The psychology of passive barriers

The psychology of passive barriers

A surprising thing happens to people in their forties. After working hard, buying a house, and starting a family, they suddenly realize that they'd better start being responsible with their money. They begin reading financial books and trying to learn how to set up a nest egg for themselves and their families. It's a natural part of growing older.

If you ask these people in their forties what their biggest life worry, the answer often is, quite simply, “money”. They want to learn to manage their money better, and they'll tell you how important financial stability is to them.

Yet the evidence shows something very different.

In the table below, researchers followed employees at companies that offered financial-education seminars. Despite the obvious need to learn about their finances, only 17% of company employees attended. This is a common phenomenon.

401k compliance rates

As Laura Levine of the Jump$tart Coalition told me — and I paraphrase — “Bob doesn't want to attend his 401(k) seminar because he's afraid he'll see his neighbor there…and that would be equivalent to admitting he didn't know about money for all those years.”

They also don't like to attend personal-finance events because they don't like to feel bad about themselves. But of those who did attend the employer event, something even more surprising happens.

Of the people who did not have a 401(k), 100% planned to enroll in their company's 401(k) offering after the seminar. Yet only 14% actually did.

Of those who already had a 401(k), 28% planned to increase their participation rate. 47% planned to change their fund selection (most likely because they learned they had picked the default money-market plan, which was earning them virtually nothing). But less than half of people actually made the change.

This is the kind of data that drives economists and engineers crazy, because it clearly shows that people are not rational. Yes, we should max out our 401(k) employer match, but billions of dollars are left on the table each year because we don't. Yes, we should start eating healthy and exercising more, but we don't.

Why not? Why wouldn't we do something that's objectively good for us?

Barriers are one of the implicit reasons you can't achieve your goals. These barriers can be psychological or profoundly physical, like something as simple as not having a pen when you need to fill out a form. But the underlying factor is that they are breathtakingly simple — and if I pointed them out to you about someone else, you would be sickened by how seemingly obvious they are to overcome.

It's easy to dismiss these barriers are trivial, and say, “Oh, that's so dumb!” when you realize that not having an envelope nearby could cost someone over $3,000. But it's true. And by the end of this article, you'll be able to identify at least three barriers in your own life — whether you want to or not.

The Psychology of Passive Barriers

Why People Don't Participate in Their 401(k)s

If you're like me, whenever you hear that one of your co-workers doesn't participate in their 401(k) — especially if there's an employer match — you scratch your head in confusion.

Even though this is free money, many people still don't participate. Journalists will cite intangibles like laziness and personal responsibility, suggesting that people are getting less responsible with their money over time. Hardly.

It turns out that getting people to enroll in their 401(k) is just plain hard. Using simple psychological techniques, however, we can dramatically increase the number of people who participate in their company's retirement plan. One technique, automatic enrollment, automatically establishes a retirement plan and contribution. You can opt out at any time, but you're enrolled by default.

Here's how it affects 401(k) enrollment. (“AE” = automatic enrollment.)

401k automatic enrollment

From 40% participation to nearly 100% in one example. Astonishing.

Today, J.D. has given me the opportunity to talk about one of the ways to drive behavioral change when it comes to your money. I call them barriers.

While I do this, I'm going to ask you for a favor. You'll see examples of people who lost thousands of dollars because they wouldn't spend one hour reading a form. It's easy to call these people “lazy” — and there's certainly an element of that — but disdainfully calling someone lazy doesn't explain the whole story. Getting people to change their behavior is extraordinarily hard — even if it will save them thousands of dollars or save their lives.

If it were easy, you would have a perfect financial situation: You'd have no debt, your asset allocation would be ideal and rebalanced annually, and you'd have a long-term outlook without worrying about the current economic crisis. You'd be at your college weight, with washboard abs and tight legs. You'd have a clean garage.

But you don't.

None of us are perfect. That's why understanding barriers is so important to changing your own behavior.

“Just Spend Less Than You Earn!”

There's something especially annoying about comments on personal-finance blogs. On nearly every major blog post I ever made, someone left a comment that goes like this: “Ugh, not another money tip. All you need to know is: spend less than you earn.”

