learn has little to do with presents or things. It has to do with a dad that lets them pile on in the living room.

As I sit in my office and look out the window, I can see a number of people and a few pieces of construction equipment busy at work about a quarter of a mile away. It just happens to perfectly line up that I can see the workers if I turn my head to the left from my natural position at work.

At first, the construction somewhat annoyed me. I can hear the construction noises throughout the day as I’m working and they, at times, can be a mild distraction. The workers are also building something that is going to sit right in my view out of my office window.

What are they building, you ask? A house. A very nice house, in fact.

A few days ago, while I was working on an article, I turned my head and watched the construction work for a bit when I suddenly realized something. The house they were building is not too dis-similar from the house I would love to build someday. It’s fairly isolated with plenty of yard space but also with access to the forest. If I understand the floor plan correctly, it has nice, large bedrooms and a nice kitchen, which are the two features I most like in homes.

Since then, whenever I hear that noise, it actually pushes me a little bit. That noise, instead of being an annoyance, is a reminder of my big goals in life. That noise tells me to keep doing what I’m doing, to push forward to big things.

It has been extremely useful to have such a constant motivator around me. It keeps my nose to the grindstone all day long. Whenever I look out the window, I see the work. Whenever I pause for a minute, the noise from the work comes in loud and clear.

In fact, I’m going to dearly miss them when they go away. I’m considering setting up a series of sound files and some desktop wallpaper on my computer to remind me of them when they leave.

This brings me around to my central point: what’s your motivator?

Personal finance success is often borne out of specific, concrete long term goals. For me right now, my biggest goal is a nice home in the country.

Quite often, personal finance mistakes come about when we lose sight of those goals. We place short term wants and desires ahead of these big goals or we simply don’t even think of them when the moment of decision comes.

It’s in those moments that a reminder can really help. For example, if I’m sitting in my office and I get an email from a reader about some great deal they found, I might be tempted to take advantage of it. But all I have to do is open my ears a little bit and that construction noise comes in. That reminds me of my big long-term goal and makes me rethink my purchase.

What’s your motivation? What can you surround yourself with that will remind you of your goals? If you find a visual or audio reminder, here are some places you can put it:
+ on your refrigerator
+ taped to the bottom of the rear-view mirror in your car
+ as your desktop wallpaper
+ as a regular sound on your computer
+ in your wallet, wrapped around your credit card
+ on your bedside table

The key thing is to push your long-term goals so deeply into your thoughts that it becomes wholly natural to consider them before you make any choices. When you do that, you’ll be on the fast track to success.

Recently, I was reading a great article at The 99 Percent entitled The 40-30-30 Rule: Why Risk Is Worth It. I originally intended to include it in my weekly roundup, but as I thought about the 40-30-30 idea, I found that the connections to careers, personal finance, and life were profound.

What is the 40-30-30 rule? Simply put, it’s an argument that when you prepare for anything in life, only 40% of the preparation is physical – the rest is mental. Thirty percent of preparation is technical skill and experience, and the second thirty percent is the willingness to take risks.

This “rule” comes up again and again in all different areas of life. Here are several examples from my own life where I’ve seen it.

When I’m playing a game I’ve played a lot of times before, I have an intuition as to what move to make next, built from years and years of experience (the 30% that comes from technical skill and experience). However, I also find that it’s very easy to just keep using the same strategy over and over again because I’ve somehow come to the conclusion that it’s the best one. So, if I combine that technical skill and experience with a risky new strategy I’ve devised (the other 30%), I might lose – but I might also devise a way of playing that’s even better.

With investing, I have a good understanding of my own risk tolerance, an understanding built up over a long period of time (the 30% that comes from experience). Howver, I also know that if I don’t push against my risk tolerance a bit and look at new investment opportunities from time to time (the other 30%, risk), I’ll likely miss out on great opportunities.

I also see it in my career, both now and when I worked for a large organization. I would often have a well-worn daily routine that worked and got the things done that I needed to get done (the 30% that comes from experience), but if I really want to excel, I sometimes have to step outside the box a little (the risk-based 30%).

The 40/30/30 rule really does provide a great framework for success, no matter what you do.

Do something worthwhile (the first 40%) means that you’re willing to get up off the couch and do something. Maybe it’s getting ahead in a career. Maybe it’s getting into a new hobby. Maybe it’s simply getting a grip on your investments. 40% of the journey is simply trying.

Keep at it (the next 30%) is simply encouragement to not let a new initiative slide, because the more you work at it, the easier it becomes. Even more important, the more you work at it, the more the basic skills that make up the task begin to become natural to you.

Take risks (the final 30%) simply means to not do things the same way every single time. When you’ve become skilled at something, it’s easy to become wedded to the same routine. Never stop looking at what you do and trying out alternate paths. Not only does this grow your skills (making your basic routine even better), it also helps you to uncover new ways of doing things.

