Deliberate Practice and Personal Finance

Over at the New York Times Freakonomics blog, Stephen Dubner wrote about the use of deliberate practice in driving oneself to become very good at a particular skill. The three tenets of deliberate practice are:

1. Focus on technique as opposed to outcome.
2. Set specific goals.
3. Get good, prompt feedback, and use it.

Here’s a great way to think of it. Many people, when they want to learn how to play a guitar, pick it up and try to bang out some awful rendition of Stairway to Heaven. They’ll practice at that song some, trying it over and over again, and they might eventually figure out how to make it passable, but playing anything else is going to be rather difficult and the person (unless they have obscene natural talent) will never get good enough to play in front of others and earn a positive reaction.

On the other hand, if you sit down for an hour and just work on a single chord, then spend another hour just working on one other cord, then spend two or three hours alternating between the two, you’ll begin to master the basics of how to actually play a lot of things. Add a third chord to that and you can play most of Tom Petty’s songbook. Add a couple more and you can play virtually every well-known pop and rock song of the last sixty years.

The difference between the two approaches is that the latter one focuses solely on technique and has specific technique-oriented goals associated with it. This technique won’t directly teach you how to play Stairway to Heaven, but it will teach you how to intimately know a particular chord and how to switch back and forth with other ones almost intimately, and that skill can be used to play Stairway to Heaven and any other song you might think of.

So how does this idea apply to personal finance? Learning how to control your spending and managing your money can also benefit from deliberate practice. Here’s how.

1. Focus on technique as opposed to outcome.
Many people pick up frugal techniques by thinking “Doing this will save me money,” but in the end it’s easy to fall back on your old and more expensive routines. Instead, the better approach is to approach specific techniques as an effort to learn a new habit, not because it has a nice outcome.

Here’s an example. Let’s say you normally have a nice big breakfast, but you read online that a big bowl of oatmeal is a great way to save money and get more healthy. You think, “Hey, that’s a great idea! I’ll eat oatmeal to improve my health and my wallet!” so you try a very simple bowl of oatmeal – and you muddle through it. You try it again for a few days, but you just loathe it, so eventually you give up and go back to eating your normal expensive and unhealthy breakfast.

On the other hand, let’s say you read about oatmeal and thought, “Hmm… I’m not a big oatmeal fan, but maybe I can make a bowl of oatmeal that I do like.” You whip up your bowl of oatmeal one morning, put some bananas in it and a bit of honey, and think, “This isn’t bad… but it could be better.” The next morning, you use less bananas and more honey and a bit of cinnamon and it’s better. The next day you remove the bananas entirely and use some honey and a lot of cinnamon – and you really like it. The day after that, you sprinkle in a bit of brown sugar and nutmeg, too, and it’s sublime. You practiced the technique of making oatmeal without worrying about the outcome (saving money or calories) and the result is a breakfast you really like. This breakfast, because it’s easy and you like it, naturally becomes a part of your routine and, as a result, you automatically enjoy the outcome – a cheaper breakfast and some saved cash.

Whenever you read about a new investing technique or frugality tip to try, don’t just blindly jump on board because it saves money. See if it fits with your life – practice the technique itself a bit and see whether it meshes with you. Try some variations. Find what really works with you. When that happens, you’ll have a new technique in your belt and the happy outcome will just follow naturally.

2. Set specific goals.
I write about goal-setting all the time on here, but they really work. Setting very specific goals, especially those in the short term that also add up to being pieces of larger goals, can be incredibly powerful for bringing about positive change in your life.

Here’s an example. Let’s say you’ve decided to make that breakfast switch. A nice small goal that would work well with practicing the technique would be “for the next ten days, I’ll eat oatmeal for breakfast with different things in it to see which one I like the best.” So, for ten days, you try different experiments with your breakfast oatmeal to find out what really clicks with you.

