Money brings up emotions within all of us and it’s natural for people to be irrational about spending it. This is why writing a monthly budget and sticking to it is so darn difficult for a majority of the population. No matter how many tips and strategies you learn about managing money, you’ll never be financially successful if you don’t develop self-control. Emotions can easily trump logic and without self-control, you sign yourself up for making “poor” decisions.
As Dave Ramsey writes, “Winning at money is 80 percent behavior and 20 percent head knowledge. What to do isn’t the problem; doing it is. Most of us know what to do, but we just don’t do it. If I can control the guy in the mirror, I can be skinny and rich.”
One effective way to boost your self-control is to set up Ulysses contracts for yourself. According to the legend, famed Greek hero Ulysses (also called Odysseus) wanted to hear the Sirens’ songs although he knew that doing so would render him incapable of rational thought. In order to get past the alluring-but-deadly songs, he asked his crew to put beeswax in their ears and had them tie him to the mast so that he could not jump into the sea. He commanded them not to change course under any circumstances and to keep their swords upon him and to attack him if he should break free of his bonds. Upon hearing the Sirens’ songs, Ulysses soon fell under their spell and was driven insane. He struggled with all of his might to break free so that he could escape the ship and join the Sirens (basically inviting his own death). However, the ear-plugged men rowed harder and harder and sped forward until they were at a safe distance and the songs couldn’t be heard anymore. A Ulysses contract is a pact made in advance to remove temptation by setting up a process or structure that enforces the person to not make a bad decision under any conditions.
If you’re terrible with handling credit cards, a good Ulysses contract would be to either freeze them in a block of ice or even better cut them up and only use cash or prepaid debit cards. Or if you’re lousy with saving money, reduce the temptation of spending all your money by setting up an automatic deposit that takes a certain percentage amount of your income directly from each paycheck. According to a 2010 study published in World Development, people who set up automated savings ended up saving 81 percent more in just twelve months!
When it comes to personal finances, it’s safe to assume that you will make some irrational and bad decisions. And hence it’s wise to look at your previous behaviors and set up effective Ulysses contracts that will help you eliminate temptations and be more sensible with money.
PS: If you found this insight useful, I encourage you to read or listen to my book Daily Wealth (The Daily Learner, Book 1). This short book is an attempt to distill the life-changing ideas from the best books on finances, money management, and investing in clear and concise daily meditations. I can confidently say that your money game will reach a new higher level in record time if you put the principles mentioned in this book into practice.
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