Nine Ways the Status Quo Bias Is Costing You Money – And How to Turn That Ship Around

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Most people are familiar with the status quo bias. In simpler terms, it simply means that people prefer things to stay relatively the same. We talk to the same people, follow the same path to work, go through the same daily routine, and so forth. We enjoy little changes – like reading a different book, going on a different trip in the summer, or watching a different movie – but radical changes? Not so much.

The only problem is that the status quo bias costs us money all the time. Because we prefer to stick with the familiar, we often choose to stick with things that are less cost-effective than the alternative. Here are nine common ways that status quo bias can cost an average person money.

1. Taking the same route to work you’ve always taken. Usually, the route to work you’ve always taken is not the most optimal one, so you’re losing cash every day simply because it’s a “risk” to try to find a better path.

2. Sticking with your old bank. If you’re getting hit with ATM fees, no interest on the checking account, and less than 1% interest on the savings account (as many people are), then your bank is gouging you. Sure, it’s convenient to stay put – you don’t have to spend a half an hour switching to a new bank – but is it worth twenty dollar bills leaking out of your pocket each month?

3. Always going to the same old grocery store. Instead of using a basic price book to actually figure out which store is the cheapest for what they buy, most people just get familiar with one store and do all of their shopping there. Even for me this is difficult – I’m trying to transition to using the much-cheaper Fareway as my primary grocery, but my natural instinct is to continue to shop at the more expensive Hy-Vee.

4. Repeatedly going out for slight variations on the same old “night on the town.” Dinner at an expensive restaurant with friends once a week adds up big time, as does a drink twice a week after work with “the gang.” They’re repeated activities that repeatedly swallow money from your pocket.

5. Stopping at the coffee shop for the daily “pick me up.” This is a routine mixed with a physical addiction to caffeine, bringing not only the status quo bias to the table, but a chemical reliance problem as well.

6. Buying the same version of the same product over and over. When you walk down the grocery aisle and buy the same version of the same item without really thinking about it, the status quo bias is at work.

7. Staying in the same house instead of looking for housing alternatives. It’s much easier to keep paying extra for your current housing than it is to look for a new place to live that might be much cheaper.

8. Keeping the same cable or satellite service. There’s a reason the cable and satellite companies offer amazing introductory deals, but their standard price after a year is really high. They know about the status quo bias.

9. Keeping the same cell phone service. Similar to the cable or satellite service, cell phone companies offer great introductory deals because they know it’s likely you’ll just stick with what you’ve got.

Fighting the Status Quo Bias
The solution to fighting the status quo bias is simple. Each week, try something new. Try a new route to work. Try finding a cheaper coffee place. Look at other options for your cable service. Do something completely different for your after-work recreation. Go to a new grocery store and see if the prices are better.

One little change, every week. Focus on repeating that change a few times without reverting back to your old path. See if it suits you and, if the old path is actually better, go back to it. Then, during the following week, seek another new routine.

Eventually, over a period of time, you’ll find yourself shaving quite a bit of spending out of your life, slowly but surely. Plus, you may have found some new routines that you thoroughly enjoy. Good luck!

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38 thoughts on “Nine Ways the Status Quo Bias Is Costing You Money – And How to Turn That Ship Around

  1. This is definitely true,for personal finance as well as other aspects of life. I find I make the most progress, whether personally or professionally, when I step outside of my comfort zone and try something different. Like you mention, you can always go back!

  2. Right on, Trent!

    Keeping with the same car insurance turned out to cost me a fortune more than it should have. I just kept paying the bill when it came in. I have excellent credit and an immaculate driving history. I live in a low risk area and have a car that is not very desirable for thieves (other than the thieves in the insurance industry that is. I received a 6 month renewal recently and was finally floored by the 6 month rate. Found the same amount of insurance for $250 less…$500 less per year! Made sure that the Best Insurance scores and ratings were top notch for the companies that I was considering and finally broke with my own status quo.

  3. The first time I tried taking an alternate route to work was the one and only motorcycle accident I’ve had.

    Status quo is just fine with me :-)

  4. Car Insurance is a really good example. We are guilty of that. I am good to start searching now.

    Robyn

    Recritique.com
    Restaurant Coupons, Freebies and More.

