#Sciencekaari के इस एपिसोड में आयुष यादव स्क्रीन एडिक्शन के विज्ञान के बारे में बताते हैं। हम स्मार्टफोन के आदी क्यों हो जाते हैं? स्मार्टफोन हमें कैसे नुकसान पहुंचा रहे हैं? स्मार्टफोन हमारे दिमाग के साथ कैसे खिलवाड़ कर रहे हैं? आज की तकनीक में क्या गलत है? हम स्मार्टफोन और इंटरनेट की लत को कैसे दूर कर सकते हैं? यह सब और इस वीडियो में और भी बहुत कुछ|
Amazon Empire: The Rise and Reign of Jeff Bezos (full film) | FRONTLINE
Amazon Empire: The Rise and Reign of Jeff Bezos (full film) | FRONTLINE
This article describes a relatively new budgeting technique called Budget Burn Down which has already helped hundreds of thousands of people save money and achieve their financial goals.
Story Time
It was a dark and stormy night. Beads of sweat began to roll down Roger’s forehead as his eyes darted nervously back and forth between the pitch black forrest road ahead and the red warning light on his dingy, old gas gauge.
Roger was lost. Completely, utterly, hopelessly lost.
“Shit.”
Roger’s anxiety turned into full blown panic as he felt the car go dead. He frantically started pressing the gas pedal harder and harder. No go. He looked at his phone again. Still no bars.
“Shit!”
Roger managed to guide his car over to the side of the road as it slowly rolled to a stop. For a full minute, Roger couldn’t move. He sat frozen with fear staring straight ahead while his mind raced through his worst nightmares.
“How could I have been so stupid?”
Turning our Fear into Power
Make no mistake. Running out of gas sucks. Perhaps the worst part about it is that in most cases it is a fairly avoidable mistake. So, let me ask you:
When’s the last time you ran out of gas?
Don’t worry, I’m not asking you a deep philosophical question about your life or anything like that. I am literally asking, “When is the last time you were driving a motor vehicle and it stopped moving because you ran out of gas?”.
Chances are, you can count the number of times this has happened throughout your entire life on one hand. Sure, when it happens it really sucks, but objectively speaking it almost never happens. Why is that?
In most cases, it is because of the following three factors:
- Gas costs money and is not always easily available
- It would really, really suck to completely run out of gas (especially alone in a dark forest in the middle of the night)
- We know how much gas we have left at any moment by quickly glancing at the gas gauge
Or, from a more general sense:
- There is a valuable, diminishing resource
- There are significant consequences if that resource is ever fully depleted
- A simple, intuitive monitoring system exists to see how much of that resource is left at any given time
Whenever you can set up a situation in your life where these three conditions exist, you have the opportunity to create a powerful force for driving positive change.
The Cash Envelope System
One example of how some of this can be applied to saving money is The Cash Envelope System which has been touted for years by finance gurus like Dave Ramsey and blogs like A Bowl Full of Lemons. As explained in wikipedia:
The key idea is to store the cash to meet separate categories of household expenses in physically separate envelopes.
At the beginning of each time period (usually a week) you put cash in the appropriate envelopes. Once an envelope is empty, you can’t buy any more items from that category until the next period.
This system works really well for a lot of people because (just like with the gas gauge example) there is a clear and straightforward way to see how much money you have left to spend for a particular category (i.e. how much cash is left in the envelope). However, this system has several flaws:
- Time & Effort — Setting up and maintaining this system is non-trivial. For some people this is a feature, not a flaw. The extra effort gets them more emotionally involved in the process. For many others, however, this is too much work and prevents them from sticking with this system.
- Categorization Craziness — At first it may seem like separate envelopes for separate categories makes sense. But…what about when you have an expense for a category that doesn’t exist? What if an expense covers multiple categories? What if you need a new category for your Minecraft Llama purchases? What happens if half way through a period you realize that one category should be split into two? It can get complicated.