Actually, it's not that simple. If that were the case, as I pointed out above, nobody would be in debt, overweight, or have relationship problems of any kind. Simply knowing a high-level fact doesn't make it useful. I studied persuasion and social influence in college and grad school, for example, but I still get persuaded all of the time.

These commenters make the common mistake of assuming that people are rational actors, meaning they behave as a computer model would predict. We know this is simply untrue: Books like Freakonomics and Judgment in Managerial Decision Making are great places to get an overview of our cognitive biases and psychological motivations.

For example, we say we want to be in shape, but we don't really want to go to the gym. (J.D. is a prime example of this, and he'll be the first to admit it.) We believe we're not affected by advertising, but we're driving a Mercedes or using Tupperware or wearing Calvin Klein jeans.

There are dramatic differences in what we say versus what we do. Often, the reason is so simple that we can't believe it would affect us. I call these barriers, and I've written about them before:

Last weekend, I went home to visit my family. While I was there, I asked my mom if she would make me some food, so like any Indian mom would, she cooked me two weeks' worth. I came back home skipping like a little girl.

Now here's where it gets interesting. When I got back to my place, I took the food out of the brown grocery bag and put the clear plastic bags on the counter. I was about to put the bags in the fridge but I realized something astonishing:

Food from Ramit's mom

…if I got hungry, I'd probably go to the fridge, see the plastic bags, and realize that I'd have to (1) open them up and then I'd have to (2) open the Tupperware to (3) finally get to the food. And the truth was, I just wouldn't do it. The clear plastic bags were enough of a barrier to ignore the fresh-cooked Indian food for some crackers!!

Obviously, once I realized this, I tore the bags apart like a voracious wolf and have provided myself delicious sustenance for the past week.

I think the source of 95%+ of barriers to success is…ourselves. It's not our lack of resources (money, education, etc). It's not our competition. It's usually just what's in our own heads. Barriers are more than just excuses — they're the things that make us not get anything done. And not only do we allow them to exist around us, we encourage them. There are active barriers and passive barriers, but the result is still the same: We don't achieve what we want to.

I believe there are two kinds of barriers.

  • Active barriers are physical things like the plastic wrap on my food, or someone telling me that it'll never work, etc. These are hard to identify, but easy to fix. I usually just make them go away.
  • Passive barriers are things that don't exist, so they make your job harder. A trivial example is not having a stapler at your desk; imagine how many times a day that gets frustrating. For me, these are harder to identify and also harder to fix. I might rearrange my room to be more productive, or get myself a better pen to write with.

Today, I want to focus on passive barriers: what they are and how to overcome them.

How to Destroy Passive Barriers

Psychologists have been studying college students for decades to understand how to reduce unprotected sex. Among the most interesting findings, they pointed out that it would be rational for women to carry condoms with them, since often the sexual experiences they had were unplanned and these women can control the use of contraceptives.

Except for one thing.

When they asked college women why they didn't carry condoms with them, one young woman typified the responses: “I couldn't do that…I'd seem slutty.” As a result, she and others often ended up having unprotected sex because of the lack of a condom. Yes, technically they should carry condoms, just as both partners should stop, calmly go to the corner liquor store, and get protection. But often they don't.

In this case, the condom was the passive barrier: Because they didn't have it nearby and conveniently available, they violated their own rule to have safe sex.

Passive barriers exist everywhere. Let's look at some examples.

Passive Barriers in E-mail

I get emails like this all the time:

“Hey Ramit, what do you think of that article I sent last week? Any suggested changes?”

My reaction? “Ugh, what is he talking about? Oh yeah, that article on savings accounts…I have to dig that up and reply to him. Where is that? I'll search for it later. Marks email as unread

Note: You can yell at me for not just taking the 30 seconds to find his email right then, but that's exactly the point: By not including the article in this followup email, he triggered a passive barrier of me needing to think about what he was talking about, search for it, and then decide what to reply to. The lack of the attached article is the passive barrier, and our most common response to barriers is to do nothing.

Passive Barriers on Your Desk

A friend of mine lost over $3000 because he didn't cash a check from his workplace, which went bankrupt a few months later. When I asked him why he didn't cash the check immediately, he looked at me and said, “I didn't have an envelope handy.” What other things do you delay because it's not convenient?