  5. Even doing small things the same way can cost money- using the same amount of shampoo or toothpaste every morning without figuring out how much less you could really use, using the same amount of laundry detergent as you’ve always used without seeing how clean your laundry can get with less, etc.

    I’m trying to break my husband of this habit- he uses amounts or brands because that’s what his parents always used!

  6. The only problem with #7 is: http://www.thesimpledollar.com/2008/07/22/is-it-ethical-to-walk-out-on-a-mortgage/. Looking for alternatives is great if you can actually take advantage of any of them. Otherwise, it’s just depressing.

    However, a great list in general!

    And to expand on #3 as well- going to the same group of chain grocery stores is just as bad. It can take a leap out of one’s comfort level to meander in to a completely alien store and try to shop. Best to start on a trip when the list is very short so you can find out if the new place has the types of items you’re looking for. (For a good old Midwestern example– have to try breaking away from Hy-Vee or Price Chopper of Dahl’s and go back to the neighborhood IGA or Thirftway or random ethnic market.)

  7. In a way, it’s cool because you’re looking for something new, but you may always find that the way you had it is already the best for you. It’s not always cost effective to find a new plan/route/whatever…just new.

  8. If you’re okay living with the way things are, what’s the point? We only get one life to live, it should be our primary job to make sure it’s the best it can be. In the last year, our household has ditched cable, switched banks, and transitioned to a new grocery sore. Now we read more, walk to the bank, and (because it’s a small neighborhood grocer, rather than a national chain) pay lower prices for our groceries without being screamed at (by LCD flatscreens) while waiting in line. Life’s short, live it well.

  9. Okay, so I’ve got a question for you, Trent. I moved to the area I live in now about two years ago. I spent a good six months or so developing a price comparison book for the things I buy regularly. It included three nearby major grocery store chains, a warehouse club, one bulk foods store that’s a little far afield for me, a grocery discount store, and a Trader Joe’s that’s quite a drive away. After those months of carefully comparing prices, I found that one of the nearby grocery store chains beat the others on most things I buy. The bulk store and TJ’s had a very few items with the best prices, and fortunately I could stock up on them just a few times per year.

    I stopped actively gathering prices about a year ago, after doing this research. In that time, grocery prices have skyrocketed, but I continue to do my routine shopping at the major grocery chain that had the best prices and stock up every once in a while at the other stores farther away. I still know in general terms when I find a really great price for things I already buy on a regular basis.

    Would it really be to my advantage now to start changing up my shopping routine? It would probably take me another 6 months to refresh all my data with current prices, by which time, if current trends hold, my data would again be out of date. And my guess is that though the prices would have changed, the same stores would still have the best prices. Let’s not kid ourselves. It takes time, transportation, and effort to gather that data.

    So what would you do in my situation? Have you continued to update your price book and track prices for everything you buy regularly?

  10. I have a recommendation for the people searching for car insurance. I hope this is allowed, Trent.

    I have been using USAA (www.usaa.com) for my car insurance for almost 10 years now. I get a call every once in awhile from other companys trying to sell me insurance and when I tell them I have USAA, they end the call very quickly. The only catch is that you, your spouse, or your parents have to have been in the military at some point. But you get a really great rate.

    I have completely ditched cable for the past several years (power rabbit ears only) and couldn’t be happier. I get all the local channels pretty clearly and I can watch just about anything else I miss online.

    Same goes with cell phone service. I had Verizon for 8 years and cancelled when the contract was up. I wasn’t using all the minutes I was paying for, so it didn’t make sense. I’m now using a pre-paid Tracfone and, if you buy the minutes online, you can get 8cents per minute. Now instead of $100+ per month, I spend about $50 every 3-4 months.

    Anyway, these work for me. Try them, you might be suprised.

  11. You may also want to add “keeping the same job” to your list. I’m sure there are a lot of us out there who are just staying with their job to maintain the status quo, even when they could get a better paying or career enhancing job somewhere else.