Your reward for reaching that goal is a recipe for a good breakfast – one that really tingles your taste buds. For me, for example, the best oatmeal is apple cinnamon, which was a surprise since I like bananas so much. I don’t like them in oatmeal. I don’t like sugar or honey in oatmeal, either, another thing which surprised me. I would have never discovered this without setting an oatmeal-eating goal, and because I set that goal, I found a breakfast I really like – and that makes it easy to keep up the habit.

3. Get good, prompt feedback, and use it.
Listen to what you learn, in other words. If you try oatmeal and you hate it, don’t make it that way again – try something different. If you’re made sick by the tremors in the stock market, don’t invest more – put your money somewhere more stable, like in a high-yield investment account. If you are trying to save energy and try out a CFL and find that it’s annoying you, try putting that CFL in a different socket where you won’t be annoyed (I think CFLs are great for closet lights and garage lights, for example, but they’re annoying for reading).

If you try something and get good feedback from it, keep doing it. If you try something and get negative feedback from it, try a different technique. If you like the oatmeal, try it again – if you don’t like it or know of an easy way to improve on it, move on and try that.

One important thing to remember, though: don’t mis-interpret the feedback. No one is happy when the stock market goes down. For some people, they shrug their shoulders, go “Eh, I’ll catch up in the long run,” and move on with life – it’s negative feedback, but it doesn’t outweigh the positives for them of the investment. Others are kept up all night by even a 5% burp. The latter is clearly negative feedback and a sign that you shouldn’t be investing in stocks whether in a bull or a bear market – that person should keep their money in cash or bonds where it will grow steadily and safely.

Are you ready to start practicing?

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16 thoughts on “Deliberate Practice and Personal Finance

  1. I pretty much agree w/ alot of this. the only exception being that sometimes i feel like “jumping in” and getting started could be beneficial for those who never start and/or have a.d.d. like myself ;)

    And i’m totally w/ you on the stock market situation these days. Although i get bored and check the market daily, it’s always key to keep that long-term goal in mind and set that freak-out-meter to extra low!

  2. It’s really all about practice, but there is another article out there I’ve referenced that covers this all in much more depth.

    I think the bit about technique is key and is usually the easiest thing to overlook.

  3. I love this post! It’s almost counter-intuitive how you kind of have to let go of the outcome and just focus on the technique. It’s like meditation: if you sit down and think hard about how it’s supposed to be making you more relaxed, you can’t relax. But if you just focus on your breathing and let go of the end result, you wind up more relaxed. Go figure. I didn’t really see the connection right away with personal finance but I’m slowly trying to incorporate a more mindful approach to how I go about that as well. Thanks for the great perspective!

  4. Toaduni44 says:

    Your Tom Petty comment got a laugh out of me…

    I just wanted to say that I really enjoy your blog. You convey your ideas effectively and do it without being arrogant or sounding like a huckster like a lot of financial writers do.

  5. Outstanding, Trent! That’s why (despite the perhaps overly-catchy) name of my blog, I don’t like ‘one trick’ finance ponies … you know the type: How I made a $1 Million in [you fill in the blank: stocks; real-estate; 401k savings; eating other people's trash; whatever] … you have to learn the SKILLS of money, first.

  6. Lurker Carl says:

    Very good! Frugal folks need a wide variety of skills and most become quite talented with their various money saving techniques. People don’t instantly become thrifty overnight, it is a large learning curve to effectively pare down spending and takes time to become efficient and proficient. Practice makes perfect.

  7. Bella says:

    Interesting article!
    Again, with anything, you have to try it again and again with the same TECHNIQUE and different variables to get to the result you want.
    Same thing when you set up a budget: it rarely works the first time!
    Same thing with health or medecine: it’s not an exact science and, it is trial and error, sometimes against the popular beliefs.

  8. Nice post, I totally agree with the benefits of moving your focus away from the outcome and more on the process. It’s easy to get discouraged quickly when you feel like you’re doing something you don’t like in order to get something you want. It’s much better when you can turn that positive action into something that you actually enjoy.

