Jamie Foehl, senior behavioral researcher at the Center for Advanced Hindsight, believes that nobody wakes up in the morning and says “I want to be sick and poor.”

Intentions and actions mix together in mysterious ways. In today’s podcast, Jamie will help you understand your brain’s needs and wants, and using those to create a plan for both physical and financial wellness, while starting you along the path to living your healthiest, wealthiest life! Money, I’m Home!

 

[transcript]

00:06 Lynne Jarman-Johnson: Money, I’m Home. Hi everyone, I’m Lynne Jarman-Johnson, and we’re talking finance to fitness today, but we’re also on location in Detroit, Michigan, at the Future Summit 2020 from CUES. And this is a credit union industry event, but I’ll tell you what, everything that we are learning really can help you become a better financial wellness individual. Somebody who can just soar when we’re talking about getting those finances in order. And one of the people who is here with us is amazing. Jamie Foehl is with Common Cents at Duke University. She’s a senior behavioral researcher, and what do you think she researches? What do you research, Jamie?

00:47 Jamie Foehl: I study decisions that people make about money.

00:50 LJ: Which truly, sometimes they’re not very good. [chuckle]

00:53 JF: Yeah, yeah, I mean … money is very hard to think about.

00:57 LJ: When people make decisions about money, we all try to do really, really well like, “You know what, I’m going to save this much a month. I’m going to save so that I can have a vacation, but it’s all paid for.” Those kind of things, but then life happens.

01:10 JF: Yeah, yeah. I think there’s this idea of the action-intentions gap, and we all have good intentions, we all have the right ideas, but somehow, New Year’s resolutions it’s … they just don’t get carried out. And so what we think about is what is getting in between people’s desires and things actually panning out for them?

01:32 LJ: And think about this for a minute, when you talk about researching how people spend and use money, it truly is the number one thing that we all do and makes our life either better or worse or, eh, money is it.

01:50 JF: Yeah, I would say money and health. I think those are pretty related in terms of how they impact each other and financial health. But yeah, everybody uses money, everybody spends money, everybody … Well, not everybody earns money, but it’s something that’s universal in terms of just living in society.

02:07 LJ: How did you get into this role? It’s really fascinating.

02:11 JF: So, I actually worked in the advertising industry before I moved to this job, and it was fun, but I was getting a little bored and wanting to do something a little bit, maybe more meaningful, different. Dan Ariely, he’s my boss, he wrote this book “Predictably Rational,” and everybody at my ad agency was expected to read it because he was coming in to give a talk. So, when the talk was happening, I was in the hospital. Won’t get into that. It was something from my brain; it was big. But I read Dan’s book in the hospital as I was having some of these brain issues or whatever, and I think it planted a seed for me. The work that I do now is very much living in between academia and industry. Right? And so, I come from industry, there are PhDs and all that stuff. I like to live in the middle to connect the two, and it’s a really fun space to be to try to take research and think about how it actually applies in terms of very practical implications.

03:21 LJ: When you look at people and how they can break habits and really start better habits, which is truly what a behavior right? That we want to do right? A good habit. Is that what you think about?

03:32 JF: So, actually about habits, there’s some things we talk about advice we give that just sounds good. But I think about a habit. If the goal is to get people to save money, let’s just use that. There are two ways to do that, or there’s a few ways, but one way is to create a savings habit, right? The other is just to get people to automate it, right? And I feel like this is where if you really need to think about the goal, and habit sounds like a good idea, because it’s something you’re engaged with and so forth, but I would much rather … I think it’s much easier if people just sign up to automate savings, if the end result is going to be the same. So I think sometimes the process of having a habit, I think there are other ways to go about doing things and engagement with money and saving, a habit of saving, then every month you’re thinking, you’re taking that money away.

04:27 LJ: So, people who are listening, what you’re saying is, look at, ask if your financial institution has it set up that you can automatically save?

04:34 JF: Sure, sure, I just think again, the idea of a savings habit to what end, right? It is about having money in your account, and I think there are other ways to do that besides the habit.

04:45 LJ: With Consumers, I can give you a really good example. One of our most used and utilized accounts that we have is called the Christmas savings that literally starts before Christmas to say “next year, start thinking about next Christmas, so that you have the dollars available to you when you’re ready to go have some fun shopping for those you love.” And it’s been an amazing reaction of people who, they set it and forget it. Is that important to not …

05:16 JF: Very. Very, very, very … The retirement savings rate in this country went from 34% to 90%, when it was just a matter of being opted in versus opted out. Nothing changed about how people feel about retirement; the structure of it did. And set it and forget it. You make the decision to have it happen, and then you just don’t think about it, and then you have a bunch of money. Whereas if every month, you’re actively putting money into that fund, you have the pain of paying, again and again and again.

