If you’ve ever persisted with a dead-end job, a loveless relationship or a university degree you quickly regretted starting, all in the hope things will somehow improve, you might want to pay attention.
Maybe you’ve endured reading a novel you hated from the first chapter or stayed through a movie just because you bought tickets – despite the fact you would rather be anywhere else.
You’ve likely done something similar with money.
Perhaps you’ve plunged money into a failing small business or felt obliged to stick with a stock after it crashed, then watched it go lower and lower. Certain cryptocurrencies come to mind.
Maybe you’ve stuck with a supplier at work because they promise to do better when they never live up to them.
Who hasn’t ever ‘chased their losses’ by doubling down on a bad bet?
All these actions, and anything else where we ‘throw good money after bad, are examples of a famous economic principle called the sunk cost fallacy, which can be applied to life in general.
It’s the tendency to continue with an irrational and risky course of action based on blind hope more than the likely outcome.
The principle explains why we persist with bad decisions even when they make our personal and work lives more difficult.
It’s a very human response to the loss to try even harder to win, sometimes to avoid feelings of guilt or inadequacy, or even just fear of looking bad.
But ego, politics and emotional decision-making can cause people to double or triple their financial losses, causing ongoing financial stress and emotional stress for individuals, their families and their organisations.
In the cold light of day, it’s not rational, but who hasn’t done something like this.
More importantly, how do we stop this apparently mindless behaviour.
In the research, the results suggest that increased mindfulness reduces the tendency to allow unrecoverable prior costs to influence current decisions.
“Meditation reduced how much people focused on the past and future, and this psychological shift led to less negative emotion,” Kinias wrote in the journal.
“The reduced negative emotion [then] facilitated their ability to let go of sunk costs.”
Evidently, mindfulness has some power over bad financial decision-making.
When it comes to how we interact with money, the optimum state is one of financial mindfulness.
Financial mindfulness is described as having awareness and paying attention to your finances and financial behaviours. It means more than being money smart or financially savvy, as it includes the capacity to regulate emotional responses that can lead to unhelpful financial behaviour and financial stress.
It is not necessarily about having a good financial position or good financial health, but an active process of being aware of and paying attention to your thoughts, feelings, and financial behaviours in a helpful way.
Another study from Elsevier’s journal Personality and Individual Differences in 2007 found “mindfulness is associated with less severe gambling outcomes”.
Chad Lakey, Keith Campbell, Adam Goodie (University of Georgia) and Kirk Warren Brown (Virginia Commonwealth University) were “hopeful that the greater attention to and awareness of ongoing internal and external stimuli that characterizes mindfulness may represent an effective means of mitigating the impulsive and addictive responses and intemperate risk-attitudes of individuals with problem gambling.”
That’s a long-winded way of saying that paying closer attention to what’s going on around you can reduce compulsive behaviour.
The researchers concluded: “In this light, mindfulness may help to lessen the grip of automatic thoughts, affective reactions, and behaviour patterns.”
Mindfulness also loosens our grip on any particular course of action, and it can help us become a little more flexible in our thinking.
It allows us to stand back from a problem and look at it holistically.
Research into the specific benefits of mindfulness is ongoing, but it seems clear that regular mindfulness practise can positively affect dysfunctional decision-making around money.
Mindfulness, in theory, sounds great. The deal seems to be roughly this: if I sit still and listen to my breathing for 10 minutes each day, I will be calmer, certainly cooler, possibly richer and definitely an all-round better person.
So how come it’s not working, you might ask because you probably feel like none of those things after a week or two doing mindfulness meditations.
However, that starting point of using mindfulness meditation to find self-improvement is, apparently, backwards.
“Meditation practice isn’t about trying to throw ourselves away and become something better, it’s about befriending who we are,” the world famous American meditation teacher and author Pema Chodron said. Chodron, was a stressed-out schoolteacher called Deirdre Blomfield-Brown until she was crippled by depression following the end of her second marriage in the 1970s.
So how does Chodron, one of the world’s foremost experts do it?
“It’s a way of being completely open to whatever is happening in your mind, and you realize your mind is wild and crazy and all over the place. The instruction is so simple: Just keep coming back to your breath. Then you say, “This is almost impossible!”
“It isn’t, but I know how hard it is.”
Initially, it will be hard – even Chodron admits her children sometimes found her uptight. So like anything, practice makes perfect.
In general, terms, if we feel like quitting after a couple of days we are expecting too much too soon.
“You might call it beginner’s uncomfortability,” says Andrew Fleming, Founder & CEO with Financial Mindfulness.
“I tried to learn the guitar literally every time I picked it up I would sweat because I was so uncomfortable. Trying anything new is uncomfortable and to experience full benefits one would need to engage for quite a while.”
Are there strategies, though, for dealing with the specific problems if they persist? Some of the most common include: I’m thinking too much, I can’t do this, I can’t sit still, I don’t have time, it hurts.
Here’s what British mindfulness expert Shamash Alidina wrote about some of these problems in Meditation for Dummies.
I can’t do this:
“When people say this, they normally mean they can’t focus … mindfulness meditation is one of the best ways to develop that focus! It’s completely normal for your mind to wander off when you’re meditating. However, as soon as you’ve noticed, bring your focus back to the object of attention specified in the meditation (often your breath). Each time … you’re training your mind to be more focused in the future. Remember, you can’t fail at meditation. As long as you try, you’ve succeeded.”
I can’t sit still:
“Some meditations require you to be … still for half an hour, but many don’t require this. You [can do a] body scan meditation lying down. And mindful yoga, walking or tai chi is meditation in movement. [A] three-minute mindfulness exercise is a great practice to do daily.”
