Even when everything is in place, even when we manage to cut back on our spending, saving can be very hard. But why are making good decisions about our finances – on everything from saving to insurance – so tricky?

In the latest World Development Report, the World Bank has pulled together an array of literature on how people make decisions. They look at how making decisions automatically, socially and using mental models affect outcomes in areas from early childhood development to climate change. Along the way, they consider household finances.

They examine case studies where people who have enough money available to save and insure, have the will to do so, but it just doesn’t happen. Why?

1. Procrastination;
2. Impatience;
3. Temptation

But these three tendencies seem contradictory – especially the first two. How can I procrastinate and yet be impatient at the same time?

In one study, students were given the choice to be paid immediately or receive more money in two weeks. Most students chose to be paid immediately and only cashed their checks four weeks later. They were both impatient and they procrastinated. Huh?

That seems really weird. The World Bank report characterizes this as an example of “the intention-action divide”. Basically, we want one thing but we do another.

How does this happen?

Step 1: We procrastinate about financial decisions. Financial decisions can be complex and often overwhelming. An abundance of choice can actually make it much harder to make decisions.

Step 2: We get impatient about things we want to consume. And now even if I’ve managed to have cash available to save or buy insurance, suddenly I have an alternative use for the money. A new pair of boots seems like such a good idea… and I have the money…

Step 3: Impatience and temptation are not that different. But in the literature, temptation refers more to things we only value when we consume them. Say, like chocolate. I pretty much only enjoy chocolate when I eat it. A week before I eat chocolate, I don’t want to eat it. A week after, I don’t want to have eaten it. But when I eat it, yum!

Temptation can be particularly difficult to manage. In their book Scarcity, Mullainathan and Shafir discuss how willpower is a limited resource. We only have so much and resisting temptation requires a lot of willpower. Breaking a diet only takes one bad decision; keeping it requires a whole bunch of good ones.

This is why it helps when we make good decisions for our future selves. When you do summon up the courage to face your finances, make sure you make your saving or insurance decision an automatic one using a debit order. Then, the good decision you made today helps you every month from then on.

We tend to treat our future self differently from how we treat our current self. It’s much easier to make commitments for our future self to go on a diet or increase savings than for our current self. So, take the opportunity to make good decisions for your future self.

A financial planner can also help. With the rise of robo-advisers, many of the technical decisions can be made for you. But the hard part is conquering your tendency to procrastinate, your impatience and temptation. So, increasingly, the key value of financial planners is their ability to help individuals help themselves.

Saving is hard. Making financial decisions is hard. And we’re wired in ways that make it even harder. But it’s not impossible. Two big things can help:

1. When you do address your finances, make decisions that will last.

2. If you’re feeling anxious or overwhelmed, getting a planner involved can help you navigate.

Article credit: http://finweek.com/2015/01/28/money-saving-hard/