05:49 JF: Yeah, so, automation is great when it can be accomplished.

05:53 LJ: How does money affect health?

05:58 JF: I think bandwidth. I think, there’s a lot to be said, we have limited attention, right? There’s only [so many] things we can pay attention to, and I think when we are sort of in a scarcity mindset where we have an emergency or something that we’re focused on, we focused on that and maybe we do really well with it. If you need to write a term paper the night before, you’re focused, you get it done, but everything else falls to the wayside. And so, I think concerns about money can consume people and impact health because they’re only taking care of the emergency and they’re not taking care of themselves, and it goes both ways. I also think your health is impacted. Yeah, it goes both ways.

06:36 LJ: Well, especially with how much healthcare does cost.

06:39 JF: Oh, don’t get me started. [chuckle]

06:40 LJ: Yeah, I mean it’s just … It’s something that truly does weigh on everyone’s mind.

06:45 JF: Yeah, and medical bills, too. It’s tricky in terms of how people get into different situations, I think a lot of it has very little to do with behavior. It has to do with system and life and that sort of thing. And when it comes to life, medical debt is considered very different from other types of debt, because it’s like some money you had to spend as opposed to money you wanted to spend.

07:00 LJ: When you look at an individual, and you truly are helping credit unions in a big way, help their members change the way that they think about finances, and how they react to, I guess what I would say.

07:19 JF: Yes, change the way that they think about it, but we don’t necessarily think they need to be thinking about it in a certain way if the products take care of some of the thinking. So, I just wanted to … We do want them to think about it differently, but what we really want to do is have certain behaviors. And sometimes thinking about something differently doesn’t necessarily mean that the behavior is going to follow. So, that’s just a …

07:48 LJ: So, give us an example of that.

07:50 JF: Alright, so let’s say you’re a person and you have a friend and something terrible happens to them. They have a financial shock, some emergency thing they could have never have predicted. And you see them struggle and you see what not having slack does, because the less slack you have, the more impact your mistakes have.

08:13 LJ: And slack means like the openness of more dollars.

08:18 JF: Yes.

08:18 LJ: Correct?

08:19 JF: Yes, slack is … Budgets are interesting. We try to do line items for everything that might happen, but there are so many things we spend money on that we they just don’t go into it. And so slack is just sort of like, slack is basically if you have money and you mess up, like for if you’re overdrawn or whatever, that mistake is not going to hurt you as much. Bad decisions don’t hurt you as much when you have slack, because you can recover faster.

08:47 LJ: Right, you have cashflow.

08:48 JF: Yeah, yeah. And so when it comes to … So, let’s say you see this friend and you’re like, “Oh my gosh, I really do need to have an emergency savings account. I am thinking about this very differently.”

09:00 LJ: Because I see it in real time.

09:02 JF: Yeah, so I see that happen.

09:03 LJ: Someone’s hurting.

09:04 JF: Or you see somebody retire and maybe you see some people retire and go to Florida and have golf and be fabulous, and then other people retire and it’s just not as great. They don’t have enough money basically. And so that might change how you think about retirement, but it’s not necessarily going to change what you do about it. And that’s what I’m getting back into that action-intentions gap, where people can think about something differently, but again we really want the behavior to change. And thinking about something differently doesn’t always lead to the behaviors you would expect.

09:39 LJ: And so what you’re saying is, “Look at. How can you,” it’s kind of a two-way street, “how can you as an individual say, ‘Yes I want to make the change,'” but then what’s the easy way to make it happen?

09:51 JF: I mean, it depends on the situation. I think setting up things for yourself when … Pre-commitment I think is a really important one. In the future, we’re all wonderful people. And so if I’m feeling like, “Yes, this is something I want to do in the future,” try to lock me into it. So that when it actually comes around, I’ll have done it.

10:15 LJ: Like it’s done for you?

10:17 JF: Yeah, you’re pre-committing. You’re agreeing to do something before you have to do it. For example, just to be totally honest, so Alan called me about this conference in August. Okay.

10:27 LJ: Okay, so you pre-committed.

10:29 JF: Many months in advance. If Alan had asked me like a month ago, the answer would have been no.

[laughter]

10:34 JF: Just because pre-commitment like in the future, in August, I was like, “Sure, why not February in Michigan?” I was a little worried about the weather, but it’s fine. But I was like, “Sure, I can do that.” But then the closer you get to it, the more your calendar fills up, and the more suddenly you’re not the person who has tons of time in February. So I’m delighted to be here. I’m glad I pre-committed. And also recognizing your weaknesses. Some people won’t keep snacks in the house. I think part of it is creating an environment that makes it harder for you to make the mistakes you know you’re going to make. Let’s go back to the snacks example. I can’t have snacks around my house. I just can’t. And so there’s a few things. I could have snacks there and just stare at them and like want them, but that takes a lot of energy and time. So what I would do is take the snacks out of the way; don’t give myself the temptation. So you can do that with money. We have a lot of locked accounts, things that are qualified and so forth.