I don’t have the time:
“If some of the busiest people in the world can find time to stop and meditate, even if it’s only five minutes, you probably can too. You can do mindfulness meditation at any time. You can wash the dishes mindfully, you can walk your dog mindfully or you can even have a mindful shower. So that takes no time at all out of your busy day.”
What about ‘It hurts’?
Tara Healey and Jonathan Roberts, writing for mindful.org are clear on this: “Being in a lot of pain is not a mark of doing it right. It can take some work, though, to find a position (or a few positions) that don’t lead to intense pain … try out different postures and supports … a hugely important lesson of meditation is that even comfort is, well, bound to eventually become uncomfortable.
“For this reason, once you find a suitable posture and support, it’s a good idea to avoid making too many adjustments.”
Getting fully into the meditation itself can help: “People have found that as they relax that inner tension, it often results in less bodily tension.”
As for I’m thinking too much, well that one is addressed by realising practice makes perfect. You accept the thoughts you have without judgement and gently set them aside. Thoughts are normal and they will come and go, hence the widely-used analogy of allowing thoughts to pass like clouds against a blue sky.
The more you meditate, Chodron told Oprah, “the more you have a lightness about what’s occurring in your life … it’s not about becoming indifferent to life’s experiences; it actually allows you to be much more present with whatever arises.
“You’re fully engaged, but you see it from a different perspective.”
In other words, you will be able to cope much better with what life throws at you.
It’s said that the American dream is upward mobility – the ultimate example being to become the US President.
The Australian dream seems more modest – home ownership, especially the good-old quarter acre block.
But arguably it comes with bigger risks than the American dream, especially for Australians in capital cities.
With interest rates at record lows and house prices surging, home ownership seems like the golden ticket for many, given the promise of appreciation that seems like it could go on forever.
But realistically, home ownership is unaffordable for an increasing number of Australian first-time home buyers, especially those in major cities on average salaries.
The fact remains ‘the Australian dream’ means many people who cannot – or barely can – afford property keep reaching for it and opening themselves up to chronic financial stress.
Who wants to give up on a dream though, right?
The problem is most pronounced in Australia’s biggest city – Sydney – where the median Sydney house price is sitting at $1,112,671, Melbourne $859,097 according to Corelogic.
To be able to afford the repayments after making a 20 per cent deposit, a Sydney household needs to earn at least $147,629 a year, 9News reported.
If that household wants to avoid living in mortgage stress – and have the relative luxury of a buffer against interest rate changes – its annual salary would need to be at least 7,155.
Mortgage stress is classified as anything above spending 30 per cent of your pre-tax income on household repayments.
According to the salary tracking website, Payscale, the average annual salary in Sydney is $76,000 – meaning the combined income even two adults earning that would fall short of avoiding financial stress.
In Victoria, it’s $70,000, it’s $71,000 in the Australian Capital Territory, while in Queensland it’s $66,000 and in Western Australia, it’s $73,000.
Because property prices are highest in New South Wales, Victoria and the ACT, anyone considering buying a home in those States, need to be on a six-figure salary to have any realistic hope of entering the property market.
9News reported 41.1 per cent of households across Australia are in financial stress despite the lower interest rate environment.
In NSW, 44.19 per cent of households were in financial stress and 37.66 per cent of households reported being in mortgage stress, and property is only getting more expensive.
Recently the ANZ bank predicted property prices in Sydney and Melbourne could surge a further 19 per cent and 16 per cent respectively before slowing in a year’s time.
So, what’s the answer? We are not saying avoid home ownership – but to be aware of what you can and cannot afford.
Mindfulness can be part of the solution to financial stress and avoiding it from taking hold.
A clarification is needed though. Mindfulness is not a solution to loan repayments that are just too high to sustain – if that is happening, we’d suggest getting honest with your bank and urgently and seeing what can be done.
But a mindful approach to money can help those who need to avoid unhealthy habits with money to maintain repayments.
Perhaps most importantly, becoming financially mindful will help people avoid entering contractual situations they really should not be in.
Staggering number of Australians with less than $2000 in the bank.
Financial Mindfulness was interviewed by the Daily Mail on the latest study on financial stress. These results show just how dire circumstances are for some Australian’s.
Revealed: The staggering number of Australians with less than $2000 in the bank – and why the slow Covid vaccination rollout could leave them financially ruined.
Financial Mindfulness study showed 34 per cent of people couldn’t raise $2,000 Almost half or 45 per cent of Australians can’t pay their weekly household bills Financial Mindfulness chief Andrew Fleming: those with low savings were at risk
Government and employers calling for halt to major minimum wage increases
A surprising number of Australians would struggle to raise $2,000 for a hot water, car or medical emergency and a slow Covid vaccine rollout could make that worse.
Australia’s eight-year run of weak wages growth is set to continue with both the federal government and employer groups calling on the industrial empire to withhold pay increases, despite the strong economic recovery from the Covid recession.
Money wellbeing app Financial Mindfulness surveyed 645 Australians and found 34 per cent of them would be unable to raise $2,000 to cover a financial emergency.
Almost half, or 45 per cent, could not meet their weekly household bills, the barometer of economic health taken in February 2021 found.
A surprising number of Australians would struggle to raise $2,000 for a hot water, car or medical emergency and a slow Covid vaccine rollout could make that worse. Pictured is a stock image
Financial Mindfulness chief executive Andrew Fleming said people with less than $2,000 in bank savings were particularly at risk.
A medical expense or a hot water system blowing up or a car breaking down: an expected expense hits people for six,’ he told Daily Mail Australia.
‘A lot of people are living week to week.’
Consumers already struggling with a mortgage, rent or credit card bills are increasingly turning to buy now, pay later apps, like Afterpay or ZipCo, or pay on demand, where individuals pay $80 a month to get $2,000 in the bank before their employer pays them.
Mr. Fleming said many Australians were unaware of the penalties they faced if they were late with repayments during a personal financial emergency.
