Some Thoughts on Passive Personal Finance Barriers

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In my most recent book, The Simple Dollar, I spent some time talking about passive barriers. A passive barrier is a small barrier that you set up that will make a particular bad habit more difficult to continue or, sometimes, make a particular good habit easier to repeat. Putting your cigarettes in a hard-to-reach place (or throwing them away) if you’re trying to quit or putting the television remote on the other side of the house from where the television is if you’re trying to cut down your television viewing are both passive barriers – they make continuation of a bad habit more difficult.

Of course, there are many opportunities to utilize passive barriers in your own financial life. I certainly use them in my own life in order to subtly push myself into good financial habits.

Here are nine passive barriers you can utilize in your own life to encourage better financial results:

Hide your credit cards
Freeze them in ice (actually, I should make a post about doing just that…). Put them in an envelope in the attic. Delete the numbers from your online accounts. Cut them up, even. The entire point is to make it more difficult for you to gain access to your credit cards to use them for impulsive spending. If you don’t have the card with you, it’s pretty hard to buy something you don’t need on credit, isn’t it?

Set up automatic savings transfers
It’s easy to tell ourselves that we’re going to start saving, but the actual process of doing that can be challenging. You have to regularly make that transfer into your savings account and it’s easy to just forget about it, whether consciously or not. Instead, set up an automatic savings transfer that pulls a little bit out of your checking account each week and moves it into your savings. Boom – you’re saving money without the effort.

Set up automatic investing plans
You can do the same thing with most investing accounts. Set it up so that a certain amount is withdrawn from your checking account monthly and transferred to your investment account. Essentially, you’re doing dollar cost averaging without even thinking about it and building up your investment in whatever you choose to invest in without the opportunity to overthink.

Change your driving routes
When I commuted to work, I used to drive by a bookstore each day, both ways. I also drove by a coffee shop that had some killer bagels. Unsurprisingly, these two things would cause a lot of impulse buying on my part. The best solution I found was to simply start utilizing a different driving route to work, one that was basically the same length but took me through a residential neighborhood and near a football stadium instead of the commercial district. The impulsive temptation to stop more or less went away – a passive barrier.

Put your savings in a remote bank
Many people find success saving, but when that savings has built up to a good number, they give into temptation and spend it on a big splurge instead of holding onto it for emergencies. Often, this is made easy by having the money in a local bank, where you can easily access it via a quick stop at the bank. If you put your savings in a more remote bank, it becomes harder to just withdraw it on a whim and, often, you have to think about that withdrawal, talking yourself out of it.

Put your retirement savings in a retirement account
If you’re saving for retirement, don’t put it in a savings account or an ordinary investing account. Put it in a Roth IRA, where you get some tax benefits from saving for retirement and can face some stiff penalties if you withdraw it early or use it for other things. These penalties create a real passive barrier against misuse of retirement savings.

Put your education savings in an education account
You can do the same thing with education savings. Instead of just saving money in an ordinary savings account, put that money in a 529 and let the money build there. As with the Roth IRA, there are extra benefits if you use it the right way and penalties if you use it in another way, thus encouraging you to leave it alone and use it for education.

Leave your wallet in the glove box
If you’re stopping at a store where you often give into temptations, just put your wallet in the glove compartment before you go in. This way, you don’t have cash or credit handy when an impulse comes up – you have to go to all the effort of going out to your car, getting yoru wallet, and going back into the store. That’s a lot of effort, especially for an impulse buy, and it can be just enough to convince you not to do it.

Eliminate consumption habits
A final tactic was alluded to in the introduction: if you have consumption habits, like drugs or alcohol or smoking, putting those consumptives in a hard-to-access place makes it a bit more difficult to actually use them. The less you use them, the less money goes down the tubes into buying the materials for your consumption. So, put the alcohol in the attic. Put the cigarettes in the rafters. Flush the drugs down the toilet. Make it hard for you to use them again.

Passive barriers have another benefit, too: they eventually create a new “channel” for your normal behavior. Soon, you’ll find that things like not giving into impulses when you’re in a store or not consuming expensive drinks becomes the normal in your life – and your wallet will thank you.

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13 thoughts on “Some Thoughts on Passive Personal Finance Barriers

  1. Where I live you would certainly not leave your wallet in the glove box, unless you want your car windows smashed. You would leave your glove box open, so that it is obvious that there is nothing interesting inside.

  2. These are great tips. I think the most useful is having specific savings accounts. Put retirement money in your retirement account. I need to do this ASAP.

  3. “If you’re stopping at a store where you often give into temptations, just put your wallet in the glove compartment before you go in. ” – 1.Why would you be stopping at a store & going in if you aren’t going to buy something? 2. I’m with Greg/#1 – cars are broken into, in busy areas, & stuff taken without being noticed, in as little as 10 seconds (per our local police dept). Items of even minimal value shouldn’t be left in cars, even when stashed out of sight (& yes, I do it too but know I am taking a gamble).

    A better recommendation would be to just carry your ID & a little bit of cash & leave the wallet or purse at home. And, don’t go into stores if you don’t plan on buying something, if you haven’t gotten a handle on impulse buying.

  4. Trent – “put your money in a remote bank” – I did just that when I graduated from college and made weekly deposits of $5 – in about five years – I purchased my first home. A Little goes a LONG WAY

  5. I think these are the kind of tips that can not only help those who are struggling financially but also take someone from good to great spending/saving habits. E.g., DH and I have never carried a balance on our credit card, but carrying it does enable a certain level of impulse spending (“I’ll have the money by the time the bill arrives.”). We had to squeeze some extra money out of our already-frugal budget this year to rebuild a depleted emergency fund; since I run all our errands, I decided to try leaving the credit card at home. That one move has probably saved us several hundred dollars over the course of the year. The emergency fund will be at 100% again by Dec. 31, but I’m planning to leave the credit card right where it is.

  6. As for putting credit cards on ice – I heard Ron Blue suggest this in his program. I don’t think it was original then. I think it’s a great idea for compulsive shoppers.

    As for the wallet in the glovebox, I’m with the others. We had our car broken into, my wife’s pocketbook and camera stolen. Fortunately, they found the guy and everything was returned.

  7. Your car is just as likely to be broken into without your wallet in your glovebox (assuming you don’t leave your glovebox open). Either way, the biggest pain in my mind is getting your windows fixed.

  8. @#8 Amanda – that’s true, but it’s certainly easier to get windows fixed than to get windows fixed AND have to cancel & replace everything in your wallet or purse (or other valuables) – & be at increased risk for identify theft.

  9. I cut down on the number of cans of Diet Coke I drank a day by only putting 2 cans in the fridge before bed. I won’t drink it warm, so when the cold ones were gone for the day they were gone. When the whole case was in there, it’s mindless to grab can after can, and some days I could blow through 6 or 8 without thinking about it.

  10. All great ideas, if you need them.

    I chose the “man up” and “grow up” approach.

    Realize that you’re never going to get out of debt without some sacrifice!

    Make the sacrifice till you’re in better shape, then you can go back to enjoying life as you choose.

    In a much cheaper fashion, because you won’t be paying all the interest to the credit card companies

  11. “If you don’t have the card with you, it’s pretty hard to buy something you don’t need on credit, isn’t it?”

    Not necessarily. I only need to type a credit card number in a couple of times before I have it memorised. The credit card I use for most of my online shopping has been in a drawer for almost 4 years now – my shopping habits are completely independent of the physical location of the card. Freezing it, cutting it up, sending it on a rocket ship to the moon; makes no difference. What does work, on the other hand, is willpower.

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