Great… so how do you do this? How can you apply the 40/30/30 rule in your life? The best first step is to figure out the area of your life where you want to improve. Do you want to get out of debt? Do you want to improve your skill at a musical instrument? Do you want to get a promotion at work? Do you want to become a writer?

Once you’ve figured out what you want to do, research it a bit. Figure out what things you’ll need to do to accomplish that goal.

After that, start practicing and building skills. The best way to do that is to start doing the thing you want to master every single day. For me, a thirty day project works well for this. I just commit to doing a certain thing every single day for thirty days (if that’s possible). At the end of it, I’ve usually vastly improved at whatever skill or attribute I was trying to develop.

Quite often, thirty days is enough to establish a positive new routine in your life, so keep it up. Keep doing that thing every day until it becomes truly normal and seemingly effortless.

Then, take a risk. Change what you’re doing a bit. Make it more difficult, or at least different. Explore something new. If you’re taking a walk every day, increase your walking pace a bit and use a stopwatch to slowly trim your time around the block. If you’re trying to break through at work, volunteer for a task that you might have avoided before, like giving a presentation. If you’re playing a game, try a completely different strategy and see how it works. If you’re investing, dig into some new investments that you haven’t looked at before and consider putting some money into them after you’ve studied them.

What you’ll find is that your already-built skill will help carry you through this new challenge and that the rewards of this new risk are great. You end up in better shape, with a better career, with a better gaming experience, and with better investments – or with improvement in anything you’d like to take on in life.

Over the last month, I’ve mentioned a technique I call “the five whys” two or three times. The technique itself is simple: when you see something in your life that’s not working like you want it to, you start asking “why” until you come to something where you can’t say “why” any more. When you find it, you’ve diagnosed the core problem – and, quite often, the solution to that problem is surprisingly simple.

Three Examples
In order to illustrate this, I thought I’d use three real examples from my own life recently, as I’ve been using “the five whys” more and more lately to uncover the roots of some of the problems in my life.

Example 1: Crunching the Numbers
I usually calculate my net worth in a spreadsheet because I like the layout and the reports, but I don’t update it as often as I might like.

Why? It takes quite a lot of time to dig out all of those numbers.

Why? They’re stored in a lot of different databases and on a lot of different websites, which I have to visit individually to extract the numbers.

As a result, I’ve decided to give Quicken a shot again. In the past, I used Microsoft Money for about a year until I found that I didn’t like the reports it generated – I preferred what I had in my own spreadsheet. Quicken may be able to provide better reports (it looks like it will from the reviews I’ve read) and, even if it doesn’t, it’ll make it easier to retrieve the numbers I want to see. (And, yes, I’ll be posting a review of it in the near future.)

Example 2: Broken Exercise Routine
During the final push to complete my book, I abandoned my regular daily exercise routine because I needed absolutely every spare minute. Since I finished it, I’ve been having difficulty getting back into that exercise routine.

Why? Every morning, I feel fairly pressured to write content for The Simple Dollar instead of exercising.

Why? I have (post-book) writer’s block and my usual protection against it (unpublished posts that I have in reserve) isn’t there any more, because I used many of those in the final push to finish the book and the few days afterward when I simply needed to do something besides write.

Why? I’m lacking the “idea juice” I usually have and without it, my entire daily routine is disrupted.

So, my solution is to find ways to reinvigorate my creativity. Over the last few days, I’ve been spending time on brainstorming exercises, simple writing exercises, and so on, as well as just reading a lot – all of that while avoiding the keyboard. It’s really starting to help. Then, as I get back in the flow, I’ll be able to build up a backlog of articles again, enabling me to feel free to exercise in the mornings.

Example 3: Laundry Backup
We often wind up with a large backup of laundry, then find ourselves doing several loads on a single weekend day.

Why? Our laundry routine doesn’t work.

Why? One big problem is that our laundry room is literally as far as possible in our home from our bedrooms, plus the laundry room is back in the corner near the guest bedroom. Out of sight, out of mind. As a result, we often don’t even think about the laundry until the evening, when we’re just about ready for bed. Then, in the morning rush, we walk right by it.

Why? It’s more convenient to just ignore it in the morning and we’re too tired to deal with it in the evening.

A solution presents itself. Fill up a laundry basket in our bedroom in the evening and place it right in front of the door so that we’ll trip over it in the morning if we don’t deal with it. Then, when we go downstairs in the morning, we carry the basket down and we’re pretty much ready to drop in a load of laundry on our way out the door. I’ve started doing this and it actually really works.