‘For those who can’t raise $2,000 for an unexpected expense in the last month, there’s a high probability they’re going to resort to these new products – does the user really understand what they’re doing?,’ he said.
The past year has been very volatile, with the Covid shutdowns causing a 7 per cent plunge in gross domestic product, the steepest downturn since the 1930s Great Depression.
But the final six months of 2020 saw a 6.5 per cent surge in economic growth, the fastest-ever half-yearly pace of GDP expansion.
Despite that, the federal government is calling on the Fair Work Commission to refrain from giving Australia’s 2.2 million low-paid workers a substantial pay rise on July 1.
The federal government is calling on the Fair Work Commission to refrain from giving Australia’s 2.2million low-paid workers a substantial pay rise on July 1. Pictured is a cafe at Brunswick in Melbourne
The federal government is calling on the Fair Work Commission to refrain from giving Australia’s 2.2 million low-paid workers a substantial pay rise on July 1. Pictured is a cafe at Brunswick in Melbourne
‘Given the current uncertainties in the domestic and international economic outlook, the government therefore urges the panel to take a cautious approach.
Taking into account the importance of creating jobs for Australians and ensuring the viability of the businesses, particularly small businesses, which provide the jobs which are crucial to the economic recovery and the wellbeing of Australian families,’ it said.
The National Farmers Federation went further in its submission to the annual wage review, arguing minimum wage workers should get no pay increase until the Covid vaccine was given to most Australians.
‘The NFF recommends that the minimum wage be maintained at current levels until economic conditions have improved, market volatility has decreased, and the level of financial risk lowered,’ it said.
‘These conditions can be reasonably expected to materialise once trends indicating a recovery can be confirmed and the risk of additional waves of infection minimalised following the roll-out of the AstraZeneca vaccine.’
Mr. Fleming said the prospect of more weak wages growth would put struggling consumers at risk.
‘If expenses are going up, out of your control, and income is stagnating, there’s a problem,’ he said.
Money wellbeing app Financial Mindfulness surveyed 645 Australians and found 34 per cent of them would be unable to raise $2,000 to cover a financial emergency.
Almost half, or 45 per cent, could not meet their weekly household bills, the barometer of economic health taken in February 2021 found
On July 1 last year, the Fair Work Commission agreed to give minimum wage earners a $13 a week pay increase which saw their wages edge up slightly to $753.80 a week or $19.84 an hour.
The 1.75 per cent wage increase was below the inflation rate at the time of 2.2 per cent.
Since then, inflation was shrivelled to just 0.9 per cent, putting it well below the Reserve Bank of Australia’s 2 to 3 per cent target range.
With a horrible year in 2020, routines have returned back to normal but 2021 hasn’t started well. David, 51 and Lisa, 46 are parents to Joshua (8), Jake (13) and Bella (11).
Josh misses his dad while Bella is angry at her dad and hasn’t seen him for 4 months. She quit her after-school job at a retail chain because she has exams this year. Jake’s behaviour problems at school have worsened since the break-up.
David works as an executive in a chartered accountancy firm and has strong earning capacity but as a divorce seems likely he may have to give the house to Lisa as it’s simpler for the children to spend the school week with her.
Both David and Lisa have been emotionally and physically affected by the separation and are worried about the future. Although each have big financial worries, they have become less careful with money, sometimes spending to numb emotions like anger, grief, loneliness and sadness.
Both David and Lisa would see improvements to their mood, energy and sense of security if they introduced proven mindfulness practices into their lives, especially around how they use money.
In other words, Financial Mindfulness. Mindfulness is not, as some people believe an attitude, but is better described as the regular practice of moment-by-moment awareness.
A ‘financial wellness’ study of PwC employees found 52 per cent stressed about their finances with 45 per cent reporting more financial stress in the last 12 months.
Reconciliation after 17 years of marriage seems unlikely for David and Lisa. The couple argued loudly at home for six years before they agreed he would move out.
Lisa is angry and feels disrespected and that David has been a poor husband, although she accepts, he has mostly been a good provider and done his best as a father. She accepts some contact with their father is good for the children but struggles with any interaction with David.
“How can I trust anything he does now?” she often hears herself saying to friends and family.
Lisa feels resentful with three children to look after and tries to make herself feel better by socialising with friends over dinner, at concerts and art galleries, pampering herself (at health retreats when David has the kids).
She has taken a few short holidays and one extended one to Britain where her sister and her husband live and then through Europe. She also re-joined the gym because she is drinking and eating more and has started smoking again. She is still working in human resources as a consultant but has a rising credit card debt.
David now lives alone in a two-bedroom apartment 30 minutes from the family but still does maintenance on the house he owns with Lisa, though he isn’t welcome to let himself in. He also maintains their investment property.
Since the separation (7 months ago), David drifted into depression and is finding seeing the children for only 3 days each fortnight difficult. He is working longer hours, going out for late dinners, is drinking more and goes on fishing and golfing trips with old friends.
He has also increased his spending on his two collecting hobbies: wine and sports memorabilia but is also gambling too often. He recently lost his driver’s licence for drink-driving.
“I sometimes wonder what the point is to any of this,” David often thinks. “Without the kids there wouldn’t be much to life for me.”
Both David and Lisa are doing individual therapy and meet for family counselling once a month. But growing financial pressure and stress is not helping their coping skills and both find themselves unhappy and snapping at their children sometimes.
In the coming months, separated couples like David and Lisa find it very challenging to manage their finances, can find some respite by empowering themselves with an app that reduces and measures financial stress by Financial Mindfulness.
Financial Mindfulness will bring a completely new element to the world of personal financial behaviour by giving people medically and scientifically-proven tools to make spending decisions that they will be proud of later (instead of regretting).