  9. Small Cents says:

    Thanks for this article Trent! I loved it! This is one of the best articles you’ve written in a long time; it reminds me of why I began to read your blog in the first place- really well written content.

  10. KJ says:

    My favorite oatmeal:

    Old-fashioned oats.
    Freezer blueberries (and cranberries too if you’ve got them) plopped into the water just before it boils.
    Cinnamon.
    Unflavored soymilk.
    Raw sugar so the top is crunchy.

    Awesome.

  11. Jack says:

    I don’t think losing sleep over a market drop can only mean that you should stop investing in the market. Why not learn more about the market so that you don’t lose sleep in the first place?

  12. Sir
    It is not the speech that can make you or break you. The ..eh..urs do not make the economy. There is plenty of water if there are hiccups. The veto applied all the times is bad, is noticed and there are who are end of the stick, the ones who do not want the veto all the time. Veto is applied when we see the end of tunnel and there is no silver cloud. The Kennedy blockade of Cuba against Russia in 60s was a classic example. Then if we carry on using the veto all the time, it sounds like the father telling the daughter not to stay on late nights or, “I will lock you out”. It carries on until the daughter marries and father keeps on telling the same to the younger daughter who scoffs this. Blair takes job to boost ‘prestige quotient’
    Tony Blair’s decision to take on yet another high-profile unpaid role – leading an international campaign to cut carbon emissions by 50 per cent before 2050 – has led to speculation that he is either preparing himself for not being chosen as the EU’s first president (he’ll be too busy anyway) or that he is desperately building his “prestige quotient” in an effort to persuade Angela Merkel and other detractors that there is a do-gooding heart beating beneath that money-grubbing exterior.
    This is exactly we see from Mr. Bush. Veto after veto until it is so diluted that those who want to put anything do not hear but, “Here it comes aging, and the speaker with sixth sense knows this and falls flat on his face hence uhs ers tumbling again and again. Here is the test. Listen to the speeches before. Mr. Bush has made so many mistakes in YO BLAIRE issue, going shoulder to shoulder with British and there is no one now. The repeatedly drawing the road maps of the Middle East. The Middle East and others notice the ink is no longer in the pen to draw the map or the ink marred with no sense.
    Did we not see the hole ripped in the Gaza? Palestinians move for some days into Egypt. Whatever the reason, the hole was sealed then Israelis bombed the innocents until there was an outcry in the TVs and the world. All wonder what the maps of peace are for. Does Mr. Bush not hear this? The dollar is at the lowest and gold at 1009. Recession whether we like it shows in form of the lending bank defaulting and FED coming in to help. There you have the ers and ums . You do not need a doctor, you need analysts who can see the truth for false, correct this, and tell Mr. Bush. Enough of your shoving democracy to those who do not want.
    The dollar will be saved later
    I thank you
    Firozali A. Mulla MBA PhD
    P.O.Box 6044
    Dar-Es-Salaam
    Tanzania
    East Africa

  13. rhbee says:

    One thing I’ve learned from a life time of teaching is that practice does indeed make perfect. However, what is made perfect is not always what you intended. This can be good if you are big enough to accept someone taking your lesson and using it for themselves in their own way. Your oatmeal for example. This can also be good if you can keep your perspective wide enough to see that the side effects of practice are also good. Learning to repeat something exactly so that the result is consistent is good. Right hand on, Left hand off is also relevant here. You may be making oatmeal but you are really learning how to cook. Sometimes it takes forever to learn the lessons of this post, I myself hated practice but loved the game when I was in college. It wasn’t until I began coaching that I realized I was teaching people something someone else had made me practice.

  14. rhbee says:

    So Trent I’d love to see what you have to say to comment #12.

  15. yp says:

    Great concept that could be applied to many situations. I’m surprised you didn’t get more comments on it.

  16. kleanchap says:

    Love this article! Very good blend of Deliberate Practice with Personal Finances!

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