  12. You are so right about the “status quo” bias! Triggered by an ad on the radio, I decided to look at competitors’ prices for cable/internet service and surprisingly it was a lot lower than what we are paying now. In spite of it though, I am still dragging my feet about making the switch :(

  13. I get your point, but I felt that all of the items you listed would require only a very small change. I’m always much more excited to make a big change like not having a tv at all, switching to a vegetarian diet, downsizing to one car. For me it’s easier to make one big, drastic change to save money, than making many small ones.

  14. Well, I like my daily coffee “status quo” and chemical addiction. I quit drinking lattes (expensive and too many calories) and soda (calories). I make the coffee myself or drink from the company stash. Saved money and lost weight!

  15. The status quo has cost me a lot over the years, but I am more mindful of that trap now and it’s helping to put money in the bank.

  16. I like the idea of just making a small change — a small adjustment — and doing it with the intent to find out if it’s better. I think dipping our toe in the water with behavioral change brings us much closer to success than plunging in head first.

    The one thing I can’t bring myself to do is change banks :)

  17. #3 is hard for me too. But ya know, I tried going to the little Thriftway and to Price Chopper and the Apple Market instead of my HyVee this month and I ended up spending the same if not more. I think part of the reason is that I’m so familiar with HyVee at this point that it’s very easy to navigate and buy what’s on sale. HyVee is so well organized and well stocked compared to the others, too.

  18. Numbers 2, 3 and 9 resonate with me. I’ve been having issues with my bank and I hate the fees. No interest on my chequing account, $12.95 for unlimited cheques, ATM, Interac etc., $2.25 for being allowed to have a passbook, $3.50 for overdraft protection each month. Multiply that by 2 for Hubby’s account (except no overdraft protection) and add $9.95 for my Credit Union high interest e-account (my chequing account for our rural home). That’s a total of $43.85 per month or $526.20 per year!

    Frankly, if my Credit Union had a branch in our city as well I’d just switch everything there, but they don’t and the work around to do stuff here via another credit union’s ATM is a pain. But I have to reduce these crazy fees (it’s just that all Canadian banks are expensive).

    I was just talking to my hubby about the grocery store issue last night after I went to both Superstore (out of the way and not as good hours, huge crowds and lineups, don’t pack your groceries for you, horrible produce) and Safeway (on my way home from work, open until midnight, nice produce but more expensive for lots of things). I’ve always used Safeway as my default but I really looked at a number of items that we use regularly and they are much cheaper at Superstore.

    Bottom line, I think from now on I’m going to go to Superstore every couple of weeks for all the cheaper things as well as the things they have that no one else does. But I won’t go every week and waste the gas and the time.

    Cell phone? I recently switched to Bell from Fido for improved service, data capability and my beloved free BlackBerry for about the same price as my totally unreliable Fido.

  19. Thanks for the reminder to be mindful, Trent. I have to chime in with “learning the ropes” comment that oftentimes, our job is the biggest example of status quo. I have just finished reading a book on “soft addictions” that helped me to understand just that. While I have to stay on the salary continuum for now, I should not let my self-limiting beliefs keep me in a position that is less satifying, less fulfilling. I think this is probably alot like the struggle you faced leaving the 9 to 5…at what cost my soul? I am still trying to slay that dragon…wish me luck!

    By the way, I know you to be a fellow bibliophile…let me recommend “Soft Addictions…” by Judith Wright. She makes very valid points about living mindfully, goal setting and surprisingly, much of what she says can even be tied to frugality.

    Thanks again and I hope you all have a fabulous day that sees growth, wealth and change!

  20. I agree with most of this – but the cellphone deal we have had for 4 years can’t be beat. I have tried but they just don’t offer that cheap of plan anymore. If we change our plan we can’t every go back b/c it isn’t offered anymore.

    i have also looked for cheaper car insurance and every time we do they said we get too good of a deal being with the same company for so long that no one can beat it.

    so i guess the more important thing is to be willing to research and change!

  21. “Well, I like my daily coffee ‘status quo’ and chemical addiction.”

