As humans, we consume. Our bodies were built to consume so that we can remain alive. We consume a Potbelly sandwich for lunch so that we have energy to make conscious decisions and perform at a high level at work. Occasionally, we add chips to our lunch order if we’re craving something salty.
In similar fashion, we as economic consumers pay $8.50 for that Potbelly sub, and another $1.50 for the desirable, but not crucial, bag of chips. Subconsciously, we know that the sandwich is vital to an energy level apt for afternoon work, while the chips are more of a nice-to-have. Chances are, the consumer’s body in this example shares the same opinion as his checking account on the addition of chips.
Bodily health and financial health have a striking number of parallels, especially with regards to how consumers manage the two disciplines. The lack of transparency around what frequent, discretionary charges at Potbelly do to one’s vacation savings is the precise conundrum faced by an individual contemplating the impact of consistent fast food intake on fitting into his shorts for the summer. Let’s examine how exactly this transparency is hidden on both fronts.
The Friction Associated with Measuring Consumer Activity
After you consume your Potbelly sandwich, can you equate its carbohydrate intake with a precise amount of flab added to your body? How about measuring the flab over the course of a week eating Potbelly? Even in more drastic examples, there still exists friction involved in the translation of daily consumption into one’s longer-term, physical well-being. The “algorithms” and “data” at play live inside your body and are constantly affected by dietary and fitness activity. The same constraint applies to money, though to a slightly lesser extent.
Managing personal health can loosely mirror the four pillars of finance: borrow, spend, save and invest. One saves (exercise) to counteract excess spending (consumption). One may also ask, what impact did my lost job (knee surgery) have on long-term investments (physical ability)? How can I allocate financial assets to absorb unforeseen expense shocks, such as a moving expense or even a lawsuit? Ironically, large medical and financial repercussions could arise from the same consumer activity (car accident).
There are dozens of variables in play for both of these inherently complex lifestyle components, including: genetics, personality, time, traits, demographic, geography, merchants, occupation, peer groups and, believe or not, random chance (no one chooses choose to get sick or injured unexpectedly).
The Rudimentary Way We Currently Manage Personal Health and Finance
We all seem to know that, if you eat too much, you will become bloated and, if you eat too much on a regular basis, you will probably become fat. Similarly, if you routinely spend too much, you’re apt to fall into debt. That’s, of course, if your income can’t support lavish spending. Or, in the health example, if your metabolism or fitness regimen can’t absorb the unnecessary calories.
We invest in the economic assets needed to “keep us going”, by paying for auto maintenance and purchasing a new pair of shoes to avoid wear on the knees over time. And we go in for physicals at the doctor so that we look out for unexpected trouble on the horizon, or help relieve a nagging ache or pain.
It’s quite easy to cut corners, though — to refrain from investing in our bodies or our savings consistently, and allow daily noise to get in the way. It’s easy to do so because there is still so much friction involved in measuring both health and personal finances. It’s sometimes difficult to see the big picture and then to fall victim to the lag associated with observing results of good behavior. It’s to be expected: both disciplines are inherently difficult for consumers to master on an ongoing basis.
Anchoring Against a Lifestyle and Leveraging Technology
One way to “conquer” personal health and finance is to focus on two things: matching activities and behaviors with a common lifestyle, and leveraging the power of technology, specifically newer mobile capabilities and advanced analytics, to make more informed decisions while performing consumer activities and take reliable corrective action.
Consumers need to match daily consumption and its respective “neutralizing” activity with their personal lifestyles. It’s a matter of doing the amount of exercising or saving that alleviates a common level of consumption in order to meet a pre-defined, near-term goal. These goals should align to high-level future goals, even if those details aren’t readily known (ex. I would like to retire by age 65).
Many people believe that saving every last spare dollar is always “the right thing to do”. And that eating less and using any down time to work out is the only way to preserve your body into old age. Unfortunately, such an attitude often causes the reverse effect. Without having a regular cadence or sense of “what’s normal for me”, the stress of trying to save all spare change can backfire and result in irresponsible behavior.
Lifestyle, unfortunately, isn’t always 100% by choice. One’s income and metabolism (or “natural physique”) can set the stage for their health and financial lifestyles. The two factors weigh heavily in a consumer’s ability to consume irrationally or absorb shocks. They are often not voluntary or tied to personality, but instead related to circumstance. Some people are fat or poor money managers due to genetics. They have a strong appetite for consuming and are forced to invest extra effort in staying fit.
Get To Know Yourself Even Better
Sometimes, even people that manage to their lifestyle struggle to stay on top of goals. These cases go back to the innate lack of transparency around current health/financial state and performance. Fortunately for today’s consumers, technologies such as advanced analytics, mobile and Internet of Things (IoT) present massive opportunities.
My Fitbit lets me know at any given moment how I’ve chipped away at the calories taken in that day with a step count and calories burned metric, in an easy-to-understand interface. Even if there are some concerns around accuracy, the values are all relative, and users can compare across time to monitor progress and establish “what’s normal”.
FitBit’s “performance figures” are inputs to ultimate health measurements, like a weigh-in, or even the resting heart rate measure on your Fitbit, which reflects consumption behavior as well. The hyper accessibility of this information provides users with a constant status on how fit they are, which can drive corrective behavior.
Taking a data-driven approach to managing money is not all that different. A vast array of personal financial management (PFM) fintech apps have already made efforts to summarize consumers’ financial health based on an aggregation of daily activity related to spending, saving, investing and borrowing.
The Winning Solution
With the technology available to health and financial providers today, there is ample opportunity to improve on existing market solutions – especially within finance. Consumer behaviors and habits must be readily communicated back to user in the form of actionable insights. To create an even richer, informative experience for the user, their activity can be married with other contextual data – such as location, counterparty, time and biometric variables.
When conducting behavioral design and analysis for the new market solutions, it should not be ignored that consumers tend to manage their personal health and financial lives in fascinatingly similar ways. The same reasons for why your last diet or savings initiative succeeded could be the key ingredients in a new app that enables consumers to better manage their personal health and finances.