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Weight Watchers has been one of (if not the most)successful weight loss programs around. If you dig into the process behind Weight Watchers, you'll see that the program is built on three central concepts. Easy. Rewarding. Normal. Because of this, it actually changes habits instead of incentivizing temporary, short term improvements. But, if you stray from one of these pillars, you will have an ineffective solution.
For something to be easy, means that an individual already has the skills and understanding necessary to follow through on the desired behavior. When something is actually easy, there's no need to drastically change one’s current processes and routines. For example, look at the structure of the Weight Watchers program compared to other weight loss programs. Most weight loss programs are restrictive in nature. You can’t eat bread, carbs, sugar, etc. This goes completely against the first pillar of making things easy. What Weight Watchers does differently is say that you can eat whatever you want (providing flexibility as opposed to dictating), as long as you stay within a certain number of points for the day. This is easy for someone to implement and understand. No having to read labels for the amount of sugar or asking whether something has a particular ingredient. Technology makes this easier as all you have to do is input what you eat to monitor your points.
How Wela makes budgeting easy: We've implemented this same concept into our Daily Spend Limit. With one simple number, there's no more categorizing your budget into coffee, gas, shoes, etc. Your daily spend limit combines all of these together ultimately giving you flexibility. So, just like weight watchers makes it easy for you to diet, Daily spend limit makes it easy for you to budget.
It must be rewarding. The results of the actions that you are pushing someone to take must provide them results that are valuable to them. The value can be felt physically, emotionally or in practicality. They must get a reward that they desire, not that you want for them. Weight Watchers accomplishes this in many different ways. First, think about how they engage their participants. They allow you to use an app to scan barcodes or input meals/foods to get an instant understanding of the number of points that particular food/meal would be. You get this emotional reward right away as you determine whether or not you can eat the food. Doing this stimulates individuals from an emotional and instantly gratifying standpoint. Secondly, though, you are seeing the rewards you want (losing weight) on a weekly basis via the weekly weigh ins they recommend. And the Weight Watchers program provides a community of others to help keep you motivated through the process.
How Wela makes budgeting rewarding: Daily spend limit rewards you by allowing you to do more with your money. Who says you can't save for retirement while also taking a trip to the Grand Canyon? As your daily spend limit adjusts with each transaction, you can spend and save at the same time with confidence. All the while, instantly knowing where you stand and how to proceed.
Lastly, the desired behavior/process must be normal. The actions it takes to change a behavior must be similar to actions that others like them take. Or that people that they want to be like take. It's increasingly difficult for a process or tool to be effectively used if someone feels like they're the odd man out when using it. Weight Watchers accomplishes normalcy by giving you the flexibility by making sure you're still able to go out to eat with your coworkers at work instead of awkwardly declining because of your diet.
How Wela makes budgeting normal: With your daily spend limit always in your pocket, you'll never have to stop and think at a restaurant, "Have I used all of my 'eating out' budget for the month?" Daily Spend limit gives you the peace of mind by allowing you to still experience life with your friends and not having to necessarily worry about acting differently or becoming a hermit. Just like weight watchers allows you to not worry about eating out with your buds, daily spend limit allows you to not worry about getting FOMO while your friends experience life.
To create a process that gives you the opportunity of success, a program or process must follow each of the above cornerstones. To allow individuals to maintain the changed behaviors after the initial process you must compliment the cornerstones with the right tools for individuals. This ultimately helps them to learn a new behavior.
As you can see, Weight Watchers has many attributes that have made the company successful and the weight loss program the best weight loss program on the market today. But at the core of the program, you can see the cornerstones that were implemented into the plan to position the program for longer term success relative to peers.
That’s what we’re doing with daily spend limit. It’s an easy to understand and implementable solution. While rewarding people with an ability to experience more, save more and invest more. And throughout the entire process providing this solution in a way that is normal. This allows them to fit in, while also allowing them to separate themselves from their peers by effectively improving their financial situation over time.
If I were to tell you 38 million people in the U.S. live paycheck to paycheck, you'd probably assume that most of them must earn an income below the poverty line. But, did you know that 2/3 of those same people have a median income of $41,000? That's well above the threshold for poverty in America of $23,550 for a family of four. This phenomenon of taking everything as we see it, or as it is presented is called "What you see is all there is." It's like having an onion. But instead of peeling back all of the skin and external layers, we just take a bite and assume that's all there is. For example, you can now easily find this stat that might make you feel better about saving. Workers the age of 30-49 are saving, on average, $200/month. The narrative around this will be something like, "finally they are working towards their future." Which, taken at face value, sounds good. But, in reality, this turns out to be $230,000 after 35 years of saving, which equates to $1,000/month in income. That's not nearly enough for retirement. The perception around financial wellness nowadays is that millennials are uniquely poor at savings, budgeting, and investing. After peeling back the layers, we see that this isn't entirely accurate.