“Everybody has a need to manage their financial affairs in a complex world. We understand people would like to improve their financial wellness.”
“We can actually help, for the first time people can choose a comprehensive, medically tested personal pathway of actions, to take responsibility in dealing with their financial stresses.
A personal program as an app, also transferrable to your computer.”
“Financial Mindfulness creates a pathway for users from the experience and impact of ‘financial stress’ to one of financial health, wellness and fulfilment.” says Financial Mindfulness Founder & CEO, Andrew Fleming.
“As a result, people like David and Lisa will become more self-aware and take responsibility of their unhealthy financial habits and use the tools of our program to form new healthier behaviours over time.
This improves their self-esteem, their productivity at work and by extension, improve the lives of their children.”
Financial Mindfulness exclusive interview with Dr Ellen Langer – Part 2.
We continue with our exclusive interview with the world-renowned Professor Ellen Langer. Part 1 can be found here
Financial Mindfulness:
So, what is the difference between mindfulness and positive thinking?
Dr Langer:
“Positive thinking says things are positive, by definition. Mindfulness says outcomes are neither positive or negative, they are what they are.”
“If you compliment someone and they take that as ‘oh aren’t I wonderful’, then they become vulnerable to an insult.”
“But if the compliment is neither good nor bad, then the person complimented is pleased, but better able to deal with changes in the other person.”
“When you understand that outcomes can end in any number of ways, it would be foolish to always see the negative version.”
“I have been told I mark the edge of the optimism continuum!”
Financial Mindfulness:
You’ve said it’s not about meditation, why is that?
Dr Langer:
“Mindfulness is very different from meditation. Meditation is not mindfulness, meditation is a process, a program one goes through to achieve post meditative mindfulness.”
“It’s fine, it’s not mutually exclusive with the work I do and I did some early work in meditation but mindfulness as we study it is more immediate, not better or worse.”
“You can more easily work mindfulness into companies, schools and so on without people having to spend 20 minutes twice a day to meditate.”
“To be mindful is to stay aware of what’s going on, once you recognise that things are not always as thought, then you naturally stay tuned in.”
“It’s when you believe 1+1 always equals 2 and always will be, and can be nothing else that you don’t pay attention to the context.”
“So now every time someone asks how much is 1 and 1 you’re going to pay attention to the context, are they talking about piles of laundry?”
Financial Mindfulness:
Can you think of dangerous assumptions we make when our brains are on ‘autopilot’?
Dr Langer:
“What happens when you are on autopilot is you are presuming everything is going to stay the same.”
“Let’s say you’re driving on ice and the car starts to skid, what do you do? You ask this of people older they’re going to tell you that you gently pump the brakes to get control of the car.”
“That was the right thing to do before there were anti-lock brakes. Now there are anti-lock brakes the right thing to do is to firmly hit those brakes, hard. What you were taught is not only ineffective its likely to cause accidents.”
“Things are changing all the time, all things, and most advice was good then and may not be so good now. So, understand that change is inevitable.”
Financial Mindfulness:
Why has mindlessness become so pervasive?
Dr Langer:
“Because that’s what schools teach – they teach absolutes, they teach that 1+1 is 2 and always will be 2, rather than realise that the right answer always depends on the context.”
“So, I tell the story I was at a horse event. I’m a straight A student, right? This man asked me if I could watch his horse for him cos, he wants to get his horse a hot dog.”
“Well, I thought ‘that’s ridiculous, I’m Harvard-Yale all the way through nobody knows better than me horses don’t eat meat! Period. End of story’. Well, he comes back with a hot dog and the horse ate it.”
“And then I realised everything I thought I knew could be wrong. My As were hindering me rather than helping me.”
“Everything you think you know could be wrong in some context. Every time you think you’re wrong, it could be right in another context.”
“We don’t look for that though. Every time people make mistakes, they try to go back to the original plan, as if that original plan was handed down from the heavens, rather than that original plan itself was just a decision, which means there was uncertainty.”
“There are many things in place out there that teach us to look for absolute right answers, and as soon as we accept things as absolute, we’re setting ourselves up to be mindless.”
Financial Mindfulness:
How can being mindful during the pandemic help us?
Dr Langer:
“I wrote about something about people who have a view of defensive pessimism, that they are hurting themselves and should switch to mindful optimism. Defensive pessimism is assuming the worst and expecting the worst, but hoping for the best.”
“That’s problematic in two ways. First, you tend to get what you expect.”
“The second is around the idea of ‘hope’. Everyone around the world thinks hope is a good thing. I don’t. Being hopeful is better than being hopeless, but hope has built into it an expectation of failure.”
“You don’t get up in the morning, go into the kitchen hoping that you’ll get a cup of coffee. You just walk in and expect to get a coffee and you have the coffee.”
“Negative expectations lead us to be stressed and stress makes us more vulnerable to all disease.”
“If you assume an attitude of mindful optimism it doesn’t mean you have your head in the sand, or you’re not paying attention to things, it means you make a plan.”
“So, we have a pandemic. My plan is I’m going to keep social distance, wear a mask and wash my hands as frequently as I need to and then I just go about my business.”
“If you do that, as a result you’re building up the resources so should something happen you’re going to be stronger and better able to deal with it.”
“There’s a little expression that says ‘no worry before it’s time’ – it’s very important for your physical and your mental health.”
“Also, we need to remember life consists only of moments. This might sound a little like it’s from a Hallmark card, but there’s something deeper in it: remember your life is about moments. That’s all it is and where there’s a pandemic, whether you’re at home or work all you have is that moment.”
“If you make that moment matter, then it all matters.”
“A mindful approach means I can find real advantages to living in a pandemic and I think if we stop and become more mindful, most of us can.”
“An example is Zoom meetings.”
