How to use barriers and pre-commitment to do the right things with your money

Three thousand years ago, there lived a great hero named Ulysses (or Odysseus, if you prefer), king of Ithaca, champion of the Trojan War, and, it turns out, pioneer of personal finance.

Ulysses wrestled Ajax, retrieved the body of Achilles (the hero shot in his heel), and devised the clever Trojan horse, which allowed the Greek army to infiltrate Troy and end the decade-long struggle.

When the conflict was over, Ulysses spent another ten years desperately trying to sail home to Ithaca. He visited the lotus-eaters, was captured by (and escaped from) the cyclops, evaded both cannibals and the witch-god Circe. He slipped past the six-headed monster Scylla and the whirlpool called Charybdis. After all these troubles (and more!), Ulysses reached Ithaca and regained his throne.

[Eric Shanower's Age of Bronze]

Ulysses was mighty. He was tough, both mentally and physically. But he was only human.

Like anyone, he was subject to temptation. He was deceitful. He was rash. He sometimes shirked responsibility. (He and his men wasted an entire year on Circe’s island “feasting upon an untold quantity both of meat and wine”.) Most of all, Ulysses was proud. Immodest. Boastful.

Fortunately, Ulysses was also self-aware.

In an episode combining both his strength and weakness of character, Ulysses decides he wants to hear the seductive song of the Sirens. Foolish, yes, and he knows it. Because he realizes he’s doing something dumb, Ulysses orders his men to prepare for possible problems. He plugs their ears with wax.

But first he commands: “Take me and bind me to the crosspiece half way up the mast; bind me as I stand upright, with a bond so fast that I cannot possibly break away, and lash the rope’s ends to the mast itself. If I beg and pray you to set me free, then bind me more tightly still.”

Ulysses and the Sirens

“Come here,” the Sirens sing. “No one ever sailed past us without staying to hear the enchanting sweetness of our song.”

No one, that is, until Ulysses.

The Power of Barriers and Pre-Commitment

By planning in advance, Ulysses escaped destruction. He and his men survived because he pre-committed to the correct course of action and established a barrier between willpower and temptation.

Like Ulysses, a money boss understands that pre-commitment is a powerful tool. In fact, it’s one of the most powerful tools in personal finance.

Because we’re human, we each have weaknesses. For me, it’s books and comics and travel gear. For you it might be shoes or tech toys or fancy restaurants. Like Ulysses, you want to find a way to bind yourself to the metaphorical mast so that you cannot be lured to your destruction. You want to use pre-commitment to make it difficult to do dumb things.

When I was digging out of debt, I was frequently seduced by the siren song of books and comics. I knew it was dangerous for me to walk into a bookstore or comic shop, but I did so all the same. I spent a lot of money because I was foolish. (In 2006, I spent $692.96 on books and $3202.91 on comics. Yikes!)

As I started to master my money, I discovered ways to “tie myself to the mast”, to resist temptation.

For instance, I found that if I didn’t enter bookstores or visit Amazon, I wouldn’t buy books. If I didn’t walk into a comic store, I wouldn’t buy comics. By refusing to even browse, I had pre-committed to doing the right thing. My spending on books and comics plummeted, and I began to repay my debt more quickly.

This experience taught me an important lesson about pre-commitment: The best way to resist temptation is to never be tempted. Obvious, I know, but it’s shocking how many people overspend simply because they expose themselves to the object of their desire.

Avoiding temptation is a great barrier to bad behavior, but there are plenty of other ways to practice pre-commitment.

  • Some experts advise that if you have trouble with debt, you should freeze your credit cards in a block of ice. Although it sounds crazy, this can be an effective deterrent for chronic debtors. I had to take things further when I was in bad shape. I destroyed my credit cards and hid the account numbers. (Even that wasn’t enough. Ultimately I had to cancel the accounts!)
  • I used to find it hard to build savings. As quickly as I put money away, I spent it. Part of the problem was easy access. My checking account and savings account were held at the same credit union. Eventually, I got wise to myself. I moved my savings account to a different bank (an online savings account) and established a link between the two. When I got paid, I put my money into savings first. I only moved money to checking when I needed it. This one act made a huge difference to my impulse spending.
  • When I go grocery shopping, I use a list. I walk to the store instead of drive. I shop the perimeter. I consciously avoid looking at the impulse items at the cash register. Each of these is an intentional barrier I build between me and bad choices. (All the same, I occasionally make it home with a bag of chips or six-pack of beer. Or a fruit pie.)

Barriers are like walls. When used strategically, they prevent you from doing the things you wish you wouldn’t do. Unfortunately, barriers can sometimes prevent you from doing the things you do want to do. That’s okay. Pre-commitment can help you build walls you want, but it can also help tear down barriers to financial freedom.

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Do the Right Thing — Automatically

My cousin Nick has always been good with money — for the most part. His earning far outpaces his spending, and he uses his profits to invest for the future. But he used to have a costly problem caused by a simple barrier: envelopes.

When he came home from work, Nick would toss his mail on a table. He was tired and didn’t want to hassle with opening bills and writing checks. (This was in the olden days — like 1995.)

Over days and weeks, the stack of mail would grow into a paper mountain. The longer he delayed dealing with the bills and notices, the more onerous the task became. He dreaded it. And because he dreaded it, he continued to ignore the fact that his bills were now past due.

Eventually, of course, he would have to deal with the problem. He’d set aside a Saturday morning to open his mail and pay his bills. It took a long time, which he hated, and he also had to pay late fees and interest charges, which he hated even more. After he’d finished, this cycle would begin again.