Passive Barriers to Exercise

I think back to when I've failed to hit my workout goals, and it's often the simplest of reasons. One of the most obvious barriers was my workout clothes. I had one pair of running pants, and after each workout, I would throw it in my laundry basket. When I woke up the next morning, the first thing I would think is: “Oh god, I have to get up, claw through my dirty clothes, and wear those sweaty pants again.”

Once I identified this, I bought a second pair of workout clothes and left them by my door each day. When I woke up, I knew I could walk out of my room, find the fully prepared workout bag and clothes, and get going.

Passive Barriers to Healthy Eating

Too many people create passive barriers to healthy eating. You're sitting at your desk at work and you get hungry. Rather than reach for a healthy snack (because you don't have one with you — a passive barrier), you go to the vending machine for a bag of Cheetos.

Here's a real-life example of passive barriers preventing J.D. from eating healthy. We were in Denver together in 2013 for a conference. During a long day with no breaks, he didn't have a healthy snack with him. But he did have Hostess Sno-Balls. Bad J.D. That's not even food.

Ramit scolding me about my snack choices

J.D. needs to remove passive barriers to healthy eating

If you find yourself snacking on Cheetos (or Sno-Balls) all day at work, try this: Don’t take any spare change in your pockets for the vending machine. Even if you leave quarters in your car, that walk to the parking lot is barrier enough not to do it. Give yourself an alternative. Carry a healthy snack with you, like apple slices. Remove the passive barrier to eating healthy.

Applying Passive Barrier Theory to Your Own Life

As we've seen, the lack of having something nearby can have profound influences on your behavior. Imagine seeing a complicated mortgage form with interest rates and calculations on over 100 pages. Sure, you should calculate all of it, but if you don't have a calculator handy, the chances of your actually doing it go down dramatically.

Now, we're going to dig into areas where passive barriers are preventing you from making behavioral change — sometimes without you even knowing it.

Fundamentally, there are two ways to address a passive barrier.

  • You're missing something, so you add it to achieve your goals. For example, cutting up your fruit as soon as you bring it home from the grocery store, packing your lunches all at once, or re-adding the attachment to a followup email so the recipient doesn't have to look for it again.
  • Causing an intentional passive barrier by deliberately removing something. You put your credit card in a block of ice in the freezer to prevent overspending. (That's not addressing the cause, but it's immediately stopping the symptom.) Or you put your unhealthiest food on the other side of the house, so you have to walk to them. Or you install software like Freedom to force yourself not to browse Reddit three hours a day.

Personally, here are a few passive barriers I've identified (and removed) for myself: I keep my checkbook by my desk, because for the few bills I receive in the mail, I tend to never mail them in. I keep a gym bag of clothes ready to work out. And I cut up my fruit when I bring it home from the store, because I know I'll get lazy later.

Now let's see how this can work for you. Here's an exercise I'd like you to do:

  1. Get a piece of paper and a pen — or open the note-taking app on your phone.
  2. Identify ten things you would do if you were perfect. Don't censor. Just write what comes to mind. And focus on actions, not outcomes. Examples: “I'd work out four times per week, clean my garage by this Sunday, play with my daughter for 30 minutes each day, and check my spending once per week.”
  3. Now, play the “Five Whys” game: Why aren't you doing each of these things?

Let's play out the last step with the example of exercising regularly. Let's assume I say that I want to exercise three times per week, but I only go twice per month. Let's do the Five Whys:

  • Why do I excercise only twice per month? Because I'm tired when I get home from work.
  • Why? Because I get home from work at 6 p.m.
  • Why? Because I leave late for work, so I have to put in eight hours.
  • Why? Because I don't wake up in time for my alarm clock.
  • Why? Hmm…Because when I get in bed, I watch Netflix for a couple of hours.

Here's a possible solution: Put the computer in the kitchen before you go to sleep ? sleep earlier ? come home from work at an earlier time ? feel more rested ? work out regularly.

That's a gross oversimplification, but you see what I mean.

Homework: Pick ten areas of your life that you want to improve. Force yourself to understand why you haven't done so already. Don't let yourself cop out: “I just don't want to” isn't the real reason. And once you find out the real reasons you haven't been able to check your spending, or cook dinner, or call your mom, you might be embarrassed at how simple it really was. Don't let that stop you. Passive barriers are valued in their usefulness, not in how difficult they are to identify.