Why It Works: The Path of Least Resistance
In the normal routine of our lives, we almost constantly take the path of least resistance when it comes to choosing what to do. What’s the path of least resistance to get from where we are now to where we want to be? We do this over and over and over again.

The only problem is that when we choose this “path of least resistance,” we often aren’t choosing the best path. If only we would choose to take some extra effort right now to remove some of that resistance, we might find a much more effective path to get where we want to go.

For example, the “path of least resistance” for me to figure out my finances was to use a spreadsheet because Microsoft Money didn’t do what I wanted. Of course, as I found out, the spreadsheet itself had significant resistance, so now I’m trying to use Quicken along with my spreadsheet (and maybe not even with my spreadsheet) to reduce that resistance, making the whole thing much more usable.

Another example: the “path of least resistance” for doing laundry was to just let it build up then do a bunch at once. The only problem was that we essentially would devote an entire day to laundry (usually Saturday was laundry day). I can reduce that big resistance by just filling up a basket before bed (a tiny resistance) and then carrying it down in the morning (another tiny resistance).

When you do the “five whys,” you’ll eventually find your way to the resistances in your life that are keeping you from what you want to be doing. When you dig into those resistances and find ways to break them, you make it much easier to go down the path you want to go down.

Why do you spend so much money each month? You might dig down and find that certain places tempt you, so just by avoiding them, you don’t spend as much. You might find that certain friends convince you to spend more, so focus on spending more time with your other friends.

Why aren’t you succeeding at work? You might dig down and find that it’s because you’re afraid to volunteer for projects, so you might overcome that by simply resolving to take the plunge on the next project that comes through. You might find that the politics of your workplace encourage you to avoid stepping up or that the entire company is poisoned, which might indicate it’s time to move on in your career.

You can use “the five whys” in every aspect of your life. If you spend some time thinking through the problems in your life in this way, you’ll almost always dig down from something that seems insurmountable to something that you can fix. That fix might lead to the big change you want or it might not, but no matter what, it’ll almost always change the dynamics of your life for the better.

We all do it. When we know we’re being watched, we’re on our best behavior. We often tend to perform better and we usually tend to make better choices, too. Then, when we think the focus is off of us, we relax and sometimes make different choices.

This effect, in which we act “better” when we believe we’re being observed by others, is called the Hawthorne effect, and it’s surprisingly powerful.

It’s easy to see examples of this almost every day in our lives. If we’re out with people we don’t know well and are trying to impress, we’re going to focus intensely on putting our best foot forward. We’ll dress well, attempt to be good conversationalists, and try hard to put positive character traits on display. On the other hand, when we’re home alone watching television, we’ll often put on old raggy comfortable clothes and curl up on the couch without combing our hair or anything like that.

Let’s carry that forward a bit. Let’s say we’re at a store with a friend and that friend is watching us as we make up our mind about whether or not to make a purchase. Simply by observing, that friend has an effect on whether we buy.

I see it even in my own life. If my financially conservative friend John is watching, I’ll tend to not buy the item and walk away. On the other hand, if one of my other heavy-spending friends is watching, I’ll lean more towards buying the item. The observer doesn’t have to actively participate at all in my purchase – simply by being there, they impact my choice.

In short, I tend to lean towards a “best behavior” in the eyes of whoever is observing me. That “best behavior,” though, changes based on who is doing the observing.

Some of you may scoff at this at first glance, but imagine yourself in situations in your life and how your actions and choices in those situations change depending on who is there and who isn’t.

For me, the intriguing part of the Hawthorne effect is how it can reinforce positive behaviors in your life. Just choose to surround yourself with people who reinforce the behaviors you want to exhibit.

So, for example, if I’m going to go do some comparison shopping for Christmas gifts with a friend, I’m far better off choosing to go with John than with other people. Why? John’s mere presence encourages me to dig for values in the gifts that I buy and not just go for the splashy gift, while others, by their mere presence, will encourage me to just go for the “awesome” gift without strong planning or thought.

If I’m trying to break a habit of drinking socially, I’m better off spending social time with friends that don’t drink. Again, just by their powers of observation, I’m more likely to make the appropriate choice. Of course, the reverse is true – if I enjoy drinking socially, I should choosse friends who also enjoy it.

If I want to go the extra mile at work and look like a winner, I should try to get into group projects with people who are really productive – the “stars” of the company – instead of people who just sit around and complain. On the other hand, if I’m just interested in passing the time at work, I should seek out those who are doing the bare minimum.

What kind of person do you want to be? It’s much easier to find the path to where you want to go if the people around you are on that same path. Just by their presence, you’ll innately want to please them with your actions, so you’ll make choices with them that lead you towards your own personal goals.

The Hawthorne effect really works. More and more, I gravitate towards friends and work associates that are the kind of people that I want to be.