Achieve Your Financial Goals With This Overlooked Technique

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Implementation intention is an interesting, simple, yet overlooked technique that could help you improve your self-control and, in turn, increase your chances of achieving your financial goals. I know, I know, it’s a fancy term, but stay with me, as I’ll define it shortly.

By now you probably know that the simple formula to achieving financial freedom is to spend less than you earn and invest the surplus. We all might have good intentions of reaching our financial goals, but often fail to act on them. This technique offers a practical solution for this problem.

The issue is that most people fall for the temptation of spending most of their earnings. We pay off a debt and then end up charging our credit cards more than we should and that leads to a debt hangover by the time January comes. We barely save and, as a result, we live in a society that lives paycheck to paycheck. Our money hasn’t even hit our bank accounts and there are ads everywhere trying to get a piece of the action, aka our Benjamins.

Even this page might show an occasional ad to entice you to spend and my advice there is to not buy what you don’t need. It’s imperative to replace bad spending habits and find ways to train your mind to deal with these salespeople that are competing for your hard-earned money. If you train your mind properly, those dollars can be invested instead or used to pay off any lingering debt.

By having implementation intentions, you could train your mind to deal with situations that might put you at risk of spending money that you  don’t have or shouldn’t be spending.

To get our point across, we’re going to get a little geeky and see how your willpower relates to implementation intention and ultimately wealth. So let’s get some definitions out of the way, so that we can get to the nitty-gritty of this post.

Implementation intention

An implementation intention is a self-regulatory strategy in the form of an “if-then plan” that can lead to better goal attainment, as well as help in habit and behavior modification. – Wikipedia

The concept of implementation intentions was introduced in 1999 by psychologist Peter Gollwitzer. Studies conducted in 1997 and earlier showed that the use of implementation intentions can result in a higher probability of successful goal attainment, by predetermining a specific and desired goal-directed behavior in response to a particular future event or cue.  – Wikipedia         

The American Psychological Association has a good definition for willpower, so let’s use theirs for the purpose of this article.

   Willpower can be defined as:

  • The ability to delay gratification, resisting short-term temptations in order to meet long-term goals.
  • The capacity to override an unwanted thought, feeling or impulse.
  • The ability to employ a “cool” cognitive system of behavior rather than a “hot” emotional system.
  • Conscious, effortful regulation of the self by the self.
  • A limited resource capable of being depleted. – The American Psychological Association         

Every day you have an amount of willpower available to your disposal. Willpower works like a muscle that can become fatigued throughout the day, so you have to replenish it. By having an implementation intention, you won’t have to worry about making decisions when you willpower is at its lowest point of the day. It’s about having a plan in place without having to withdraw from your willpower for decision-making.

“Ok, that sounds great, Mr. Enchumbao, but how does this relate to wealth and reaching financial goals?”

You risk making the worst decisions for your pocketbook when your willpower is at its lowest. How many of you tend to overspend for the holidays? Had too many margaritas at a happy hour and then lamented the charges that show up on your credit card the next day? Bought too much housing while overexcited? Or went to a dealer and drove out with a car that would make a dent in your net worth? These are all decisions that could’ve produced a better outcome if you had an implementation intention and, in turn, it could’ve possibly saved you thousands of dollars. I know, I know, you might argue that feeling tipsy after drinking is a good outcome as well. I’m not going to argue with that. 🙂

Bad money decisions and willpower

We can make bad money decisions when willpower is at its lowest. There are times we go for a drink after work because we feel that we deserve it after a stressful long day.

I’ll give you a fresh example where, although it didn’t cost us money, willpower failed us miserably. As you might have read from a previous post we had a Month of Change in August that included goals such as not drinking during that month. We opted for 31 days of no drinking to detox. On the 31st day of our challenge, our employer had a diversity event that culminated with Asian hors d’oeuvres (that’s a word I can’t never spell correctly without looking it up first) and, guess what else? Free drinks!

The Asian hors d’oeuvres were as yummy as you can imagine and the drinks included Blue Moons and red wine, which we enjoy so much. Free booze and food!!! What to do? We were on our last day of our detox month and if we decided to have a drink the next day, we’d have to purchase it. The fact that there were free drinks added to the mounting pressure!

Mrs. Enchumbao was scheduled to attend the event, but got held up in a meeting. Everything went downhill after I initiated the following text:

financial goals

We accomplished the goal of no alcohol spending for the month, but our willpower failed us. Worse, we failed because we didn’t have an “if and then” plan. Besides getting free drinks and the fact that we missed having a nice summer drink, what else might have contributed to this poor decision? We were exhausted after a stressful workday and alcohol seemed like a good relief. It’s no coincidence that happy hours are right after work. They tap into your conscience when you’re tired of making decisions and are more willing to give in to your desires.

Even judges make bad decisions when willpower is low

A study published by the National Academy of Sciences shows that even judges make bad decisions when willpower is low. It turned out that the time of the day made an impact on their final rulings. According to the study, the most favorable rulings were at the beginning of the day and after a lunch break. As the mornings and afternoons wore on, favorable rulings would go bye bye. So now you know when it’s the best time to be in court! 🙂

Link between willpower strength and poverty

In another study, Princeton University doctoral candidate Dean Spears observed a cross-section of American shoppers. Everyone that shops, whether rich or poor, engages in economic decision-making. Financial decisions for richer shoppers are quick and easy. Think about it. If your bank accounts are loaded, you don’t have to sacrifice one thing for the other. The same financial decisions for shoppers that are financially insecure represents a series of difficult tests of self control. “I need to buy my kids clothes for school, but I also need that money for groceries, and then the gas bill came up pretty high this month. How am I going to pull this off?” That’s what might be on a poorer shopper’s mind.