- Unnecessarily Restrictive — The ultimate goal is to save money. Does it matter that you go over hundreds of dollars in one category if you are actually way under budget overall? If anything the categories are a means to an end.
- Non-intuitive Monitoring — One envelope is easy to monitor. A dozen envelopes? Not so much. It can take several minutes to determine your financial health at any given moment and that is way too long.
- Cash is Not Always King — Yes, there are a number of psychological benefits to using cash instead of credit cards. However, for many people (including me) those benefits are not worth the pain of dealing with cash. I would much rather get rid of my wallet altogether and use my phone to pay for everything if possible.
What some of us really need is a much simpler form of the Cash Envelope System that addresses some of these issues. That is where Budget Burn Down comes in.
The Budget Burn Down System
The best way to explain Budget Burn Down is to go back to those three conditions for driving positive change (i.e. Diminishing Resource, Significant Consequence and Intuitive Monitoring).
1) Diminishing Resource: Free Spend
What is the one primary resource we care about when it comes to saving money? Your bank balance by itself will not help here because that number only helps describe the current state. It does not capture anything related to the future which is needed for planning purposes. What we really need is something more like this:
- Expected income (or budget if no income) for a given month
- Minus expected bills during that month
- Minus desired savings goal for that month
- Minus expenses to date through the month
The resulting number from this equation is called Free Spend and it is the single most important financial metric to help you save money. This one number is more simple and can be more powerful than the many different category cash amounts used with the Cash Envelope System.
2) Significant Consequence: Spending Bankruptcy
What consequence do you think is more impactful to your daily behavior?
- Once you run out of your clothes budget you can’t buy any more clothes
- Once you run out of money you can’t buy anything
It is true that the first option can be more effective at curbing a specific bad spending habit. For example, if you were generally a frugal spender but the amazingly delicious ham and cheese croissants at Flour Bakery puts you over budget every month, then something like Cash Envelope could be really effective.
In most cases, however, saving more money requires behavioral changes across the board. Thinking in terms of individual categories can create unnecessary distractions and almost certainly waters down the potential consequences of not hitting your goal.
3) Intuitive Monitoring: Realtime Free Spend
The more simple and focused the monitoring, the easier it will be for you to understand where you stand at any given point in time and enable you to adjust your behavior accordingly. For example:
$173.53 left for 2 days this week
All you have to worry about each and every day is making sure this number is not going to drop down to zero. Forget about trying to budget for dozens of different categories or do any mental arithmetic. Just keep an eye on this one number.
The Psychology Behind Budget Burn Down
Back in 2003, authorities in city of Garden Grove, California were grappling with a big problem. Too many people were speeding through school zones. They tried a number of different tactics to curb this behavior but speeding cars continued to hit bicyclists and pedestrians in the school zones with depressing regularity.
Then, they tried something that was quite unique at that time:
“…they put up what are known as dynamic speed displays, or driver feedback signs: a speed limit posting coupled with a radar sensor attached to a huge digital readout announcing YOUR SPEED”
This experiment proved wildly successful with the average speed dipping below the posted speed limit at all Garden Grove schools. Motor vehicle accidents involving bicyclists and pedestrians dropped dramatically. The use of these dynamic displays quickly expanded throughout the state and then, ultimately, the entire nation.
The reason for this success (and the reason for the success of the Budget Burn Down system) can be explained by the idea of Feedback Loops:
“The signs leverage what’s called a feedback loop, a profoundly effective tool for changing behavior. The basic premise is simple. Provide people with information about their actions in real time (or something close to it), then give them an opportunity to change those actions, pushing them toward better behaviors. Action, information, reaction.”
I love how succinctly this captures the essence of the Budget Burn Down system.
Action. Information. Reaction.
Final Thoughts
Budget Burn Down is most definitely NOT for everyone. Some people simply prefer Cash Envelope or some other budgeting technique (or nothing at all).
However, as proved by our app it can be amazingly effective for people that want something simple and who are highly motivated by a good financial feedback loop.