Think about all of the incredible things technology allows us to do presently. We can communicate with someone across the world instantaneously, request a car to come pick us up through an app, and even find love by swiping right. And yet, with all of the advances we've made one thing that has stayed the same is the way we budget. In fact, budgeting advice and the way it's delivered has been the same for hundreds of years. Of course, multiple different platforms and products have been developed to help us better set, track, monitor and gain insights to our budget. But nothing has peeled back the layers and looked at the root problem of the way we’ve budgeted. No focus has been given to creating genuine engagement and long term saving habits of the user. Sure, we can't just throw away the stats. The statistics tell a story. Just not the story we've been led to believe. The problem isn't that the millennial generation doesn't like to budget or isn't making enough money. The problem is the platform. The problem is the antiquated nature of finance.The problem is that budgeting as we have known it is too complex, too burdensome, too restrictive and lacks long term adoption or acceptance. Think about it; it's a daunting task to sit down and list your spending and set limits on specific categories. Even if you did that, then you'd have to track it (whether manually or automatically). Lastly, you'd have to figure out how to move one category budget to another category. Like take from your haircut budget to allow for you to eat out towards the end of the week. Where's the fun and flexibility in that?
One of my biggest pet peeves is someone who states a problem but doesn't offer a solution. So, I wouldn't do that to you. So here's our solution: A daily spend limit. A simple, flexible number that creates engagement and easily integrates into your everyday life.Because, in the end, does it really matter whether you spent $500 or $200 on coffee for the month? As long as you're still able to pay for your core expenses and save for your short and long term goals like taking a trip or saving for retirement, then you're making progress. That’s why we developed the daily spend limit. To simplify budgeting. We break it all down to one number. ONE number. And that's the amount that you can spend every day. NO MATTER WHAT. Spend it on whatever you like; it's your money. If you don’t spend it all, then you get to carry it over. If you spend more of it, then you have to control yourself the next day. We put the power back in your hands. So you never again have to worry about where you are spending your money as long as it's in your Daily Spend Limit.
"Forever never seems that long until you're grown." When Andre 3000 first uttered these words in the Outkast song, Ms. Jackson, he probably never imagined they'd be quoted in a financial blog about retirement planning, and yet, here we are. The gist of what he's getting at is how hard it is to wrap your head around concepts like "forever" and "lifetime." It happens to be the same reason why it's difficult for you to routinely take money out of your paycheck each month to save for a retirement that is 25 to 35 years down the road. When dealing with a problem that's that far away, you'll mentally do two things. First-you'll have a hard time grasping it. Think about it, let's say you're thirty, your "lifetime" is thirty years, and yet you're supposed to plan for something that is further away than all of the life you've lived plus five years? That's tough to conceptualize. Secondly, you'll take the same approach that you took with your papers when you were in school; you'll procrastinate on doing it until you get closer to the deadline. The problem with delaying to start saving for retirement is that retirement doesn't become "real" or attainable until you get around fifty years old. At fifty, retirement is only fifteen years away; it's much easier to visualize something at this point. Ultimately, this dilemma doesn't stem from you not wanting to save for retirement but just from the simple psychology of the situation. Does this mean we shouldn't save for retirement until we can visualize it? Of course not. What has to happen and what we've been doing at Wela is changing the conversation around what retirement planning should be.
Saving for retirement shouldn't be some abstract concept that is years away, but rather it should be the vacation you want to take in six months to Costa Rica or maybe the Coachella festival you want to attend next April. Ultimately saving for retirement is like anything else, it's built on habits. So, creating the right habits and incentives are what will lead to success. If you were to ask any financial advisor about saving, they'd suggest you automate it to make it easier. Using this idea, you could set up a fund to automatically save $25 a week for that trip to Costa Rica. What you'll realize after you've taken your dream vacation is that you've now made savings a habit. Because of this, you'll have rewarded yourself with two things: A great vacation and a new habit of saving that will continue. Another way to accomplish this is to match the savings with the incentive. For example, if you want to save for another beach vacation, this time to Fiji then save $25 a month to a savings account and automate the same amount of savings to a Roth IRA. As you reach your vacation goal and experience that, you have now created a positive savings habit that can last a lifetime.
There are plenty of variations and creative ways to think about retirement and everyday savings that bring the conversation back to today, to something concrete instead of the dated idea of "just save a million dollars for something 35 years away." Making practical changes like staying within your daily spend limit, Wela's guilt free way of providing clarity to how you spend your money. With your daily spend limit, you're equipped with the knowledge to know how your purchases today affect your ability to save tomorrow and the flexibility to adjust your budget day to day depending on each day's unique needs. At Wela, we're helping you do more. Contrary to how you've always thought about finance, you can do both; live for today and save for tomorrow.