So Spears reasoned that the poorer shoppers experienced a greater willpower depletion as they are faced with difficult financial decisions. And guess what they were more likely to do at the mall?

They were more likely to eat and drink while shopping than richer shoppers. The fact that they faced big financial decisions ran down their self-control reserves.

Also drawing on willpower to resist one thing might deplete your self-control for subsequent situations. And here we are, in the FI community we tend to quickly judge people for making bad financial decisions without realizing the psychology behind their behavior.

How to keep willpower replenished

The good news is that you can replenish your willpower throughout the day and use it more effectively by doing the following:

1. Eliminate the number of decision-makings throughout the day. It’s no surprise that successful people, like Mark Zuckelberg, wear the same clothing at most public events. He has multiple same gray T-shirts that he wears to simplify his life, so that he has to make as few decisions as possible.

2. Make big decisions early in the morning.

3. Plan your day the night before.

4. Take a break and eat a meal if you need to make decisions later in the day. Also eat regularly.

5. Eliminate the decision whether to spend or save.

6. Drink lemonade. That’s right, lemonade, not iced tea, lemonade! (thinking of the GEICO commercial with Ice-T)  Your brain is a high-energy organ, powered by a steady supply of glucose (blood sugar), so give it a little sugar. You can eat fruits, if you want to avoid refined sugar. 

7. Be yourself. It takes a lot of effort to suppress your normal personality.

8. Practice delayed gratification. Just knowing about this concept makes you more likely to succeed as Silvia Barcellos points out in the TED Talk video below.

9. Do physical exercise.

10. Watch a comedy video. A good mood can help lift your willpower.

How to use implementation intentions to help you achieve your financial goals

So far we learned that willpower can be replenished and that implementation intentions can lead to better goal achievements, but how could the technique helps us achieve our financial goals?

The “if-then” plan is an approach that is more specific than just having a goal. For example: A goal can be: “I want to save more this year.” But by being more specific and using an “if-then” plan, you can increase your chances of achieving that goal. Instead you can say: “If I get a bonus or windfall, I’m going to invest 90% of it in X,Y and Z accounts.”

Other examples of how you can implement these to help you reach your financial goals:

  • If I go out to eat, I’m going to order water instead of alcohol. Let’s say you go out to dinner with friends. While your friends look at the menu wondering what to drink, you already made the decision a long time ago! And congratulations you’ve just lowered your dining out expenses.
  • If I’m going shopping, I’m going to make a list of what I need and buy exactly what’s on that list.
  • If I make extra income beyond my budgeted needs, I’m going to pay off the debt with highest interest first.
  • If I’m going to buy a house, I’m going to make the buying decision based on a strict set of parameters.
  • If I feel that I need more clothes, I’m going to check my closet before I head to the stores.
  • If I go to a happy hour, I’m going to order food before a drink.
  • If I get a raise, it will go to savings automatically. 

By setting your implementation intentions, you can help yourself achieve financial success. I recently came across this technique, but I also realized that we’ve been using it all along in our financial journey. When we get bonuses or make money beyond our budget, there’s no question where the money is going. It’s going to be invested to buy our financial freedom. We’ve been doing this without fail, for the past few years and we’re now a month or two away from reaching financial independence. We now have the power of compounding working harder than ever to get us to our goal and beyond.

When we planned our wedding, we had a budget that we stuck to. We also kept the process stress-free and that helped in keeping our willpower replenished. As a result, we didn’t face making tough decisions when we could’ve been drained, and we broke even in the end.

This technique works! So try it out. Write your plan on a piece of paper or save it on your phone and let us know how you do. Also share this information with others since studies have shown that people who know this information are more likely to achieve their financial goals just by being exposed to it. Let’s achieve our financial goals with implementation intentions, fancy-pants readers!

What are you financial goals for the year? Do you have an “if-then” plan set up to achieve them?

Featured image by stevepb

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Mr. Enchumbao

I work for a large investment management company helping people save for traditional retirement. During my spare time, I write about our FIRE journey here, at Enchumbao. My journey to FI began in 2012. I was in a lot of debt back then, but I turned things around and became debt free a few years later. My wife and I reached financial independence in 2017 and are preparing to retire soon.

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5 Responses

  1. Stephanie says:

    Great article. I try to reduce my temptations to spend in the food dept by having plans as well. I have a staple of snacks near my desk, which usually involve fruit, nuts, or a cup of tea. I also bought a single serve coffee maker (not Keurig, just a regular coffee grounds machine) for work that has saved me hundreds over the past 2 years.

    • Thank you. Having snacks around is definitely a great way to save at work. Those vending machines are budget killers and a lot of time don’t have the healthiest choices. Awesome ways to save there. Thanks for stopping by.

  2. Thank you for sharing so much!

  3. Acton Ace says:

    Nice job! Overall, even though YOUR didn’t meet your stretch goals, you made tremendous progress! Life has a tendency to sometimes get in the way of accomplishing some of our goals, but it sounds like you regrouped and still came out ahead.

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