The Bottom Line

Passive barriers are subtle factors that prevent you from changing your behavior. Unlike “active” barriers, passive barriers describe the lack of something, making them more challenging to identify. But once you do, you can immediately take action to change your behavior.

You can apply barriers to prevent yourself from spending money, cook and eat healthier, exercise more, stay in touch with your friends and family, and virtually any other behavior. You can do this with small changes or big ones. The important factor is to take action today.

A caveat: Sometimes people take this advice to mean, “The reason I haven't been sticking to my workout regimen is that I don't have the best running shoes. I should really go buy those $150 shoes I've been eyeing…that will help me change my behavior.”

Resolving passive barriers is not a silver bullet: Although they help, you'll be ultimately responsible for changing your own behavior. Instead of buying better shoes immediately, I'd recommend setting a concrete goal — “Once I run consistently for 20 days in a row, I'll buy those shoes for myself” — before spending on barriers. Most changes can be done with a minimum of expense.

J.D.'s note: This is one of my favorite guest articles in the history of Get Rich Slowly. It had a profound effect on me, my life, and my work. This piece was originally published on 17 March 2009. I'm reprinting it today to celebrate the newly-published second edition of Ramit's book, I Will Teach You to Be Rich [my review].

More about...Psychology

Become A Money Boss And Join 15,000 Others

Subscribe to the GRS Insider (FREE) and we’ll give you a copy of the Money Boss Manifesto (also FREE)

Yes! Sign up and get your free gift
Become A Money Boss And Join 15,000 Others
guest
71 Comments
Oldest
Newest Most Voted
Inline Feedbacks
View all comments
Writer's Coin
Writer's Coin
11 years ago

Ahhh…one great PF writer on a great PF blog…bliss. This whole idea of people being afraid of looking stupid or not knowing what they’re doing is a huge deal. But that’s why the Internet is so great. I managed to teach myself everything I know about finance and stocks without really letting anyone see that I didn’t know this stuff. I covered up the cover of Rich Dad, Poor Dad on the train and all that stuff. But once you come out on the other side, all you want to do is go out and help people “get it” before… Read more »

Maggie
Maggie
8 years ago
Reply to  Writer's Coin

I used to be insecure, and afraid of admitting my ignorance. That meant that when someone said something I didn’t understand, such as mentioning asset allocation, I was too intimidated to ask questions. Finally, I realized that if I put my fragile ego aside for a while, I could ask questions and learn a lot more. Now, when I want to learn about something, e.g. personal finance, I ask for advice from people I respect. I admit I don’t know much about a topic, e.g. saving for retirement, and ask others what they do. I’m polite, don’t take up too… Read more »

Byron Woodson
Byron Woodson
11 years ago

Magnificent post, laughing all the way to enlightenment and riches!

There’s a book out called Nudge that talks about how making such small changes in what they call ‘default behavior’ (like the 401k automatic enrollment) can have dramatic effects on people’s behavior. I hadn’t thought of the concept in terms of modifying my own behavior.

Thanks for that.

Now I’ll go do something that will help me do something later. 🙂

Garry - thisimprovedlife
Garry - thisimprovedlife
11 years ago

Great post.

I like the idea of passive barrier. It is a concept I have been using for a while (although I never heard of passive barriers). For example, I always carry cash to the shops and never my card. That way I have a barrier preventing me from spending too much.

Also similar to you, I prepare my gym clothes the night before so that when morning comes I don’t have a barrier in place stopping me from heading off for a work out.

Neal Frankle
Neal Frankle
11 years ago

I have a slightly different take-away. Why do we set ourselves up for failure? Why don’t we act like grown ups and be prepared, eat well, invest wisely? In my opinion, its because we surrender to that little voice inside that tells us to get what we want when we want it. In short, because we give in to the immature child inside us all. To act responsibly, I have found that I have to acknowledge my strong desire to be a lazy slob (in whatever area – or often….all of them) and “act as if” I’m not. When I… Read more »

EscapeVelocity
EscapeVelocity
11 years ago

I didn’t contribute to my 401(k) for years because it meant acknowledging that this is my real job and not just a stopgap measure until I get a job in my field. Fortunately, my employer also has a pension plan that I was automatically in.

plonkee
plonkee
11 years ago

This is good.