    Me, too. Why does the personal finance advice always knock on coffee? Why not sodas? Why not alcoholic beverages? Coffee is the whipping boy of the personal finance world.

    Some of us enjoy the experience of going into our corner coffee shop, chatting with the regulars, and taking a moment to wake up and reflect before starting our day. I’m with the Europeans–drink coffee and wine, eat good cheese, and really live your life.

  22. “chemical reliance problem as well”

    I don’t see my morning coffee as a “problem”. I make my own for just pennies per cup. Sure, if I don’t get my coffee I get a headache, but I wouldn’t call that a problem. Now if I spent $4 per day at Starbucks, that would be a problem.

  23. Interesting article. I never thought about the status quo affect. I guess I’m big on status quo for the comfort factor – at least until I get annoyed with something they do and then I switch if I find a better deal.

    About banking fees…I live in Canada and a few years ago I switched to banking with President’s Choice Financial because there are no bank fees. In about six year’s, the only time I paid bank fees was when I accidentally went into overdraft. I don’t know if PC Financial is available everywhere, but there must be other banks out there that have no bank fees….it is ridiculous to me to pay money for the privilege of spending my own freaking money – banks make interest off of investing my money, that is enough of a gain for them in my opinion so it is no fee banking all the way for me.

    I don’t mind not having a physical bank – all of my needs can be met with a bank machine. When I need to buy foreign currency, I just go to a national bank and they will sell currency to anyone as long as you have the cash on hand (no debit or credit cards). Works for me!

  24. Kate, I’d be inclined to keep your shopping routine. Like you said, the price differences between the stores are probably about the same…they just went up everywhere. I’m still keeping my normal shopping routine(Weis Markets and Costco, with some loss-leader shopping at Giant and Safeway, and an occasional TJ’s purchase) for that reason.

  25. Once I used Google maps to figure out my mileage for work & it found a much shorter route than the one I had assumed (for a route I regularly take). Type your start & end points into G-maps & see what route the computer chooses – it might surprise you! (human knowledge factors like “that route is *always* clogged at 4:00″ aside)

  26. I agree with the theme of this article, but my status quo on these specifics actually does save me money because I have already done the research. Whenever I’m in a new situation, I like to check out alternatives right at the beginning.

    I do have the job problem of keeping the same job too long, as learning the ropes pointed out.

    For Kate, I keep my price book somewhat updated with the products I buy regularly. I use my receipts (often, not always) to update the price if it has changed. And then when I’m in another store, I’ll occasionally check items I don’t usually buy there. I look for sales there and compare the sale price to my usual price; if the sale price is lower, I’ll record both the sale price and the regular price in my price book. I mostly only change my habits when I find a new product. Like I’d been looking for a tasty whole-grain (high-fiber) bread, and when I found Alvarado St. Bakery bread, I checked all my favorite stores to see if they had it and if so, for how much.

    The main thing I keep changing through time is how to invest my money. When I was a kid, I used savings accounts (that paid 5% interest). Then I switched to CDs because even though there is a “substantial penalty for early withdrawal,” you never lose more than you’ve earned since you bought the CD. And the interest was so much higher that even if I did have to cash one in early every now and then (which I did), I’d still come out way ahead. Then I-bonds were kind of nice when they paid 3% (or more) over inflation. And now online savings accounts are better than all of those.

    For longer-term investments, I’ve mostly changed as I’ve learned more, but also more things have become available there, too (like index funds! woo hoo!). So that’s an area where you have to keep checking. Other areas you should probably re-check periodically are insurance and cable, phone, and internet services. (There’s also a lot of construction in my area–they’re
    developing an old airport–so I need to check driving and bus routes periodically.)

    Another area I do have to watch out for is food habits. Like if I use a vending machine once when I’m starving, then any time I’m in the place where the vending machine is, I feel it calling to me. Same with eating at a fast food place–once I let my self do it once, suddenly I’m in the mood to do it every day.

  27. I kept the same cell phone service but asked them for a loyalty discount and got it. Switching is a good strategy but if you’re happy with your existing cell phone service or if that’s the only one with good phone reception in your area, then it can’t hurt to ask for a discount.

