Updated on 03.30.10

Personal Finance and the Path of Least Resistance

Trent Hamm

One of my mentors once told me, quite insightfully, that most people make almost all of their decisions based on whatever is easiest in their life. At the time, he was referring to college life – he argued that people who filled their dorm room with distractions and entertainment were more likely to do poorly in classes than people who had a dorm room filled with books and other learning materials. Why? Because when a person is sitting around in their dorm room on a given evening, a bit on the tired side from a long day, they’re going to grab whatever’s easiest. What’s easier? Picking up the remote to watch a television show or picking up a textbook? What if the television isn’t in the room?

His argument wasn’t that television and other entertainment should be banned in the dorms. His argument was that we have a lot of control over what is in our environment and our environment shapes what we wind up doing.

This carries through to personal finance. If the path of least resistance is to just go buy stuff, swipe the plastic, and walk out, it’s a lot easier to buy without thinking. If the path of least resistance is to maintain your bank account that’s loaded with fees, money is going to seep out of your account.

In other words, an awful lot of personal finance success (and success in other areas) revolve around making the good choice as easy as possible. Here are some examples of how to do this.

Remove your credit card numbers from online sites. Turn off that “one click ordering” at Amazon. Delete your web browser cookies. Doing this will make it harder to order online, convincing you to not buy or find alternate (and often less expensive) means.

Cut up your credit cards (and your debit cards, too). Make it difficult for yourself to acquire the cash with which to make purchases. If you literally don’t have the cash, you’re not going to go on a shopping spree, are you?

Install a programmable thermostat. You can save a lot of money by keeping your thermostat properly adjusted, but that requires remembering to do it multiple times a day. If you forget, you waste energy – and that’s a cost. The path of least resistance is to set the cycle of temperature adjustment once and then forget about it, which is exactly what a programmable thermostat allows.

Make meals in advance. It’s easy to talk ourselves into eating out because that has less “resistance” than going to the effort of preparing food. Eliminate that resistance by making meals in advance, or at least portions of meals. Prepare casseroles and freeze them. Make a batch of breakfast burritos and freeze them, too. There are countless things you can do to make it very easy to prepare an inexpensive and healthy meal very quickly.

Cancel your premium cable channels. If you mostly just turn on the television and surf to see what’s on, why are you paying for premium channels? Whether you have them or not, you’ll find something to watch among the eighty other channels you have.

Leave books out and available. Choose some books you really want to read, then check them out from the library. Leave these books in the places where you sit most frequently and you’ll find that you’re much more likely to pick them up and read a few pages. It’s incredibly cheap entertainment and it’s often a great way to get exposed to new ideas and help you grow personally and professionally.

The same thing applies to diet (get rid of unhealthy foods in your home and stock up on healthy stuff) or exercise (leave your exercise gear out front and center) or quitting a bad habit (dump out all the alcohol or drugs or cigarettes) or anything else you want to change in your life. The more resistance you eliminate to the things you want, the easier it becomes to reach them.

What resistance to your big goals can you eliminate today?

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  1. Johanna says:

    This is only slightly relevant, but for those of us who can’t (or don’t want to) install programmable thermostats, what works for me is to turn the heat down (or off) while I’m brushing my teeth. I need to do both those things right before I leave the apartment in the morning, and right before I go to bed in the evening, so I’ve trained myself to mentally associate them.

  2. Nicole says:

    Another insightful post today. You’re on a roll!

  3. This was a pretty decent post until the list of ways to create financial resistance in your life. It seems that the world of personal finance continues to belabor these (and a few other) points in order to save money. It would be nice to read some fresh ideas rather than being told over and again to install programable thermostats or to cut up the credit cards. There MUST be something else we can do to create financial resistance, isn’t there?

    We’ve read all these ideas (here and elsewhere) hundreds of times. Freeze the cards in a block of ice, cancel premium cable, prepare meals at home…

    Aside from the weak list, I thought this post was heading in the right direction, and probably could have gone without the list entirely and could have expanded on the thesis of the article, it was really only 257 words of something new and interesting followed by an old, rehashed list.

  4. Strick says:

    I think for a lot of us (me) the path of least resistance toward improving ones personal financial is by cutting expenses (I find that easy to do). Its increasing income by challenging one’s perceived limitations that is daunting.

  5. jgonzales says:

    #3 Steve,

    Personally, the one I rarely hear is Ramit from I Will Teach You To Be Rich’s idea of automation. It’s a lot easier to save money when it’s not in my checking account to begin with. I think this makes a huge difference to me, but few people talk about it.

  6. Johanna says:

    My debit card is also my ATM card. If I cut up all my cards, the only way I’d be able to pay for *anything* would be to write a check or to visit a bank teller to withdraw cash. Even if I was in terrible financial shape, I don’t think I’d want to create quite that much resistance for myself.

    Yes, I know that there was a time before ATMs. And I am glad I don’t live in that time.

    Besides, I think that for a lot of people, that plan might backfire. If I knew that Saturday morning was my last chance to get cash before Monday, I might end up withdrawing more than I needed, “just in case” – and so I might end up spending more than I needed, also.

    I’d think that a better solution – if you really can’t control yourself around ATMs – would be to leave your card at home unless you know you need it to withdraw cash for a planned purchase. And if there are particular places where you tend to go on shopping sprees, don’t take your card anywhere near them.

  7. greg says:

    Similar ideas have been explored by behavioural economists Richard Thaler and Cass Sunstein in their book “Nudge: Improving Decisions about Health, Wealth, and Happiness”.