I don’t clean the house, nor do I cook from scratch any more because of exactly these sorts of barriers. I would be more inclined to cook if it wasn’t so silent in the kitchen, and if it involved less work. I should put the radio on and buy some bagged salad.

Eric
Eric
11 years ago

Great article that illustrates that money is indeed attached to emotion/personality–but more importantly, it demonstrates how important it is for folks to pass along their financial knowledge onto their kids and have them understand basic concepts at a young age. Before I even got my first full-time job out of college, I understood the basic ideas around 401Ks and the beautiful company match that often times come with it–needless to say, I was signed up for it shortly after I started working. By instilling basic financial knowledge into our youth, we might be able to avoid the barriers that this… Read more »

Britt
Britt
11 years ago

Awesome post Ramit. I actually use the last method a lot. I’ll want something, but make myself “put up” with what I have until I’ve committed enough to prove I’ll stick with it. Although, this doesn’t eliminate ALL impulse buys… :-\

New Beginning (Mo)
New Beginning (Mo)
11 years ago

This is awesome. Certainly a great way of identifying the causes of active/passive barriers. While I was reading, I made a list of 10 things I could do and by the end of the article I had more to add to it. I am now working on the 5 Whys. Man! very interesting and they do sound silly, but the impact is huge. @Writers Coin: I hear you about Rich Dad Poor Dad. I have recently started reading and am on my third book (Prophecy by Robert Kiyosaki).When I was reading, Cash Flow Quadrant on the bus people were commenting… Read more »

AD
AD
11 years ago

My company puts 6 percent of our salary into a 403b whether we contribute or not (it’s not taking 6 percent FROM our salaries, it’s in addition to our salary). Maybe it’s because they know most people won’t contribute?! Then we get a match after we’ve been here 4 or 5 years, so until then, I’m putting money in a Roth IRA. The only thing I’d add to Ramit’s post is that I think overcoming one barrier gives you the confidence to tackle more, which is encouraging. Ever since that first college credit card, I didn’t have a handle on… Read more »

Tyler Karaszewski
Tyler Karaszewski
11 years ago

Good post. A bit long though, it almost became an active barrier to my reading it. I do suffer from these passive barrier problems all the time though. I drove around for a year and a half with no proof of insurance in my car because I didn’t have a printer at home. I stopped using my desktop computer at work because I can’t log into my version control software. I don’t know why it broke, but it doesn’t work, so I just work on my laptop all the time. Some of these problems though, even ones with very simple… Read more »

The Personal Finance Playbook
The Personal Finance Playbook
11 years ago

On the food front, I think the key to eating healthy is just having the right stuff around. If you don’t buy cheetos at the store, you aren’t going to eat them at night. Buy fruits and other healthy snacks and reach for those instead. Put up a barrier to the junk food!

The Writer's Coin
The Writer's Coin
11 years ago

Neal: I think it’s a little more complex than that. I just finished reading How We Choose and it shed a lot of light on this kind of stuff.

Turns out our emotions, which are so helpful and powerful in a lot of the decisions we make in our everyday lives, have more to say than we care to know. So it’s not like we can just reason our way out of everything.

The book is a great read and I highly recommend it, although it can get a little long on the brainy/neurology parts sometimes.

AJ
AJ
11 years ago

Ramit this was an excellent post!! I found that I have changed a lot of things, but still make excuses for things I have not changed. It is a process however you can not change everything overnight.

B7
B7
11 years ago

Who thinks people are rational? That’s just silly. All people make decisions based on emotion. And, that’s why habits are such powerful forces in our lives…

Linear Girl
Linear Girl
11 years ago

The discussion on barriers was interesting, but Ramit’s statment, “If you’re like me, whenever you hear that one of your co-workers doesn’t participate in their 401(k) – especially if there’s an employer match – you scratch your head in confusion. In my case, I feel a rage boiling up that reminds me of the ruins of Pompeii,” is over the top. There are many rational reasons for not participating in a 401(k) – from the extremely limited choice of investments to philosophical differences that make money less of a motivator than it clearly is for Ramit. I participate in mine… Read more »

Eric
Eric
11 years ago

I would like to point out that you can use barriers like these to your advantage in certain circumstances. For example, I used to smoke and when I quit I threw away all of my lighters, matches, ash trays, etc… The barrier of having to go to the store to get any of these things really helped with the short term urges.

