Why we make bad financial choices -- even when we know better | Your Money and Your Mind

Transcriber: "Always wear sunscreen." "Eat a balanced diet." "A penny saved is a penny earned." You probably all learned

these lessons as a kid, maybe from your parents, or if you grew up in the '80s,

on the public service announcements at the end of every episode

of the G.I. Joe cartoons. But chances are, despite knowing this, you still stepped outside

without putting on sunscreen, devoured an entire bag of chips in one go or spent way more of your paycheck

than you anticipated. So why is that? [Your Money and Your Mind]

with Wendy De La Rosa A few years ago, two Yale professors

coined the term "G.I. Joe fallacy" to describe this very phenomenon. It's the mistaken idea that

knowing is half the battle. But as it turns out, in most situations, just knowing something

is not nearly enough for you to put it into practice. Information doesn't

always change behavior. As a behavioral scientist helping families

make better financial decisions, I've seen people struggle to save money, to cut back on their expenses

or to manage their debt, even after they've taken

a financial literacy class. And the reality is that

people fundamentally know what they need to do to improve

their financial situation. We all do. The equation is simple:

they need to save more and spend less. But the thing is, that's

just really hard to do. It's easier said than done, and I've been in this boat as well. So for example, I had

a magazine subscription that I knew I should just cancel. I never read the magazine, and every month, money was

coming out of my checking account, and every time I reviewed

my budget, I saw it, I knew I had to cancel it, but I didn't. It took me two years to cancel

that magazine subscription. And I'm sure I'm not alone. You probably have

some type of subscription that you know you should cancel. So the critical piece in all of this

is to get rid of this belief that financial security is just

a problem that we can teach away. In the US, for example, we spend nearly 700 million dollars every

year on financial education programs, yet a team of researchers have found that these programs explained

only 0.1 percent of the variance in financial behaviors. Not zero, but pretty close to it. Meanwhile, 20 states mandate

financial literacy classes in high school, but studies have found that unless

these programs are well-implemented, they are unlikely to have any effect

on a student's future credit score or their likelihood to invest. A more significant predictor

of how well you manage your finances is your general ability to do math. From all of this, I've learned

that behavior change is not an educational pursuit. It's an environmental one. If you are struggling, it's not because there's something

fundamentally wrong with you. It's most likely because

there is something wrong with how your environment is set up. Look around you. The cues to spend money

have gotten smarter, faster and more efficient. Targeted ads are becoming

more personalized, corporate content is

becoming more engaging, and everything around you

is focusing on spending. So let's change that. You can reshape your environment

and how you interact with it, and I can guide you through it. Over the course of this series, I'll take you through a step-by-step look at how you can change your environment and regain control of your finances. At the end of every episode, I'll share practical tips

based on research on how to spend less

and save more today -- not tomorrow, but today. And your future self will thank you.