“I’m loving the zoom meetings, not just because I don’t have to worry about my choice of shoes and pants that day, but when I’m zooming with a large audience, I see everyone and they’re just a foot away from me. Whereas when I’m lecturing to a large group I’m here, and the audience is removed by being over there – normally it doesn’t feel as personal.”
“Zoom also gives me the names of everyone in my lecture, so if I have to ask you a question, I don’t have to make believe I remember your name, I just look and I see your name.”
“One of the things I argue about a lot, although I haven’t written much about it, is we have many business gurus who push the idea of ‘work-life balance’.”
“It’s a bit like hope – hope is better than being hopeless but not as good as just assuming everything will be fine. Work-life balance is better than work-life imbalance.”
“But there’s a better way, which is work-life integration.”
“One of the strong advantages of all this working from home is more integration of our lives into work.”
“I’ve given lectures where my dogs have been barking and I’ve been talking to people and their young children walk in on them and so what? It’s all part of life and helps us integrate our home and our work life.”
“One of the big mistakes people make about work is putting up with feeling so stressed at work and I don’t think that that’s a good thing, I don’t think doing something 40 hours a week and being stressed is good for you.”
“So, in many respects the pandemic is a time to figure out what you enjoy, what you miss, what you don’t miss, and then you go forward with this opportunity that you wouldn’t have had, because you would have been in your typical routine.”
“So, try to enjoy your job. Sure, you can’t always be eating out of restaurants. I haven’t eaten out since Covid and I’m enjoying cooking enormously.”
“You come to learn that life isn’t going to rise or fall on one meal, so what if one meal turns out to be awful, who cares?!”
“Be aware of the possibilities and move on to enjoying the next moment!”
Financial Mindfulness:
Dr Ellen Langer, it’s been a pleasure, thank you.
Dr Langer:
Thank you, it’s been lovely talking with you. Stay safe.
Financial Mindfulness exclusive interview with Dr Ellen Langer – Part 1.
Financial Mindfulness had the good fortune in March 2021 to secure an exclusive interview with the world-renowned Professor Ellen Langer, the first woman ever tenured in psychology at Harvard University, in the United States. She has written over 200 research articles and six books on the illusion of control, aging, decision-making, and mindfulness theory.
Dr Langer is also known as ‘the mother of mindfulness’ and is regarded as a major influence in the positive psychology movement.
Her next project is a paper on mindful economics.
We started by asking Dr Langer, who remains a brilliant and quick mind at 73, about her new project, the current trend towards so-called mindlessness as a backlash against the mindfulness movement.
Financial Mindfulness:
Can you please explain your term ‘Mindful Economics’ and why you think it is the next revolution in economics?
Dr Langer:
Standard economics and my own research has agreed that most people tended to have been mindless most of the time. Economics has largely studied the aggregate effects of mindless individuals while I have been studying individual mindfulness as a cure to mindlessness for more than forty years, and shown how it leads to better individual health, longevity, well-being, and decision making. So now what if entire groups of people become mindful? How would that effect the economy and society as a whole? That’s where mindful economics comes in. Mindful economics is the new approach to studying how mindfulness can spread and impact an entire society. It revolutionizes economics by upending long-held assumptions that had been based on the behaviour of mindless people such as the scarcity of resources, stable preferences, forecasting, and optimization, and suggests new ways forward towards unlimited progress and wealth in the context of an uncertain reality.
Financial Mindfulness:
There’s a lot of talk about ‘mindlessness’ as something that we need in life to switch off a bit because of how much pressure is on people nowadays. Does ‘mindlessness’ have a place?
Dr Langer:
“No, no, no! I have to strongly disagree. It’s important to recognise mindfulness is the essence of engagement and enjoyment. If you’re having a good time should you limit it? I think not.”
“The instances you should be mindless, are: one if you’ve figured out the very best way of doing something and two, if circumstances don’t change – and things are always changing.”
“People have said to me ‘what if you are in the park with a kid and the kid goes into the street, shouldn’t you just mindlessly just drag the kid back?’ My response is no.”
“First, if you were mindful before, the kid wouldn’t have ended up in the street in the first place, you would have gotten cues earlier on. And second, what you want to do is notice in subtle way whether cars are turning right or left so u know which way to pull the child out of the street.”
Financial Mindfulness:
So what is mindfulness and what isn’t it?
Dr Langer:
“People often confuse mindfulness with thinking, and thinking itself has gotten a bad rap. The problem is not the thinking per se, it’s the worrying about thinking successfully, thinking: can I figure it out? And what’s going to happen if I can’t figure it out?”
“Mindfulness is just noticing. The process of just noticing feels good, and it’s energy-begetting not energy-consuming and is literally and figuratively enlivening.”
Financial Mindfulness:
What about the usefulness of mindfulness when it comes to money? A lot of people are suffering with financial stress – in epidemic proportions. Do you have a view on that?
Dr Langer:
“Stress itself is mindless, what people are doing when they’re feeling very stressed and worrying about money is being mindless.”
“Events themselves don’t cause stress, what causes stress is the view you take of an event and stress requires a belief that something is going to happen, which is illusory – because we cannot predict – and second that when it happens it’s going to be awful.”
“So, if you say to yourself ‘what are some reasons something bad might not happen?’ because you understand that maybe it will, maybe it won’t.”
“If you say ‘what are the advantages of it happening then you can see them – because there are always advantages. Then you end up in the position, maybe it will happen, maybe it won’t – and whatever happens, things will be fine.”
“So as an example, we go out for dinner, and the food is good – wonderful. But oif we go out for dinner and the food is awful – wonderful, because I won’t eat so much, and presumably I won’t gain weight.”
Financial Mindfulness:
Why is it important to be mindful about money?
“Remember, being mindful about anything is literally and figuratively enlivening. Being mindless with respect to anything is holding the world still, when it’s naturally varying, so it buys you nothing.”
