By Jill Schlesinger
Good financial planning and investment management are like diet and exercise: We often know what we should be doing, but have a hard time controlling our impulses. That’s why I was interested to read about Brian Wansink’s new book “Mindless Eating: Why We Eat More Than We Think.”
Rhode Island's Market Has Changed. Developers, Builders, Investors and Sellers Must Change With It.
By Emilio DiSpirito IV License Partner | Engel & Völkers Oceanside Leader | The DiSpirito…
Learn More
If you think that this is yet another gimmicky manual that will shave “50 pounds in 50 days,” think again. According to the publisher’s Web site, Wansink is a Stanford Ph.D. and the director of the Cornell University Food and Brand Lab, and he’s “spent a lifetime studying what we don’t notice: the hidden cues that determine how much and why people eat.” In other words, this guy is a scientist first, author second.
What I discovered in Wansink’s research is something that always tickles me about investors, gamblers and failed dieters alike – nobody wants to admit that she is the dope who did the dumb thing.
Who among us wants to be the sap that falls for flashy food packaging, the equivalent of buying an investment based on the headline-grabbing past performance number, or the gambler who actually loses at the casino?
Nah — that must be some other schlub, not me!
But Wansink’s experiments prove that most of us do make those mistakes. When it comes to food, we don’t overeat because we’re hungry. We overeat because of lots of external factors, including labels, shapes, smells and distractions.
Likewise, in my experience, most people don’t buy high and sell low because they want to lose money. Rather, it usually occurs when an investor sits with a quarterly statement and sells a fund that appears to be lagging and swaps it for last month’s winner.
Or maybe it’s when he has been reluctant to invest but is ultimately encouraged to do so when the Dow Jones Industrial Average breaks through a new record.
“Mindless Eating” notes that studies find that average people cannot explain the decisions that they make, which is similar to investors who can’t remember why they chose the funds in their retirement accounts. That said, the book aims to shine a light on our behavior and helps people take control of their decision-making process and learn how to manage their urges.
To combat both mindless eating and financial stewardship, you need to understand the decisions that you are actually making. That means seeing the hurdles that exist and anticipating the ones that could trip you up.
On the financial front, this usually translates into understanding how much you are spending and recognizing what you need to save to reach your stated goals. It also means developing some kind of investing strategy that depends more on detailed variables than on your whims.
When it comes to eating, Wansink comments that people want to eat what they want to eat without recourse. So too with financial matters, where we want to spend what we want to spend and make money when the market is going up, but not lose when it goes down.
Obviously, these are unrealistic expectations, but there is a way to create a fairly straightforward plan that can be implemented with limited risk. That can only occur, however, if you start with a financial roadmap that incorporates the family’s goals and objectives, but does not fall for the “get rich quick” schemes that litter the media.
In most cases, there needs to be some imposed discipline, but the good news is that it’s usually not at the expense of living your life.
Wansink notes that the best mindful eating tips are “personalized and tied to your diet danger zone – meal stuffing, snack grazing, party binging, restaurant indulging, and desktop dining.” The best mindful financial tips are also personalized to your specific needs and help you avoid pitfalls such as blowing your cash flow by not planning for unforeseen circumstances or falling into the buy high and sell low trap.
“Mindless Eating” is a good reminder that while many think they know what they are doing, whether with eating or managing our financial lives, few are willing to see that they aren’t. But it also underscores a simple solution: Even small changes in your routine can make a difference, without tremendous sacrifice.
Jill Schlesinger, CFP, is chief investment officer of StrategicPoint Investment Advisors. She can be heard on 920-WHJJ’s “Making Money Show” on Saturdays from 9 a.m. to noon and on Coast 93.3 Tuesdays at 6:10 and 8:10 a.m. and on B-101 at 6:15 a.m. You can e-mail her at jschlesinger@strategicpoint.com.