Shara
Shara
11 years ago

I like people who don’t participate in their 401k because that leaves more money on the table. The money isn’t *free*, it is from the employer, and if everyone participated it would cost the company more and perhaps result in a drop of the company match. Just like people think that employer provided health insurance and other benefits are free. They are actually part of the total cost of having you as an employee. Even though they aren’t dollars you see on your pay stub they are part of your total compensation. I don’t begrudge anyone participation, but I don’t… Read more »

Taylor at Household Management 101
Taylor at Household Management 101
11 years ago

Ramit – I think you would like the book “Nudge” which discusses political solutions for trying to make it easier for people to make the “right” choices, like changing from opt-in for retirement 401(k) to opt-out, for example. You should check it out. The people that wrote it advised Obama during his campaign, so be warned it is rather leftist (but I personally like that!)

Stephanie Wilson
Stephanie Wilson
11 years ago

I cannot say when I have read a more important post. I have printed this out and plan to do the exercises recomended. Thank you so much, such common sense for a serious problem that so many of us have.

kick_push
kick_push
11 years ago

i just started eating healthy again

i am non-mortgage debt free

i have been saving 20% of my income into retirement for almost 8 years (i have been working for 9 years)

i have an emergency fund

i consider myself personal finance savvy

BUT

for some reason cleaning out my garage SCARES the bejeezus out of ME! haha there is so much clutter in there i don’t know where to start..

Corporate Barbarian
Corporate Barbarian
11 years ago

I wanted to eat healthy and lose weight, so I added my food preparation as a goal. As soon as we’re home from grocery shopping, my wife and I start making up healthy snacks in ziploc bags for the coming week. I’ve lost almost 20 pounds by eating better and exercising. But my garage is a mess, too. Another goal to add to the list!

PDXgirl
PDXgirl
11 years ago

I briefly did the exercises and found that most of my sewing projects languish with inattention because I don’t have a chair in my sewing room and it’s usually messy, so keeping a chair in there (instead of moving it) and keeping it orderly would help. It looks like not having my debit card with me would curb my spending on morning coffee and spur of the moment after work happy hours… or maybe just keeping it in my glove box during the day would work since I’d have to go to the car. Anyways, great article Ramit! I know… Read more »

Chris from St. Mary's
Chris from St. Mary's
11 years ago

I didn’t contribute to my most recent job with a 401(k) because I needed every penny of my take-home money in order to pay my bills because they were out of control.

I can say from experience, though, that HR people should take exit surveys with a grain of salt. They know they’ve been caught, they might not have been paying attention, and they will just tell you want they think you want to hear.

Gloria
Gloria
11 years ago

Very enlightening article. I think the concept of passive and active barriers is fascinating. In yesterday’s post about defeating temptation to shop, I agreed with the commenters who stated they didn’t even go into the stores or check out Amazon. I rarely to shopping, even grocery shopping, as my husband works for a grocery store, and he can pick up whatever I need. This not only saves me money by not compulsively shopping (candy bars weren’t on my list!), but saves me extra calories of not impulsively going down the soda, chips, and cookie aisle. I don’t have a degree… Read more »

Kelly
Kelly
11 years ago

I worked on my garage this weekend. It’s not perfect, but over half of it is now cleared, and I have plans for other items in there. It feels good, and my husband is very pleased. (It’s almost all my stuff.)

I know it’s silly to have so much just piled up, but I have a hard time getting rid of things. I try to remind myself that I never even look at most of the stuff, and that a clean and usable space makes for a happier household.

Lauren Muney, behavior change specialist
Lauren Muney, behavior change specialist
11 years ago

I work with clients about their wellness, fitness, work/life balance, stress management and time management. Not surprisingly, all these aspects flow together. Again, not surprisingly, all these aspects work along the same lines that you are discussing. I find that people create their own barriers. Some are logical, but many are, sorry to say, laziness. Yes, to complete a marathon takes many months of hard work and dedication, but I’m not talking about ‘marathon-laziness’. I’m talking about the example of the food containers above. I’m talking about people not wanting to take a walk because it interferes with their favorite… Read more »

bethh
bethh
11 years ago

I think this article missed an interesting point: non-participants who go to the retirement planning seminar are twice as likely to start contributing to their 401(k)s, according to the numbers above. I admit I skimmed the article though. For me, it was flawed from the start: “A surprising thing happens to people in their forties. After working hard, buying a house, and starting a family, they suddenly realize that they’d better start being responsible with their money.” Oh really? Are there any numbers to back that up? I had that wake-up call with my very first job and my very… Read more »

Luke
Luke
11 years ago

Great post.