“The question seems to be so what should people do because they’re so stressed about money? The stress is based on an assumption that they know something bad is going to happen. But you can’t know the future.”
“Sure, people think: ‘what if I lose my job? I’ll have to give up my job, I’ll have to give up the house and I won’t be able to feed my family!’”
“All of that is just guessing. If that person said to him or herself: ‘what are reasons I won’t lose my job?’, then the stress tends to dissipate. Some people are going to lose their job and worrying about it doesn’t buy you anything.”
“If there are things you can do to prevent losing it, do them.”
Financial Mindfulness:
Financial stress can have aspects to it that are very much ‘auto-pilot’ thinking, like not opening mail. What can be done about that?
Dr Langer:
“Surely, not opening your mail is not being engaged with the world and with reality. Unless you make a decision up front to do that.”
“You could be in the middle of an important interview and in the middle of the interview you realise your money in the meter has run out.”
“So, you have to think should you end the interview prematurely to go and put money in the meter or not. It depends on your finances.”
“I probably wouldn’t, but I’d have to be aware I may get a ticket – that was the price of the interview.”
Financial Mindfulness:
What about impulse spending, where people are spending money to make themselves feel better?
Dr Langer:
“Is that always a bad thing?”
“Of course, it can depend on your finances or it can depend on how depressed you are. Whether it’s worth it or not. When you come home if you see ‘my goodness I went crazy, you probably can return most of the items.’”
Financial Mindfulness:
Some of what you say makes us think that mindfulness is a bit like curiosity. Is that right?
Dr Langer:
“Mindfulness is very similar to curiosity, with one important difference, if I’m curious what’s happening out the door of my house and I open the door I see what’s there.”
“Curious has a right answer and an end point. Mindfulness doesn’t because anything can be examined from multiple perspectives and it’s all changing, all of the time.”
“It’s an explicit awareness of uncertainty. Uncertainty is not the exception.”
“A mindful person comes to learn over time how to exploit the power in uncertainty.”
Financial Mindfulness:
How do we switch mindfulness on each day? How do you switch it on?
Dr Langer:
“I don’t know that I turn it off! So, here’s some simple ideas. Whatever you are doing, look for different ways of doing it. When you wake up in the morning, if you live with somebody, ask yourself three ways that this person is different today from the way they were yesterday?”
“You go into the kitchen, the lighting will seem a little different, the coffee is going to taste a little different, notice the differences.”
“When you look for differences in the things you think you know, you come to see you didn’t know it at all.”
“It’s like with the example of what does one plus one equal? We think we know that it’s always two. But it’s not.
“Sometimes the answer is one. If you have one pile of laundry and you add another pile of laundry, you get one bigger pile of laundry. But it’s still one plus one equals one.”
Financial Mindfulness:
How can you tell what a mindful person looks like?
Dr Langer:
“Some years ago, we did an exercise with magazine salesmen where they were taught to sell the magazines in two ways, one was mindless – where they told learn the script, memorize it and then go and give the pitch and the other was a mindful approach.”
“The mindful salesmen were told ‘learn the pitch, but make it ‘new’ in very subtle ways every time you make it’.”
“After they spoke to the client, somebody else arrived and asked the person to evaluate the salesperson and it turned out when somebody was mindful, they were evaluated as more charismatic. They also sold more magazines.”
“In lots of cultures people have expressions like ‘the lights are on, but nobody is home’. You know when someone’s not ‘there’, so you should know when they are there.”
“There’s lots of research that shows that when people are mindful, they’re more charismatic, they’re seen as more authentic and trustworthy.”
“They’re also more open to seeing things as they are. They can see that one plus one sometimes equals one.”
“I had these findings from a study of nursing home residents and we gave them mindful choices to make, the long-term result was that people making mindful choices actually live longer. So, I gave this talk about life and death with these findings – you know, you can live longer.”
“Somebody in the audience asked ‘is that always a good thing?’”
“It occurred to me, that’s true, maybe not in certain contexts.”
“A mindful approach generally though can see why something you might have thought was bad is actually good in some contexts.”
Mindfulness can help you get in control of your spending.
Why do we spend money to feel good now, even if it’s obviously going to have negative consequences at some point, such as damaging financial stress.
And why do we seem to make better decisions if those decisions are planned and not impulsive?
The answer is complex, but just so you really get the ideas, first try to imagine yourself under a lot of financial stress. Maybe you are working and studying, and dealing with a worrying, ongoing health issue too – so you’re always flat-out busy, your mind feels ‘full’ and you have a sense of no end in sight.
Imagine how that stress feels in your body. It’s a difficult feeling, right?
Then without thinking, answer which of these options you’d pick:
buying two pairs of the same fancy shoes you like because they are in the window at your local mall or ordering them for 25 per cent less but having to wait a month.
selling your car today for $500 less than you could probably get because a buyer is ready with the cash and you want a weekend away or waiting for more money.
Many people probably favour the first option in each case because they want the ‘reward’ now.
Why? According to behavioural scientists, “present rewards are weighted more heavily than future ones. Once rewards are very distant in time, they cease to be valuable,” so says behavioraleconomics.com.
This was the finding of landmark research done in 2002 by Shane Frederick, George Loewenstein and Ted O’Donohue, and published in the Journal of Economic Literature.
Interestingly, when it’s not possible to be rewarded immediately, we will often wait longer to receive a greater reward. Research shows if given the choice between $100 in a year or $120 in 13 months, we are more likely to wait.
All this suggests when if we plan for the future, we are likely to make better decisions about money. But it depends what that future event is, and how far off it is.
If it’s a skiing holiday with friends in the Canadian Rockies next Christmas, we will probably start saving. But if it’s retirement at age 70 (as the Federal Government proposes from 2035), that feels somewhat less urgent, even though few would argue it’s more important than a skiing trip.
