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OSU Extension

College of Food, Agricultural, and Environmental Sciences

March 9, 2021 - 8:00am --

As time for tax returns are here, I’m sure many have varied plans in how to spend a little extra money.  This year has been like no other, and with household budgets being strained, there’s always somewhere to place a few extra dollars.  A co-worker of mine, Emily Marrison, wrote a few weeks ago about how some of our biases influence our financial behaviors. Please read on to see if you can relate to any of these:

Present bias: We procrastinate and favor immediate rewards over far-off benefits. The present carries more weight relative to tomorrow. How often do you imagine yourself in 20 years?

Limited memory: We only have so much room in our brain to remember and worry about a certain number of things. Some people fill this capacity with more immediate rather than long term things.

Exponential growth bias: Time is our friend when it comes to saving. Starting to save small amounts and letting them grow with compound interest is way better than waiting until later.

Herding bias: Following the crowd can show up in savings behaviors, too. We tend to go along with the savings and spending habits our friends have.  

Loss Aversion: For some people, transferring money into savings seems like they are losing it, or at least losing out on the pleasure from immediate spending.

Inertia: Inertia is the tendency to not change how things are and retain the status quo. Starting new habits, like saving money, can be challenging at the beginning.

This topic of behavioral finance can be big business for companies that are trying to increase the money they get from us. The 2017 Nobel Prize winner in economics, Richard Thaler, introduced the “nudge” concept. Economic theories make assumptions about humans when formulas and algorithms are created. Thaler explored the concept that humans do not act entirely rationally, because emotions and biases are real.

He found that our human nature is to go with the default option. If we can set up healthier and wiser default options for ourselves, then we will have fewer opportunities to make unhealthy and unwise choices. We purposefully can nudge ourselves away from acting on the laundry list of human biases we have.

When it comes to savings, the best nudge we can create for ourselves is automatically saving. More than 93% of U.S. workers receive their pay by direct deposit. It is easy to have that deposit split into a checking account and a savings account. Find more automatic savings tips at

If you ask yourself “what do you want your money to do for you in 2021?”, do you have a list of suggestions to consider?  Remember to break them down into the following manageable steps.  Be specific with the amounts to save or pay towards debt.

Measurable- How are you going to monitor your progress with money?  An account, an envelope, or a calendar to show how close you are to your goals?

Attainable- How invested are to you to make this happen?  Are you passionate enough to work towards this goal?

Realistic- With the funds you have available, can this goal be achieved in the time you have allotted for it?

Time Bound- Setting a date to accomplish this is simply a guide to help you reach your goals.

After deciding what you want your money to do for you this year, write your goals down on note cards and post on your kitchen window, bathroom mirror, car visor, and in your wallet.  Each time you go to spend money, then ask yourself, do I want these goals more than I want this item?  In short, it’s about choices and consequences.  Make a plan to make your money work for you both now and in the future.  Emily had this quote from Warren Buffett: “Do not save what is left after spending, but spend what is left after saving.”


Melinda Hill is an OSU Extension Family & Consumer Sciences Educator and may be reached at 330-264-8722.

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