Lucky enough my employer makes a mandatory contribution up to the limit that they match.

When all is said and done, I wonder how many employers will drop their match.

Steve @ Freedom Education
Steve @ Freedom Education
11 years ago

Hi Ramit, I don’t really buy your “passive barrier theory”. I mean, yeah it does help to have my gym bag packed and ready to go in the morning before I go to work out, but that’s just one small barrier. If my gym bag is not ready, then I can easily find others reason not to go to the gym at all; maybe the drive is too long, or when I arrive at the gym it takes too long to find a locker and change, or maybe my gym clothes are not comfortable, or the staff at the gym… Read more »

Stephanie PTY
Stephanie PTY
11 years ago

It’s funny – in between reading this article and coming back to comment, I ran into a passive barrier: privacy. I don’t like the work out with anyone watching, or anyone in the near vicinity (probably because I’m a girl – is it just me, or do men tend to have less of a problem working out publicly?). But since I still live a “college lifestyle,” there are people around 24/7. I could work out privately, but the only place to do that is in the bedroom with hardwood floors. This may take a bit of explaining, but today is… Read more »

Des
Des
11 years ago

Ironically, this is what keeps me from reading Ramit’s blog. I’m embarrassed to read a blog called “I Will Teach You To Be Rich” around my co-workers, but by the time I get home I’m distracted with personal tasks and never get back online.

Hogan
Hogan
11 years ago

On the gym theme, I have belonged to many gyms over the years and wasted a lot of money by not going to them! Strangely, I found that when a new gym opened up and I signed up for it (despite my nagging internal voice saying “you’ve never stuck to this before, you’re just going to waste more money), I now go consistently and enjoy it very much. It was like a bolt of lightning to see that in the case of the other gyms, it wasn’t that I didn’t like working out…it was that I didn’t like working out… Read more »

chacha1
chacha1
11 years ago

I contributed to 401(k) plans at my two previous longterm employers. The second of those provided a generous profit-sharing contribution. Consequently I have (or will have, when the market picks back up again) a good amount invested. And consequent to that, I’m not currently contributing to my company plan because a) I wouldn’t be vested till I’ve been here 5 years, and I don’t expect to be here for 5 years; b) the only investment options are lousy mutual funds that would earn a lot less than I can “earn” by paying off debt – even with after-tax dollars. Automatic… Read more »

WereBear
WereBear
11 years ago

What a fascinating take on why we don’t do the things we say we want to. In my case, I hate spending time on certain things, so I mentally commit to only fifteen minutes (sometimes I even set a timer.) I realized my internal barrier came from the perception that these tasks might suck up my whole evening.

Though of course they would not, knowing I have the option to stop gets me started. And that is always the hardest part.

elisabeth
elisabeth
11 years ago

this sentence: Don’t let yourself cop out: “I just don’t want to” isn’t the real reason.
doesn’t make sense to me. I think there are times — maybe many times, when we think we have chosen goals for ourselves, but we haven’t really committed to them, and the truth is that we don’t want to really achieve them. And that may be ok. If you examine an unmet goal and find out it’s not really a goal for you, that’s a solution, too.

Chris Johnson
Chris Johnson
11 years ago

So true, though my garage is clean these days. I’m particularly fascinated by the near 100% participation in opt-out 401k plans–as an employer, I’d like to try this. Provided I overcome my laziness by emailing the plan administrator.

rothko
rothko
11 years ago

one major barrier for people not participating in their 401(k) plans? living paycheck to paycheck and being (or perhaps feeling) unable to put any of that check aside for a later date that’s so far away it’s easy to let oneself believe they can take care of it when they have more disposable income. and like that’s gonna happen. a good friend of mine in her early 30s now did exactly that and she’s really worried about having spent 10+ years working and not investing any of it in her employer’s plan, and about how far behind she is now.