All of this because of a simple barrier: the act of opening mail after work and dealing with bills immediately.

Nick’s story isn’t unique. In fact, I’ve struggled with a similar problem in the past. After becoming the boss of my own life, however, I’ve used a couple of tools to destroy the “envelope barrier” — and other obstacles between me and financial success.

First, and most importantly, I’ve learned to love automation. Automation removes roadblocks to good behavior.

When I set up automatic bill payments, for instance, I no longer had to worry about bills piling up on my desk. I also used automation to start saving for retirement. I had 401(k) contributions deducted from my paycheck, and I scheduled monthly transfers to my Roth IRA account. When I decided to eliminate my mortgage, I established automatic payments with an extra amount built in. And so on.

Removing me from the equation made my entire financial life run more smoothly. Automation made financial success almost inevitable! It certainly made it much easier to do the right thing.

Exercise
This week, I want you to discover the power of pre-commitment. Ready? Set aside one hour of uninterrupted time. Grab pen and paper.

First, review your financial goals and personal mission statement. Also look through your monthly financial statements. What can you automate? Debt installments? Retirement contributions? Extra mortgage payments? What about using a money-management tool like Mint or YNAB?

Next, think about where you’re weak with money. Where do you spend too much? What tempts you? Pick three problem areas you’d like to address. For each, brainstorm three ways you might be able to “bind yourself to the mast” like Ulysses to avoid temptation. How can you create barriers between you and bad behavior? Do date nights with cash instead of a credit card? Block Amazon from your web browser?

The final step, of course, is to put these ideas into practice. Pre-commit to doing the right thing.

Sometimes, like Ulysses, you need to pre-commit to the right action by building barriers to temptation. You need to bind yourself to the mast. Other times, you need to try the opposite approach, practicing pre-commitment by tearing down walls.

In either case, your goal is to the same. Instead of being your own worst enemy when it comes to money, you want to become your best ally in the fight for financial freedom.

More about...Psychology

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There are 11 comments to "How to use barriers and pre-commitment to do the right things with your money".

  1. Wesley says 02 April 2018 at 07:29

    I’d never heard of “shopping the perimiter” before, thanks for that! Also, re-imagining my life as an in-game experience never fails to make me enjoy mundane, repetitious things a bit more. Good reminder…I need to share that thought with my son.

    • Jeff says 27 May 2018 at 00:45

      The perimeter of most grocery stores have bacon, ground beef, and cheese, while the aisles have canned salmon, beans, and quinoa.

    • Travis says 14 November 2018 at 15:25

      An even better solution to this, use Walmart’s online shopping app. No more impulse buys, less time spent at the store, and more money in your pocket. WIN, WIN, WIN!

  2. Mitch says 02 April 2018 at 07:33

    Great blog! I agree with you, so many people have trouble with their money, may it be impulse buys or things that they just don’t need. Some people also have problems with buying things they can’t afford! So many people take out debt equivalent to or more than their yearly income to buy fancy cars or houses to try and impress people they don’t even like and this causes huge problems in their finances! They need to start putting up their own walls for the betterment of their future!

    • bambam says 03 April 2018 at 06:21

      We’re advertised to all the time and offered credit all the time. Would you believe that about 2 weeks after my bankruptcy was finalized back in 2010, I was sent an offer for a credit card? Not a credit card backed by a deposit, but a real, honest to goodness unsecured credit card. They know who they’re dealing with.

      And you’re right about the consumerism, and the people you’re talking about aren’t even aware of why they do it.

  3. Jason@WinningPersonalFinance says 02 April 2018 at 07:33

    Fantastic. The cycle never changes. Think. Plan. Execute. The last piece is usually the hardest. Finding ways to hold yourself to do the “right thing” is so key. I’m looking forward to reading what others do to hold themselves accountable.

  4. Dave @ Accidental FIRE says 02 April 2018 at 08:35

    Automation removes roadblocks to good behavior.

    Absolutely! I also find that if you establish a routine well enough and do it for long enough it becomes defacto automation. For instance, working out. My bike rides and runs are practically on auto at this point in my life. I of course can’t push a button and make my body do them, but they are such a deep-seated part of who I am that there’s no question I will do one or the other on each day. It simply becomes an act like breathing. It has to be done!

  5. Joe says 02 April 2018 at 08:39

    I like Ulysses. He’s human, just like us. Personal finance blogger needs to share their weaknesses too. Nobody is perfect.
    I was thinking automation about half way through and I was right! Automation helps a lot especially if it’s done before you get your hand on the money. That’s why I love 401k auto deduction. It’s the perfect way to save. Good analogy.

  6. rosarugosa says 02 April 2018 at 10:13

    I love the Odysseus analogy, very apt!

  7. Sequentialkady says 02 April 2018 at 16:27

    JD, if you’re going to blow your money on comics, it might as well be on *amazing* creator-owned works like Age of Bronze. 😉

    (I have an awesome Cassandra sketch by Shanower in my guest room.)

    But that said, yes, thinking about the exercise at the end of the essay, I need to work on not letting mail pile up and wrangling those impulse buys. GRRRR.

  8. Beta says 08 April 2018 at 00:52

    Whenever I got a raise, I would add that amount to my mortgage payment. I paid off my mortgage several years early. When I paid off my car loan, several years ago, I continued to make the payment …. to myself. I put it in my savings account. When I need a new car, I pay cash for it, and continue to make the payments to myself.

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