Is financial success a question of willpower?
“What lies in our power to do, lies in our power not to do.” – Aristotle
Last week I explored the idea that our ability to save might be more a question of nature than nurture. A recent research study published in the Journal of Political Economy concluded that, while parental influence is a strong factor in the saving habits of children, the impact of that influence starts to fade in adulthood once children move out of home and are virtually undetectable at the age of 40. This suggests that the ability to save is more a question of nature than nurture.
This subject fascinates me because I don’t think there will ever be a concrete answer to this question. There are just too many different influences at play. Children who are raised to be savers will be savers simply because that’s what’s expected of them. Some will be better savers than others because, even when they have the opportunity to spend, they won’t spend as much. However, when you think about it logically, it’s easy for a child to save their allowance when they have no expenses and no opportunity to spend money that isn’t theirs. As we grow older, we are faced with a very different reality. There are expenses that have to be paid for, a myriad of wonderful things that can be bought and an abundance of ways to pay for those things that don’t involve dipping into your own bank account. Saving becomes a matter of choice and it takes a certain amount of willpower to put money aside rather than spend it, especially if your income is almost equal to your expenses.
What is willpower?
Willpower is something that has been the subject of many research studies. “Will” is our ability to make a conscious choices and “willpower” is our ability to exercise those conscious choices. Willpower and self-control are closely linked; the better we are at exercising self-control, the stronger our willpower is likely to be. Children who demonstrate strong self-control tend to achieve more academic success, have better health and stronger relationships as adults. This suggests that perhaps helping our children to develop good self-control is just as important as teaching them to save.
Researchers have found that willpower acts very much like a muscle in the sense that it can be both weakened and strengthened by our actions. In the same way that exercising a muscle makes it stronger but overworking muscle fatigue, so exercising self-control can strengthen our willpower but restricting ourselves too much can lead to burn-out. In one study, people who were asked to suppress their feelings while watching an upsetting movie gave up sooner on a physical stamina test than those who were allowed to express their emotions freely. In another study, people who were asked to watch a documentary while sitting next to a bowl of candy (which they were instructed not to touch) gave up quicker when asked to complete challenging brain teasers than people who weren’t sitting next to the candy. Both studies led researchers to conclude that keeping ourselves in a state of “willpower depletion” actually makes it harder to exercise self-control.
How does willpower impact finances?
Financial success is built on a foundation of core habits that are repeated on a regular basis. It takes willpower to establish these habits and willpower to continue them. If we can maintain the discipline and self-control needed to establish and continue strong financial habits and to continue to learn more about wealth building and finances then we can achieve financial success.
Related article: Four disciplines to financial success
However, if we procrastinate on getting started or allow ourselves to get off course we will likely find it much harder to achieve our financial goals. Sometimes when we find things hard or can’t seem to achieve success it’s easy to blame external forces such as our job or the economy or to dismiss money management as something that we’re “just not good at”. However, if we look at our lack of success as a symptom of something deeper, then we give ourselves the ability to change it. Like many other things in life, building and maintaining our willpower is a question of balance.
Here are some suggestions for how you can strengthen your willpower and make it easier to achieve your goals:
1. Avoid Willpower Depletion
If you were planning to run a marathon, you probably wouldn’t go to the gym and do a really hard workout the day before the race. While a hard gym workout isn’t a bad thing, fatiguing your muscles the day before you need them to be in optimal shape isn’t a good move. Similarly, if you keep yourself in a prolonged state of financial restriction or if you’ve spent the whole day making decisions or under pressure, it becomes harder and harder to resist the temptation to spend or bail on your goals.
2. Learn to Distract Yourself
Too often, we give in to temptation because we can’t stop thinking about something: that takeout item mentioned in the radio ad, the cookies in the cupboard or the fabulous shoes at the mall. The more we think about them the more we want them and the less we want to save. People will strong willpower have the ability to distract themselves from temptation by thinking about something else until the craving subsides.
3. Avoid Temptation
Exercising self-control takes effort and, while it might make us feel good to conquer a craving or resist temptation, if we play with fire too often we’re likely to get burned. Building a new habit often means breaking old ones. A few years ago, if I had some time to kill, I’d often wander through the mall or one of my favorite stores. I don’t do that anymore because, even though I have much better impulse control than I used to, the risk of giving in to temptation (and bailing on my financial goals) is too great. When I do go to the mall, I go with a plan and a budget and I leave my credit cards at home just in case there’s a sale I can’t resist!
At the end of the day, financial success isn’t rocket science, it’s pocket science: know your cash flow, pay yourself first, spend less than you earn and put your money to work for you. It’s simple but not necessarily easy because it takes discipline and willpower to create and maintain the financial habits that will help you to achieve your goals. Exercising and improving your willpower is one way of making that process easier.