  28. @April:

    Coffee per se is not really a whipping boy for personal finance writers, it’s just one of the most common examples of where, if people changed their daily routines, they could find a good chunk of cash to balance their budget with.

    I, too, enjoy going into our local coffee shops and chatting with the regulars. One of them even has better coffee than I could make at home. I enjoy the ambiance, the people, and the overall experience.

    However, I decided I could use the $100 plus in cash more than I could use the experience of paying for my coffee. It was a personal decision, not a judgement on others. I don’t go to these shops more than once or twice a month because I added up what it was costing me and decided the coffee shop experience wasn’t important enough to me that I would rather keep the $100 a month for things that are more important to me in the short, medium, and long term.

  29. BonzoGal:

    It’s true, any time you do something on a regular basis it’s worthwhile looking at how you could do it using less resources.

    I also have been thinking about my automatic dishwasher detergent usage, and have taken a tablespoon and tied a string to it and taped it to the detergent box. That way I can actually measure the amount of detergent I am dispensing. I am guessing that for light loads I won’t need more than 1 tablespoon, which is probably 1/3 of what I am currently using by just pouring detergent into the machine’s receptacle.

    This is an example of what deciding what’s reasonable to use and then creating a system so that it’s easy to do so. The “system” and “easy” part are at least, or more so, important than the analysis part.

  30. I disagree with #3 because I live within walking distance of a Kroger and do most of my grocery shopping there. I save gas by walking (or sometimes biking) and I also get some exercise, so I don’t worry about whether or not they have the lowest prices. Plus I end up saving money by buying only what I can carry back instead of loading up my car with too much food.

  31. this is about the first post that you have done that I disagree with, putting it in the “knowing the price of everything and the value of nothing” category. I have been at the same bank branch for 25 years and when I walk in they know me; I am saving a point or two on my mortgage and a lot of other problems are smoothed out because of that. I go to the same insurance broker and company that my father did 50 years ago, and every time I have checked comparable rates I have come out ahead where I am.

    When my expensive Treo bounced out of my backpack when I hit a pothole on my bike, I spent a few hours on the phone with a company that saw that I had been with them for thirty years through thick and thin, and they gave me a new one.

    Just as I buy my vegetables at a farmers market where I can look the farmer in the face, I think relationships with your pharmacist or insurance broker or banker are far more important than saving a few cents on a promotion.

    Loyalty, relationships and support of your local provider count, more than chasing the absolute lowest price of the moment. Status quo bias pays off big in a crunch, when people have to decide who their friends and best customers are.

  32. @jody

    Thanks for pointing out President’s Choice Financial (operated by CIBC). I’m looking into them and so far they look pretty good. So long as I can get my pre-authorized stuff moved over okay and so long as they’ll permit transfers out to ING and an RRSP without charging transfer fees I’ll probably go for it.

    The ATM thing is a pain (basically you only have free transactions at ATMs in a Superstore, but if I’m going there every 2 weeks or so and get my government cheques direct deposited (my paycheque is already direct deposit) it shouldn’t be too bad.

    Plus, when you use your PC debit card at Superstore you get points you can turn in for stuff. This could be a good solution!

  33. The ATM thing is a pain (basically you only have free transactions at ATMs in a Superstore) but if I’m going there every 2 weeks or so and get my government cheques direct deposited (my paycheque is already direct deposit) it shouldn’t be too bad.

    grr grumble hanging parenthesis typo daemon….

  34. @steve,

    I think it comes down to deciding what you enjoy in life. I take pleasure in food and the coffee experience mentioned above. Maybe if I had money issues or if we were still struggling to pay off debt, I’d need to give it up. But at this point, I see it as a pleasurable thing I do that costs a lot less than other activities I could take up.

    I’ve just noticed that PF advice always brings up the daily coffee, and there are so many other expensive habits out there that deserve some attention (big screens, iPhones, 300 TV channels, expensive hobbies, etc.).

  35. An America that sits back while its government invades countries without good reason, violates human rights, rapes the constitution, impoverishes the masses while further enriching the rich is NOT heading in the right direction!!!!

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