11:46 JF: I think that’s important to just take the choice out of it. I, actually, for snacks, I have a lockbox that I put snacks in. No, it’s really great. It’s really great, because I can’t have snacks in the house, but I need them every now and then. And so I put the snacks into this thing—candy. And then I …

12:04 LJ: I was going to say, what’s your favorite snack?

12:06 JF: Oh gosh. It used to be Snickers, but I think Twix is gaining on Snickers. But …

[laughter]

12:13 JF: Wait, it has this some spinning thing on the top, and I can lock my candy in there for five hours or however many hours, and I cannot get at it. And so this is one of those things where …

12:24 LJ: Serious?

12:24 JF: Yeah. Yeah, yeah, no, I can send you a picture. It’s awesome. So here’s the thing about that. First of all, there’s no back door. Okay, there’s no like, “Oops, just kidding,” special thing. The only way I could get at that candy would be if I had to break the container, which was $60 and hard to break. The only people who broke it for me were the TSA when I traveled with it. And so what that does is it …

12:45 LJ: Okay, that’s a whole ‘nother story.

12:46 JF: Yeah, yeah, I know.

[laughter]

12:47 JF: But what this lockbox does is it takes away, I just can’t get at it. And I know eventually I’m going to want it, so I just have to wait a certain amount of time, but I don’t have to …

12:57 LJ: Set you up for success.

12:58 JF: Yeah, I don’t have to … There’s this idea and it’s a little debated in the literature, but of ego depletion. That the more you resist, the longer you have to say no and do all that stuff, at a certain point you’re going to be like … Like, it’s why we have Friday, pizza on Fridays, and like healthy lunch we made on Sunday for Monday. ‘Cause just by the end of the week, you’re just at a different mood.

13:20 LJ: I just need the pizza.

13:21 JF: You’re kind of like, “Alright, you know, it’s almost the weekend.” And then you know Sunday night, you’re back to making a healthy lunch for Monday. But we get tired, and just do things that are … you know, you can only be good so long, it wears you down.

13:34 LJ: Wears you down. Listen our podcast is from finance to fitness. And I really like to find out from you, what’s your most aha moment that maybe someone taught you, or that sticks in your mind or heart about finances?

13:52 JF: You know, we look at poverty, alright? People who are in poverty. I did not grow up in poverty. I grew up in like a very nice environment. And I think when you look at decisions that people in poverty make, it’s very easy to judge. You see people making decisions that are kind of bad for them. And I think the thing that I’ve kind of learned and that has resonated with me the most is that people in poverty are in a scarcity mindset. And when you’re in a scarcity mindset, you are, I mean there’s studies about this, you are not as intelligent as you actually are. And so anything that’s limited, really … to me it better explains why people do the things they do. I think, the sort of analogous situation is time. You know, like how do we handle our time? Does our time reflect our values? That sort of thing. Like, should I be on Facebook or all these different stuff? But I think for me, understanding how a scarcity mindset impacts decision-making is really the thing that was the most aha. I think it’s easy to judge and look at people who are making bad decisions, and say, “What are they doing?” And then you look at … You know, you think about the limited bandwidth, and the fact that one mistake kind of cascades, and it’s just … It’s much more difficult than it looks.

15:08 LJ: And you know, it’s interesting because truly that is what credit unions focus on, is that we all make mistakes.

15:16 JF: Yeah.

15:17 LJ: It’s how we can take the steps you talked about in the podcast to really lift yourself up and not feel guilty.

15:27 JF: Yeah, yeah. You’re getting into something I’m actually starting to think about researching more is fresh starts. Cause sometimes if you feel so far away from something, you might just give up, right? And we want people to have fresh starts, so they can do it. And so I think we are thinking about how people cannot feel … Like how to help them stay the course, not feel discouraged, not give up. And then you know stuff happens, and how do you bounce back from that? Cause it’s, you know, especially with savings for college and retirement, it’s a long haul, and it can feel like very daunting.

16:19 LJ: Long haul.

16:19 JF: Yes.

16:20 LJ: I love that. Well, thank you so much, Jamie Foehl. And she’s with Common Cents, Duke University. We just have had such a delightful conversation. Thanks for being with us today.

16:29 JF: You’re welcome.

16:30 LJ: I Lynne Jarman-Johnson. Money, I’m Home, from finance to fitness. We’d like to thank Jake and Aaron who are producing our podcast today. And we welcome you in next week. We’re on location, in Detroit with the CUES Future Summit 2020.

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