Over at the New York Times Freakonomics blog, Stephen Dubner wrote about in driving oneself to become very good at a particular skill. The three tenets of deliberate practice are:
1. Focus on technique as opposed to outcome.
2. Set specific goals.
3. Get good, prompt feedback, and use it.
Here’s a great way to think of it. Many people, when they want to learn how to play a guitar, pick it up and try to bang out some awful rendition of Stairway to Heaven. They’ll practice at that song some, trying it over and over again, and they might eventually figure out how to make it passable, but playing anything else is going to be rather difficult and the person (unless they have obscene natural talent) will never get good enough to play in front of others and earn a positive reaction.
On the other hand, if you sit down for an hour and just work on a single chord, then spend another hour just working on one other cord, then spend two or three hours alternating between the two, you’ll begin to master the basics of how to actually play a lot of things. Add a third chord to that and you can play most of Tom Petty’s songbook. Add a couple more and you can play virtually every well-known pop and rock song of the last sixty years.
The difference between the two approaches is that the latter one focuses solely on technique and has specific technique-oriented goals associated with it. This technique won’t directly teach you how to play Stairway to Heaven, but it will teach you how to intimately know a particular chord and how to switch back and forth with other ones almost intimately, and that skill can be used to play Stairway to Heaven and any other song you might think of.
So how does this idea apply to personal finance? Learning how to control your spending and managing your money can also benefit from deliberate practice.
How Your Finances Can Improve From Deliberate Practice1. Focus on technique as opposed to outcome.
Many people pick up frugal techniques by thinking “Doing this will save me money,” but in the end it’s easy to fall back on your old and more expensive routines. Instead, the better approach is to approach specific techniques as an effort to learn a new habit, not because it has a nice outcome.
Here’s an example. Let’s say you normally have a nice big breakfast, but you read online that a big bowl of oatmeal is a great way to save money and get more healthy. You think, “Hey, that’s a great idea! I’ll eat oatmeal to improve my health and my wallet!” so you try a very simple bowl of oatmeal – and you muddle through it. You try it again for a few days, but you just loathe it, so eventually you give up and go back to eating your normal expensive and unhealthy breakfast.
On the other hand, let’s say you read about oatmeal and thought, “Hmm… I’m not a big oatmeal fan, but maybe I can make a bowl of oatmeal that I do like.” You whip up your bowl of oatmeal one morning, put some bananas in it and a bit of honey, and think, “This isn’t bad… but it could be better.” The next morning, you use less bananas and more honey and a bit of cinnamon and it’s better. The next day you remove the bananas entirely and use some honey and a lot of cinnamon – and you really like it. The day after that, you sprinkle in a bit of brown sugar and nutmeg, too, and it’s sublime. You practiced the technique of making oatmeal without worrying about the outcome (saving money or calories) and the result is a breakfast you really like. This breakfast, because it’s easy and you like it, naturally becomes a part of your routine and, as a result, you automatically enjoy the outcome – a cheaper breakfast and some saved cash.
Whenever you read about a new investing technique or frugality tip to try, don’t just blindly jump on board because it saves money. See if it fits with your life – practice the technique itself a bit and see whether it meshes with you. Try some variations. Find what really works with you. When that happens, you’ll have a new technique in your belt and the happy outcome will just follow naturally.
2. Set specific goals.
I write about goal-setting all the time on here, but they really work. Setting very specific goals, especially those in the short term that also add up to being pieces of larger goals, can be incredibly powerful for bringing about positive change in your life.
Here’s an example. Let’s say you’ve decided to make that breakfast switch. A nice small goal that would work well with practicing the technique would be “for the next ten days, I’ll eat oatmeal for breakfast with different things in it to see which one I like the best.” So, for ten days, you try different experiments with your breakfast oatmeal to find out what really clicks with you.
Your reward for reaching that goal is a recipe for a good breakfast – one that really tingles your taste buds. For me, for example, the best oatmeal is apple cinnamon, which was a surprise since I like bananas so much. I don’t like them in oatmeal. I don’t like sugar or honey in oatmeal, either, another thing which surprised me. I would have never discovered this without setting an oatmeal-eating goal, and because I set that goal, I found a breakfast I really like – and that makes it easy to keep up the habit.
3. Get good, prompt feedback, and use it.
Listen to what you learn, in other words. If you try oatmeal and you hate it, don’t make it that way again – try something different. If you’re made sick by the tremors in the stock market, don’t invest more – put your money somewhere more stable, like in a high-yield investment account. If you are trying to save energy and try out a CFL and find that it’s annoying you, try putting that CFL in a different socket where you won’t be annoyed (I think CFLs are great for closet lights and garage lights, for example, but they’re annoying for reading).
If you try something and get good feedback from it, keep doing it. If you try something and get negative feedback from it, try a different technique. If you like the oatmeal, try it again – if you don’t like it or know of an easy way to improve on it, move on and try that.
One important thing to remember, though: don’t mis-interpret the feedback. No one is happy when the stock market goes down. For some people, they shrug their shoulders, go “Eh, I’ll catch up in the long run,” and move on with life – it’s negative feedback, but it doesn’t outweigh the positives for them of the investment. Others are kept up all night by even a 5% burp. The latter is clearly negative feedback and a sign that you shouldn’t be investing in stocks whether in a bull or a bear market – that person should keep their money in cash or bonds where it will grow steadily and safely.
Are you ready to start practicing?