  8. alexandra says:

    I disagree with cutting up the debit card, credit I can understand the reasoning.
    Whenever I have cash on hand (which would be necessary without at debit card) I ALWAYS have a much stronger temptation to stop at the baker’s downstairs on my way home when I’m fine living with it as a week-end treat or to buy bread when needed for a meal. But if I have cash, pain au chocolat & croissants galore!
    With my debit card that temptation to just spend spend spend on little things just isn’t there. Or not nearly as strong. Because I know there’s accountability behind that card, in the form of my detailed bank statements.

  9. It took making a lot of hard decisions in my life to finally get straight on my finances.

    Definiely not the path of least resistance.

  10. marta says:

    Cutting up the debit/ATM card too? No way. I would have a way harder time tracking my purchases and, besides, I get a stupid fee if I withdraw cash from a teller. That would totally cancel the savings of making homemade detergent (which I don’t, but that’s not the point).

    Johanna’s solution is a good one; I know a few people who do that to control themselves. They’ll withdraw just enough to cover whatever is in store for that day, and leave the card at home so they won’t be tempted by video games and the like.

  11. Steffie says:

    To belabor the point, insulation will do way more to cut energy use and cost than the programmable thermostat. Yes, it is a big expense if you buy it all at one time, but a roll a month will get the job done just as well. And why is alchohol always on the list of things that you must cut out to be financially fit and free of debt ? Yes, if you are an alchoholic and spend all of your money on booze and neglect your family etc. What is wrong with spending 10 bucks on a bottle of wine to go with that home-cooked food ? (Yes, 10 bucks can buy a decent bottle) Along with cloth napkins, a tablecloth and candles, it makes the eating at home a much better experience which makes it easier to be a habit which leads to financial freedom. Again it is all about balance and what you are willing to spend your hard earned money for. Look at the price of the item, figure out how long it took to earn that money at the job you don’t like, putting up with people you don’t like and it may not be so important to have the item after all.

  12. triLcat says:

    One way to add “resistance” to spending money is to write down everything. Better yet is if you’re in a relationship to share your list daily. The accountability makes you feel guilty about spending on anything you don’t need.

    My husband and I started doing it and suddenly, getting a coffee or a burger stopped being something that slipped in under radar and I cut way back.

    Another thing to consider is that prepared food from the freezer section in the supermarket might be more expensive than homemade food, but they’re frequently a lot cheaper than eating out.

    When we started keeping frozen chicken cutlets and burgers in the freezer, it was easier for me to resist ordering in when I had no energy to make dinner.

    Even better was when I discovered that my daughter (2.5) will eat cottage cheese, a handful of cherry tomatoes and some cucumber and consider that a yummy dinner! Talk about “fast food”

  13. Moby Homemaker says:

    We have done several of these things–the first that we REALLY got into was pre-making our meals.
    This is HUGE!!! We create our weekly menu and shop accordingly, then prepare everything Sunday night. t acyually has become a fun part of the weekend for my wife and I. (How lame has our lives become???).
    Seriously, it is a great money and time saver….

  14. Johanna says:

    @Steffie: I don’t think Trent is saying that you must cut out all alcohol to be financially fit and free of debt. I think he’s saying that you should get rid of all the alcohol in your house if you have a drinking problem and you want to stop it (which I’d think would be an obvious step to take, but possibly only a first step).

    Along those lines, whether something is a “good” or a “bad” choice financially depends on your goals and your situation. Buying stuff on Amazon is not inherently evil – I ordered something from them just the other day, and I haven’t been struck down by lightning yet – it’s only “bad” if it’s conflicting with other goals that you have that you value more. I assume that Trent knows this, but just forgot to say it.

  15. Skeemer118 says:

    I don’t get why people feel that this particular post didn’t help them. Just as when you read anything else, take what you need from it & think about some other poor guy without financial knowledge needs to know the “basics”. There’s lots of people who don’t make the rounds daily for financial help. Why don’t you hang out your own blog shingle & get to work to make better lists than this one? Oy.

  16. jgonzales says:

    While I didn’t physically cut up my card, they were completely inaccessible. So was my checkbook. Which meant yes, I did have to walk up to a teller. I knew my budget and took out half the amount twice a month (when we got paid). Then I had to control my spending because once it was gone, it was gone. It really taught me to be more controlled in my finances. It can be done and you don’t have to blow your budget to do it.

  17. Nicole says:

    Nudge is an excellent read.

  18. Steffie says:

    wow, some of that Zen stuff I’ve been reading must be making an impression, I didn’t get bent out of shape by Johanna’s comment, I would have in the past….Seriously just getting a little more relaxed and less stressed out about the little stuff in my life has reduced the need to buy things that are supposed to make me happy.

  19. Shevaun says:

    This reminds me a lot of two things: Self-Binding and the Marshmallow Test.

    So, Self-Binding is like not having the TV in the dorm room to help you study–you’re too tired to walk down to the common hall. Or, another example, if you’re trying to lose weight, simply don’t purchase the junk food. It’s a whole lot easier to eat healthy food when healthy food is the only thing in the house and you have to walk through the snow to get anything else.

    Secondly, the Marshmallow Test is a test that was first done in the 1950s (?? I think ??) but has been done many times since. You put a little kid in a room with his or her favorite food (such as a marshmallow). You tell the kid that you can have the treat now, or, if he waits until you come back, he can have two treats. The kids who tried to use “will power” almost always ate the marshmallow and “failed” the test. The kids who passed the test did self-binding things like covering the marshmallow with a napkin, sitting under the table and playing house, singing, etc.

    I’m all in favor of letting your rational self play tricks on your impulsive self.

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