How can tools help us make better decisions for our future-selves? It seems safe to say that at some point everyone has had to weigh the pros and cons of their financial decisions; should I indulge in something I want in this moment, or delay gratification because I know that it will leave me better off in the future?
When it comes to financial decision making, it can be incredibly difficult to give up immediate gratification for long-term benefits or stability. One example of where this can be observed today is the market for auto-loans where the average duration of new loans is increasing. While this may suit some buyers well, there are long-term implications associated with these loans that can be challenging to compare with the immediate gratification of a newer, more expensive vehicle.
Leading economists, psychologists, and behavioral theorists are working to better understand challenges associated with weighing short-term vs. long-term rewards and recommending systems of thinking to help individuals succeed in these situations. Tools like "commitment devices" and "temptation bundling" can help reinforce ongoing positive behavior. While much of this research has been conducted with a focus on health decisions, however our team believes this can be used as a model to inform creative solutions to help communities, families, and financial institutions educate individuals and reinforce positive financial behaviors.
We spent time devising a new application in the form of a personalized financial guide and incentive system that could change the way we interact with daily purchases. The ideal app would present data in the right context, structure incentives to encourage positive behavior, and enable social interactions.
For many of us, it's small daily decisions that add up each month to make up a large portion of our personal expenses. It is easy to see large purchases and expensive items like rent or a car payment, and blame them for depleting our financial resources. It's often the many smaller purchases that we make throughout the month that add-up, and it's these expenses that we can control and adjust through small changes in our behavior. For this reason, we need a tool that helps encourage positive financial decisions throughout our daily lives. We believe this tools needs to have three key capabilities:
1) Contextually relevant budgets: Budgets are only helpful when they are presented at the right moment with the right information. This tool would use location information on your smartphone and past spending data to push advice to the user when they enter common spending locations (e.g. grocery stores, shopping malls, farmer's markets, etc.)
2) Incentive systems that are personalized and meaningful: We believe it would be easier to make positive spending decisions and stick to budgets when these experiences are bundled with items that are personally desirable. This tool would allow users to choose a game like experience (think Candy Crush or Clash of Clans) or more tangible rewards like a TV show through Netflix or songs on iTunes to tie to their weekly spending behavior. Users will be rewarded with items that are meaningful to them.
3) Social comparison and sharing: Every individual creating a budget wonders what the right amounts are for them - this tool would use anonymous information and personal surveys to provide benchmarks for users based on situational information. Users would also be able to share positive experiences and saving behaviors with their social networks to create pressure for positive decisions making within communities. We believe that a tool that combines the right information in the right context with a compelling incentive structure would have the potential to transform the way individuals and families manage their daily spending. Control over these seemingly small daily decisions can empower users to take control and become financially healthy.
Part Two can be found at this link - "Conducting interviews of potential users and developing scenarios are methods often used in user centered research to help stakeholders in the product or service development stages gain insights of real people’s behavior, needs, and motivations."