Wednesday, April 08, 2009

The Mind Game of Money

National Football LeagueImage via Wikipedia

Money really is a mind game.

A University of Maryland study examined the “denomination effect”.

The study found that if you carry around big bills ($50s and $100s) you’ll spend them slower than smaller bills.

Would you break a $50 or $100 to buy a pack of gum or a cup of coffee? Even if you would, my guess is you’d think about it just a bit longer than if you had to break a $5 or $10. It might even “hurt” you to break a big bill.

And here is the most interesting part of the study: People who break big bills ultimately end up spending that money faster than people who started out spending smaller bills.


Merriam-Webster defines setpoint as: “the level or point at which a variable physiological state (as body temperature or weight) tends to stabilize.”

I would argue that there is a big psychological aspect to “setpoint” as well.

That 5’5” guy who has been 250lbs for many years will probably find a lot of success when he first gets serious about diet and exercise.

At some point though, his brain will point out to him that he USED to be 250lbs. “That one extra box of donuts won’t matter….it’ll be a nice reward for losing so much weight”

And before he knows it, his weight is creeping back up to where he was “comfortable”.

The same can be said for money and debt.

According to a Sports Illustrated story , 78% of former NFL players are bankrupt or under financial stress within two years of retirement, and 60 percent of former NBA players are broke within five years of retirement.

Many lottery winners are in a similar position just a few years after their big win.


Books have been written on the subject but part of the answer comes down to their psychological “setpoint” about money.

Years and years of carrying the same credit card debt can make someone very comfortable with a certain amount.

It’s the most common thing I hear from students. “I invested in “How To Own Your Paycheck Again!” and I was doing so well…”

You’ve chipped away at your debt and 40% is now gone. You’re justifiably proud of yourself. That big screen TV would only add 10% to your debt and your deserve a reward.

Since that 10% would keep you under your original debt “setpoint” you go for it. And before you know it, your debt has crept up back to your comfort level.

So how can you develop a new setpoint?

Prepare for challenges.

You’ve lived with yourself for awhile now. Where do you usually stumble?

Take a small percentage of the amount you were putting toward paying off your debt and start a couple savings accounts. One for long-term saving and one for that “reward” you so justifiably deserve….whatever that may be.

Think about the long-term repercussions of NOT lowering your debt setpoint. You can see them all around you these days. Debt-free people are weathering these financial times much better than the deeply in debt.

My friend Leo Quinn has written a practical guide tohelp you reset your setpoint or your mindset. You can find it on his site here

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Tuesday, October 21, 2008

You are paying those inflated bank bonuses

In this environment where the federal governments are bailing out the big Wall St banks, did you think that the logical thing is to cut any bonuses to be paid this year. The bankers should be thankful that they even have a monthly pay check.

They are still in their job as the government decided to spend the taxpayers' money in bailing out the big banks. In theory, this is a sound decision as it creates stability in the banking world and the world financial markets are relatively stable. On the other hand, there should have been caveats to how this money is applied once injected to the these sickly institutions.

Last week, Morgan Stanley was saved by the taxpayers with help from the Mitsubishi UFJ financial group Inc when $10bn was pumped into the bank. Morgan's bonus owed to employees for this year is $10.7bn which works out at twice its pretax earnings. You can read more about this story on Bloomberg.

At the end of the day, is this bailout hurting or helping the taxpayers? Are the governments working for the good of the little people? Where are their priorities?

Monday, October 20, 2008

Small changes at home to save you money

I just read a very useful post with some tips on how to save money. This might be of some use. Read about saving money tips here.

Sunday, March 02, 2008

Are you holding a lemon?

It seems there is about £20bn invested in popular funds that have been seriously underperforming. These funds have produced below average returns against it peers in the smae fund sectors for the last consecutive 3 years.

Please check the list to see if you are one of the investors in these funds and look around for a better performing fund to switch to. Keeping your investments in these funds is tantamount to throwing your money down the drain. In the long run, it will not appreciate and you might even find your capital eroded by the low returns and the effects of inflation.

Chelsea Financial Services has identified more than 100 unit trusts and open ended investment companies that are serial failures of the which the largest 5 with over £9bn invested in them are:

• Halifax UK Growth
• Scottish Widows Corporate Bond
• Liontrust First Income
• Axa Equity Income
• Jupiter Distribution

A full list of these underperforming funds can be found at

If you are holding any of these, you might like to switch to a better performing fund within and ISA supermarket so that you don't pay the expensive transactions costs. If you hold these funds outside of an ISA and don't want to invest in funds for a while, a really good alternative is to select one or a few ETF. These all have very low entry costs and are normally based on an index. This way you will get market performance and won't have to pay any management fees.

Read more on these topics on the website.

Wednesday, February 13, 2008

No charge blogging course

I'm evaluating a multi-media course on blogging from the folks at Simpleology. For a while, they're letting you snag it for free if you post about it on your blog.

It covers:

  • The best blogging techniques.
  • How to get traffic to your blog.
  • How to turn your blog into money.

I'll let you know what I think once I've had a chance to check it out. Meanwhile, go grab yours while it's still free.

Wednesday, November 22, 2006

Watch this amazing film: The Secret

If you want to make some big changes in your life, watch this inspiring film. It will make you think about how you use your thoughts.

Knowing this secret and applying it to your life will create all the abundance that you want in your life.  So watch the film, learn it and use it.

So what is "the secret"? It is the Law of Attraction.... you have to watch the film to understand what it means. Enjoy:

Friday, October 27, 2006

Internet Business: Use social networks to promote

If you have a service or product to promote, you must use all the new channels to promote your business. Some of these new social networks like YouTube, MySpace and Flickr have millions of members. How else can you get to a list as big as this to market to?

I have not had much time to sign up to and learn about marketing to these networks so I was looking around for some help on the net and I came across this book. It has simplified this process for me so much and saved me so much time. The book teaches you step by step how to get started on MySpace and it has helpfully listed all the groups that you can sign up to, to place your ads, a great shortcut. You can have a look at the book on How to Market to Myspace here.