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Why small decisions matter

by | Feb 16, 2023

When it comes to our financial health, small decisions that we make every day can have a big impact.

Why small decisions matterHave you ever wondered why those pants just seem to be getting tighter each year even though you’re not really eating that much more? Or why your credit card balance keeps growing even though you’re not quite sure what you’ve spent the money on?

These outcomes are the result of small decisions we make every day, according to psychiatrist and money coach David Krueger.

He explains in his book Your New Money Story that if you are burdened by credit card debt, it probably wasn’t one huge purchase that created the problem. It was more likely hundreds of small decisions along the way, like “just this one time” or “I will pay it off next month”.

Kreuger uses an analogy of how eating two french fries a day can result in a weight gain of 18kg over a ten-year period.

Gaining 18kgs over ten years means you gain 1.8kg a year. At the time 1.8kg may not seem like a problem, but if you keep doing that each year, over ten years you will have gained 18kg.

Gaining 1.8kg over a year is so easy to do. That’s just 150 grams a month, or 5g a day. Again, we don’t worry if over a weekend we put on a bit of weight, but if we consistently do that every weekend and do not lose the weight during the week, then slowly it starts to add up.

Krueger calculated that to put on 5g, you need to eat an extra 35 calories, which is equivalent to two french fries. So just two extra french fries every day for 10 years would result in a weight gain of 18kg (all else being equal, of course).

Small decisions we make every day matter, and the longer we make small “bad” decision, the bigger the problem we will have to deal with in the future. It is a lot easier and quicker to lose 150grams or even 1.8kg than it is to lose 18kg.

Small decisions that affect our finances

The same applies to our finances. If we constantly make small ‒ usually impulsive ‒ spending decisions, we add to our debt. Maybe it starts off with a store card owing R500, but then it becomes a credit card owing R10 000. And because we just pay the minimum amount and keep spending, it does not take long before we find ourselves faced with a credit card bill of R50 000.

Kreuger explains that you can be held hostage by small decisions, or you can be effective and achieve mastery and freedom by small decisions.

“All you have to do in life is the next right thing. At times, it may not be clear what the next right thing is, but you can almost always know what it isn’t.”

As Kreuger writes, “we are a collection of our habits”. It is about starting new, healthier habits like not eating those two french fries every day.

There are many small habits you can put in place to start taking control of your finances.

Track your spending. Start by writing down everything you spend. This is not about judgement, but about awareness. Do you actually know how much you spend each week? Make it a habit to capture all your spending on a spreadsheet once a week.

Sleep on it. Make it a habit to only make a non-essential purchase after a few days have passed and you have had time to think about it. This moves you from a “hot” state to a “cool” state where you can think rationally about whether you need the item.

Give up just one thing. Once you track your expenses you will identify some spending habits. Identify one habit you will change. Maybe it is buying one less takeaway a month, cancelling a contract you never use, or drawing cash at a retailer rather than an ATM.

Start saving. Even if it is just R200 a month, make a commitment to put something away each month. Like those small “bad” habits, good habits also grow into significant outcomes.

Understand your money emotions

Neuroscientists have shown that anticipating a reward is even more exciting than receiving it. Receiving a reward shuts down the anticipatory release of dopamine, diminishing the energy and pleasure.

Kreuger explains that this is similar to how cocaine works. The brain adapts to a new state of wealth and possessions and therefore it keeps looking for more pleasure through more shopping. That means no amount of shopping will ever be enough.

Instead of making a purchase, rather just window shop. Scroll through online stores and even put the item in your cart, but don’t check out. You can dream and imagine, but don’t make the actual purchase.

You should also avoid shopping when sad or even very happy. Researchers have found that sad people become self-focused and spend as much as 300% more for the same type of commodity or the same item as when they are not sad.

Krueger explains that the new purchases distract them, as the act of spending stimulates the pleasure centre of the brain in the same way as cocaine. He advises that if you shop while feeling sad or upset, that you only spend cash and have a limited amount on you.

Researchers have also found that very good news, such as an unexpected bonus, may cause us to abandon our best-laid financial plans.

Krueger explains that emotional override creates myopia with regard to future consequences. We focus only on what will make us feel better right now. “The surprisingly large bonus check is turned into a new car or television instead of paying off our credit card or going into our retirement fund.”

This article first appeared in City Press.


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Maya Fisher-French author of Money Questions Answered


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