Having Trouble Saving? Maybe You’re Feeling Powerless

Research suggests that savings behavior can be affected by feelings of power, and it also shows that you can change how powerful you feel. Here’s how to manipulate yourself into better decision-making.

Jul 27, 2014 at 9:31AM

Flickr / black_tsuba.

A fascinating study carried out by researchers at the Stanford Graduate School of Business and Tilburg University in the Netherlands found that feelings of power affect peoples' savings decisions. In a nutshell, the more powerful you feel, the more you'll want to save money -- probably to maintain that wonderful feeling.

So, if you're having trouble setting money aside for retirement or finally tackling that budget, maybe what you really need is a little bit of power in your life. 

How is that possible? 
The study's authors, Emily Garbinsky, Jennifer Aaker, and Anne-Kathrin Klesse, found that manipulating people's sense of power was surprisingly correlated with financial behavior. By putting subjects in a higher chair than a peer or asking them to write about a time they felt powerful, they found that they could affect subjects' decisions about how much money to save. 

Those who felt powerful saved more. 

These decisions were about saving "for the future." When asked how much they'd set aside for a new BMW, the powerful subjects changed course and said they would save less than the powerless. 

In other words, feeling high status encouraged savings for more actual status (through money in the future) rather than just the appearance of status (in the form of a nice car.)

It goes to show you that feeling powerful can really have a real effect on your financial decision making. This sounds very cute, but the result could actually be very, well, powerful. 

Manipulate your mind to make good decisions 
The beauty of research like this is that it shows the extent to which our perceptions are malleable. Armed with this kind of information, you can help to manipulate yourself into doing the things you know you should -- like saving more money or staying under budget.

How? By utilizing another cool research finding, of course. 


Pixabay / OpenClips.

Allow me to introduce the "power posture" -- think Wonder Woman with hands on hips or Don Draper leaning back in his chair with his feet on the desk (cape and whisky optional.) Columbia and Harvard academics Dana Carney, Amy Cuddy, and Andy Yap found that assuming such postures for two minutes literally enhanced testosterone levels and reduced cortisol, hallmarks of dominance and stress, respectively (if you have a few minutes, take a look at Cuddy's supremely interesting TED talk on the subject.)

In other words, if you act powerful, you can literally convince your physiology, and thus your self, to feel powerful. 

Act powerful before asking yourself to save money
An obvious application of the two-minute trick is a job interview or public speaking engagement. Alongside the Stanford results, though, I can't help but wonder if acting more like Wonder Woman would help a lot of us take control of our finances.

Money management can make the already frazzled feel even worse. What if you reduce that stress and improve your decision-making ability simply by changing the way you carry yourself for a couple of minutes?  

It's certainly worth a shot. Try your best Draper on for size and then try making important financial decisions, like the level of your 401(k) contributions or the amount you want to put aside in your savings account. 

I'm willing to wager that by the time you realize you're wearing a cape (or have found the bottom of a glass of single malt), you'll have made some powerful financial moves. In any case, it certainly can't hurt to try.

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4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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