In a 2014 report on savings, the Reserve Bank of Australia showed “younger households place more weight on saving for large purchases and emergencies to smooth near-term consumption rather than saving for longer-term (retirement) consumption.”
“Some keys to managing decisions like these are to make those far-off outcomes feel closer,” Peter Sokol-Hessner, assistant professor in the department of psychology at University of Denver, The Huffington Post.
He suggested “to imagine how you’ll feel when you can use those retirement funds, how grateful you’ll be that your younger self sent this gift into the future.”
What has all this got to do with mindfulness?
Mindfulness is being fully aware of what’s happening in the present moment. When we can train our minds to be more aware of each moment – either through some kind of mindfulness practice like meditation, or just a deliberate change in mindset – we make better spending and saving decisions.
We can think about what we really need now, versus what we need in the future.
For instance, you may decide to do extra research before selling your car or home, looking more carefully at trends and brainstorming other ways to find ready cash.
A big benefit of becoming more mindful is it creates a buffer against the power of the external pressure to spend. Think about the hype involved around the release of the next stage of a sought-after apartment development: it’s in the interests of a real estate agent to get potential buyers into a feeding frenzy state with other potential buyers, so the stage sells out, the project can go up and the next stage goes into marketing overdrive.
“It’s not just real estate,” says Financial Mindfulness’s founder and CEO, Andrew Fleming.
“A lot of marketing works on the idea of scarcity and urgency, whether there’s only 100 in stock, or it’s a brand new order, or whatever. Think about new phones, new cars, something that is labelled ‘limited edition’.
“Marketing often works on us by getting us to make a decision before we’ve had a chance to think through all of the consequences.”
“Becoming more mindful will help you to buy things rather than be sold to. It’ll allow you to come from an understanding of your real needs, consider the consequences of your actions and respond by making decisions, rather than be manipulated by marketing.”
Mindfulness to remain a key part of what it means to be human in the future.
While we look in awe at the videos of amazing robots coming out of labs worldwide on ever smarter smartphones, sceptics and academics are meanwhile busy wrestling with the real value of mindfulness.
A leading British expert has made a huge claim linking the two.
“Mindfulness may come to be seen as the core 21st century capacity, because it concerns our only competitive advantage over the machines: awareness itself,” wrote Jamie Bristow, director of the Mindfulness Initiative in the United Kingdom. The Initiative is an institute that lobbies politicians to include matters “of the heart and mind” in their policy decisions worldwide.
That’s right. We may actually have an edge over machines.
We have known for decades that machines have the potential to outperform humans in almost all areas of life. The World Economic Forum (WEF) concluded in a 2020 report that “a new generation of smart machines, fuelled by rapid advances in artificial intelligence (AI) and robotics, could potentially replace a large proportion of existing human jobs.”
In the next few years, 3% of jobs will be potentially automated by AI, according to PwC’s report “Will robots really steal our jobs?” Increased digitization resulting from COVID-19 may accelerate this trend. By the mid-2030s, as AI advances and becomes more autonomous, 30% of jobs and 44% of workers with low levels of education will be at risk of automation.
“Artificial intelligence and robots are not just challenging blue-collar jobs; they are starting to take over white-collar professions as well. Financial and sports reporters, online marketers, surgeons, anaesthesiologists, and financial analysts are already, wrote Business Insider’s Kathleen Elkins.
The ‘technological singularity’ is the name given usually given to the point at which artificial superintelligence sees machines ‘transcend’ human beings. Some experts in the area believe this will happen before 2045, although Google’s director of engineering, Ray Kurzweil thinks machines will match human intelligence by 2029.
A slightly newer take on the idea is that it’s not black and white, and that we are simply merging intelligence – a process that accelerates the more we rely on it. Think of our use of google maps instead of street map books of just 15 years ago.
So, as we merge with machines, what parts of us survive?
Writing for Mindful.org, Jamie Bristow pointed out that some of the world’s thought leaders are looking past inevitable explosion in AI and to how our innate humanity can solve problems robotics cannot.
One of the key issues put forward at the 2017 World Government Summit in Dubai was that “We need to develop 21st century job skills that cannot be replaced by robots and AI, which means exploring and cultivating what makes us uniquely human.”
Bristow alluded to the fact that plenty of parts of many jobs, such as being listened to by, for instance a GP, carry value beyond anything a machine could do.
In 2021, Bristow was more certain than ever than our innate humanity
‘As the ‘fourth industrial revolution’ advances, bringing with it increasing automation and escalating AI, it will be ever more necessary to retell our stories of purpose and value around qualities that are innately human,” he wrote in a recent paper, Mindfulness: Developing Agency in Urgent Times.
“Indeed, it has been suggested that we are entering the age of humanics rather than robotics: “an age that integrates our human and technological capacities to meet the global challenge of our time.”
A great example of this at play is how Big Tech is paving the way with the global roll-out of the COVID-19 vaccines. “Globally, we will be using everything from AI to machine learning, the Internet of Things, and blockchain to process huge amounts of data about vaccinations happening in real time, says Daniel Newman principal analyst of Futurum Research. And the data isn’t just about “shots in arms.” It’s about cold-chain traceability (proper storage), serial number verification, vehicle routing and geofencing of vaccine delivery, and more. It’s a supply chain problem at a massive scale.
Another key idea proposed at that summit, by Professor Klaus Schwab, founder of the World Economic Forum, was “new, human-centered thinking—considering happiness, wellbeing, purpose and meaning” in policy-making. Human happiness was also consistently near the top of the agenda, especially with mass unemployment a big possibility due to automation.
“It goes without saying that anything that we can do on autopilot, robots and AI will soon do better,” Bristow wrote.
