The Power of Framing in Money, Life

In a consumerist culture, happiness is closely associated with wealth. The more you earn, the more you can buy, the happier you will feel.

Yet, there is a reason why studies show older adults are happier, and it's not from accumulating massive levels of wealth.

The secret is found in a quote attributed to Roman emperor and Stoic philosopher  Marcus Aurelius: “Everything we hear is an opinion, not a fact. Everything we see is a perspective, not the truth.”

What he seems to be articulating is actually a superpower within everyone to change the entire world around us in an instant.

My most recent article published in Kiplinger explores this superpower, which is commonly known as the power of framing:

The framing effect is the psychological principle that our decisions are influenced by how choices are positively or negatively presented. It is related to the groundbreaking research of Amos Tversky and Daniel Kahneman known as prospect theory, which states the pain of a loss is twice as powerful as the pleasure of a gain. What that means is that when given the choice, people prefer a sure gain over a probable one, and they prefer a probable loss over a definite loss...

Framing is considered one of the strongest cognitive biases that impact the decision-making process. It can influence everything from our political and social attitudes – what we call spin – to how we spend money and even what type of health insurance we choose.

While all of this may sound alarming, there is a major silver lining. We are not relegated to being only involuntary victims to framing. Instead, we also have the ability to use it as a tool to make better decisions and become happier people.

You don't need an app, online program or self-help workshop to start re-framing your life. It is a habit that you can develop with small, consistent efforts.

There are a variety of ways to frame situations that are conducive to your financial goals. For example, if your friend is getting married in Aruba, and it’s not in your budget to go, instead of thinking to yourself, “We’re missing our friend’s destination wedding,” tell yourself, “We’re choosing to stay committed to our financial goals.” Or say there’s a hot shoe sale going on. Tell yourself, “Yes, that’s a great sale , but it’s still spending money I don’t need to spend.”

But there is much more. Framing can also help you find greater peace of mind and happiness – every day. Research indicates that people become happier with age, greatly because they start to perceive the world in a more positive and impartial light. Journalist John Leland came to that conclusion while spending a year interviewing six New York City residents who were 85 and older. He documented his experience in the book Happiness Is a Choice You Make.

“Older people are more content, less anxious or fearful, less afraid of death, more likely to see the good side of things and accept the bad, than young adults,” Leland writes. 

In the full article, I go in more detail of how framing works in your financial life and tips for seeing the world with a new frame of mind.

Read it here: One Trick That’ll Help You Live a Wealthier and Happier Life: Framing