Hello SOTGC community,
Now that Tax season is over, you might be having fun spending your refund (Vitamix Blender or Jimmy Choo’s … tough decision!), or, you might find yourself dealing with the stress of having to pay your federal and state “debt”… yuck!
We often hear about managing our risk when it comes to investing, but there are several other ways to keep your stress low when it comes to finances, one of which is to set up what authors Tom Rath and Jim Harter call “positive defaults.”
They found, based on Gallup research, that those with high levels of financial wellbeing were not always the ones with the most money; rather, they were those who were able to minimize their stress by setting up specific positive defaults.
Setting up an automatic payroll deduction, a positive default, is one way that individuals can minimize financial stress. For instance, if your taxes and your retirement savings are automatically set aside, you won’t find yourself as troubled.
If we know that death and taxes (and add to that, retirement) are certain, then it makes great sense to prepare for them in advance. With tax season in our midst, those of you that have not set up these defaults may not feel so relaxed.
Beyond those deductions, there are other defaults that can be set up to manage risks, so long as you are aware of them; as they say, awareness is the first step. For some of you, that means you have to take a close look at your “risky behaviors” in the first place …
Do you bite off more than you can chew by accumulating loads of credit card debt?
Do you make quick or uninformed decisions when it comes to your finances?
Do you fail to diversify your portfolio by putting all of your eggs in one basket?
Do you make quick and impulsive decisions when shopping?
On that note, I have heard it is good practice to wait a week before you decide to make a minor purchase, like a dress for instance. (For bigger purchases, like a car, it goes up to one month).
I tried that tactic once when I saw a pricey sweater I liked at Bloomingdale’s. I have to say I found it annoying to have to make another trip all the way there if I did indeed think it was a good buy. So instead, if I like something I buy it on the spot, however … I leave the tag on for a week. That way, at least I have it in my possession if I want to keep it, and I can return it when it is convenient if I decide it wasn’t a wise purchase.
By understanding our risk-taking tendencies, and then having fail-safes (positive defaults) in place to manage our risks, we are able to minimize our stress and maximize our wellbeing.
Setting positive defaults allow us to keep present moment attention on things in life that are more enjoyable, instead of keeping our heads in the clouds worrying about our money.
Do you have any other “positive defaults” that have worked for you? If so, let us know in the comment section below!