Improve Your Money Habits by Defining and Changing Your Default Settings
Whether it’s the font setting in a Word document or the food served for lunch in the cafeteria, the defaults can make a big difference. As journalist Lena Greger notes, defaults set the standard for our actions, behavior and decisions.
Chances are, your TV, computer, and phone are mostly stuck at their default settings . Sure, we all customize some things (some of us are larger than others), but for the most part it’s safe to assume that the entire population is using the default settings. These settings affect how we use this product every day, and we usually don’t think about it. Groeger explains how this affects personal finances:
Most Americans are pretty poor at saving money for the future, especially for that ambiguous middle ground called retirement. And the current default settings don’t make it easy. Many companies’ retirement plans, such as 401 (k), are voluntary: you have to go to HR and sign up, and sometimes you need to know a little about investments. But an alternative strategy has been hugely successful: automatic registration. This means that employees are enrolled by default, unless they choose not to contribute. Research shows that under these conditions, participation in runway 401 (k) …
That’s one takeaway – implementing certain programs can help change the default saving behavior. But you can also change your own default settings. This is why “ pay yourself first ” is such effective advice, even if you’ve probably heard it a million times. You make this habit easy and automatic. Similarly, a change of settings default may be related to the setting of the automatic payment on your credit card or direct debit using student loans . It can be as simple as setting a rule for yourself to increase your retirement savings every time you get a raise.
We’ve discussed these tips before. The key here is simply to be aware of the role that defaults can play in your life. They are powerful, and they are powerful because we do not notice anything and do nothing with them. If you can change your default settings, you can harness this power and use it to your advantage.
Install and Forget: How Default Settings Rule the World | ProPublica via Rockstar Finance