Mindfulness could be a key, partly because it can be much more powerful than simply quieting the mind.
“Mindfulness practice is about more than just attention training. It’s also largely about developing kind curiosity towards inner experience, and provides a framework for deep inquiry into the psychological mechanisms of distress and wellbeing,” Bristow wrote.
In other words, when we observe thoughts without judgement we can see past our own insecurities and find it easier to empathise with others.
“This heightened empathy arises in part through the development of body awareness—as it turns out, the more we are grounded in the body and know stillness, the more we can feel moved,” wrote Bristow.
Psychologists who utilize mindfulness in their work might well add guilt and healthy shame to empathy on a list of things machines could mimic but would find it very difficult to do as naturally as humans. Could a machine that malfunctioned and injured its owner slow its output and produce extra reporting until it had regained trust?
If you consider financial stress too, it’s hard to imagine how machine learning can cope with the highly complex emotions involved in our dysfunctional and illogical behaviours with money – such as shame and remorse from things like gambling, impulse spending, or comfort-spending.
A mindful approach is inclined to accept the confusing, even contradictory and move forward purely based on empathy not only a focus on outcomes.
“Far from just another fad, perhaps the mindfulness craze is the start of a macro trend towards putting self-awareness and contemplative practice at the centre of human endeavour. Let’s hope so.”
It’s hard to argue with that – unless you are a super smart phone capable of understanding this on your own.
Using Mindfulness practice to help reduce financial stress.
Mindfulness has been a big buzzword for several years.
The cabin-fever worry of the COVID pandemic reinvigorated mindfulness as a solution too. Mental health organisations, major news outlets, universities and of course meditation programs were discussing the merits of mindfulness as a way to deal with COVID stress.
In recent years, mindfulness stress-reduction programs have emerged as a key plank in corporate wellness programs too – the new gym-at-work, except for the mind.
Mindfulness programs, run by external trainers and delivered in-house to stressed-out employees are in hot demand as employers seek to curtail the impacts of a big range of lifestyle and mental health issues that lead to costly absenteeism and its sneakier sibling, presenteeism.
There is little doubt mindfulness practices – which range from yoga to tai chi and the most popular recently, mindfulness meditation – work.
Researchers for the American Psychological Association, Daphne Davis and Jeffrey Hayes found many clear benefits from a broad review of prior research into mindfulness.
Davis and Hayes’ 2012 practice review What Are the Benefits of Mindfulness? A Practice Review of Psychotherapy-Related Research, found mindfulness “decreases rumination” (or ‘over-thinking’), improves memory, reduces anxiety and depression symptoms, people to become “less reactive” and more flexible in their thinking.
People who meditate were found to be better at “self-observation” and could adapt better to “stressful and negative situations” and concentrate better after receiving “upsetting stimuli”.
But the issues that worry us enough to interrupt our work and sleep are so mind-bogglingly varied that general, one-size-fits-all mindfulness programs could conceivably frustrate us as we are encouraged to gradually become more mindful across every areaof life.
Wouldn’t it make more sense to apply targeted mindfulness practice to one or two areas of life? Maybe the ones that stress you out the most?
Think about that: don’t we need distinct mindsets to resolve relationship issues, compared to say, problem-solving our career stagnation, compared to finding the calm and patience to cope with a major health scare or crisis, compared to the action needed to reign in our ballooning credit card debts?
One of the biggest issues stressing out employees is something not often associated with mindfulness meditation: financial stress.
The American Psychological Association’s Stress in Americansurveys consistently report high rates of financial stress. In 2020 it found that 73 per cent of Americans with a household income of under $50,000 reported money was a significant source of stress.
It’s not a one-off result. 73 per cent of all Americans rank their finances as the No. 1 stress in life, according to new Capital One CreditWise survey.
Another survey by Thriving Wallet, a project backed by Arianna Huffington’s Thrive Global and Discover, found that 90 per cent of Americans said financial considerations have an impact on their stress levels
In Australia, it is estimated at least 2.44 million people are suffering financial stress, with about a quarter of women in financial stress, compared to 14 per cent of men.
The numbers come from AMP’s 2019 Financial Wellness report, which found that financial stress has affects more than personal lives.
“While many people think money worries are a personal issue, our research shows being financially stressed spills into your working life, increasing absenteeism and impacting productivity,” said AMP Director of Workplace Super, Ilaine Anderson.
The report estimated that financial stress costs businesses $31.2 billion a year in lost revenue.
While one solution AMP suggested was financial goal-setting, given the amount of distress and discomfort money causes us, could there be other answers too? What if mindfulness practice could dramatically change not only the way we view our money problems, but lead us to concrete actions that solve some of them?
Andrew Fleming, Founder of Financial Mindfulness,says mindfulness practice can help with obvious but hard-to-control problems like overspending in two ways. The first is to help you stop re-living the kind of fantasy in which it’s somehow okay to continue living beyond your means.
“You become more aware of the situation not as you want it to be, but as it really is,” he says.
“The second thing it does is to create calmness, less emotional reactivity and a balanced mind, so you can deal with the ups and downs of life. Then you are better equipped to deal with whatever situations you face, with calm focus and clarity.”
So mindfulness may not directly improve your financial circumstances, at least not straight away, but it is capable of quickly reducing the pressure you feel about money – which is by definition your sense of financial stress.
Fleming says practicing techniques like meditation can go further too, putting you in a frame of mind to find solutions to stubborn problems with their personal finances.
“Most people from when they wake up to when their head hits the pillow mind are constantly switched on, moving from task to task to task all day long. When the mind is constantly switched on, it’s inevitable stress will occur.
“Mindfulness is a maintenance tool to help develop clarity of thought to create space in the mind for new ideas and innovations, new ways of changing or improving current circumstances.”
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