Linear Girl
Linear Girl
11 years ago

Paranoid Asteroid – I don’t assume that people think and reject; I know that many never stop to think about anything they do. I just tried to make the point that Ramit’s assumption that everyone should always participate is just as irrational as never bothering to find out your options and then acting in your best interest based on those options. bethh – I noticed the correlation between attendance and participation, too. I was surprised that Ramit didn’t talk about that but about the overall low rates of participation. I think his negative take flows from his assumption that everyone… Read more »

Steve
Steve
11 years ago

This article has made me feel better.

I’ve been berating myself for a long time to learn more about the financial world. Especially with all of the things going on in the news.

I started doing the max on my 401k and other savings in my late 30s, so at least as I’m not as bad as other people.

Steve
Steve
11 years ago

I think a lot of these barriers are fear.

Some of it can be like going to the dentist, you are afraid of how much irreversible damage you have and on getting a lecture.

Some of it is being scared of being overwhelmed with all of the terms and concepts to learn to feel like you really have a handle on it.

Robb
Robb
11 years ago

Inertia is HUGE! It’s hard to get up off the couch and go for a walk. And it’s even harder to make time to attend a financial seminar or research your 401(k) plan.

In finance and investing, automatic/ default plans work the best. Deduct that money from your paycheck before you even see it!

Keith Smith
Keith Smith
11 years ago

I love the way this post gets you to thinking and examining your life. If we can do things like identify passive barriers in our lives we become aware of what obstacles are holding us back and what good things we have in place as well! Thanks for a great and challenging read.

getagrip
getagrip
11 years ago

@bethh, who asked where Ramit got his data, the article is linked (see the highlighted words “the evidence”) to the research he used. If anyone wants a more hard core slap in the face on barriers and getting over them check out Larry Winget’s books. His latest is called “People are Idiots and I Can Prove It. The 10 ways you are sabotaging yourself and how you can overcome them.” In the end no matter who says it or how it’s said, you pretty much you have to get yourself going. Others can recommend, demand, or threaten but you will… Read more »

James
James
11 years ago

Maybe the participants are rational, and the seminar convinced them not to participate?

It’s a low sample size, a non-random sample, there’s no control group, and correlation does not imply causation.

It’s an obvious point, there’s no reason to misuse and misinterpret statistics to cone to such a simple conclusion.

Troy
Troy
11 years ago

My first thought after reading this post is this isn’t an accident. 401K’s exist because most people don’t contribute. Just like credit card “rewards” and grace periods exist because most users don’t benefit from them. Why the encouragement to contribut to company 401k’s? If more, or everyone contributed, the cost would be so great that either the plan would be eliminated, curtailed, the match woul be eliminated, reduced, or employees would be fired. The small match is calculated as part of total employee expense and total business expense. encouraging everyone to participate, while noble, is foolish. It would eliminate the… Read more »

bethh
bethh
11 years ago

@getagrip – sorry, my comment wasn’t clear. I wanted to know the source for the opener to the article: “After working hard, buying a house, and starting a family, [people in their 40s] suddenly realize that they’d better start being responsible with their money.”

I felt that was so flawed as to leave me questioning all the following information. I am not a fan of the writer, though, so I am being even more skeptical than usual.

mimms
mimms
11 years ago

Credit card companies would not have to go away if people paid their balances every month. That’s simply a false statement.

The market would thin, probably, and the companies in it might not be as profitable.

But because these companies charge vendors a percentage and users an annual fee, the business model is quite robust.

NIUiceprincess
NIUiceprincess
11 years ago

I agree about the whole working out/dirty clothes bit. I bought myself a second leotard and ballet tights for my ballet class. I just know that if I relied on my one set, that I would skip class on the week that I didn’t do laundry and I am not one to wear unlaundered clothes that I sweated in the previous week. People will come up with all sorts of excuses not to work out, me included. I even stashed extra elastic and hairpins in my dance bag so I can’t say that I forgot some and can’t dance with… Read more »

Beth
Beth
11 years ago

Bethh, I thought the opener was a bit over-dramatic myself. My parents and most of their friends were capable of managing their money in their twenties and thirties. I was raised the same way.

If there’s evidence of Ramit’s claim, I’d like to see it. One has to be very careful making broad statements like that.

shares