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Rick Mazur: Hey there, everybody today, I have Sarah Blanchfield on the show. Sarah is a financial therapist and the founder of my Bulletproof budget. She helps online business owners create simple budgets to help them create security in their lives and a variable income and grow their businesses simultaneously. One of the main tools she uses to help is called behavioral economics.
We’re going to cover it in the interview for those of you who don’t know what it is, but I can tell you it’s used behind the scenes in many aspects of your life, sometimes without you even knowing it. One example is banks that started using behavioral economics to shape how they offer products and services to customers.
But there are many more. So I hope you find this interview interesting, and we’re going to learn a lot more as we go along. So with that, Hey Sarah, how are you?
Sarah Blanchfield: I’m great. Thanks so much for having me on the show.
Rick Mazur: Absolutely. Can you just start by giving me a little background about you, where you’re located? Where you grew up and all that kind of stuff.
Sarah Blanchfield: I’m a lifelong Oregonian. So a west coaster out here in the big rainy state. And I got started in personal finance. It’s been a lifelong passion of mine. I spent some time working in corporate health care for 14 years. But have always been passionate about personal finance and kind of what it can do for you.
And you know that when you manage your finances, it just opens up why the opportunities for your life in ways that wouldn’t happen if you don’t have the money situation under.
Rick Mazur: Is there a particular reason that happened in your life that you went into personal finance
Sarah Blanchfield: oh gosh, lots.
Rick Mazur: Do you care to discuss
Sarah Blanchfield: totally. I. I grew up in a one-income household. My mom stayed home. My dad worked; he was laid off multiple times as I was growing up. And so we had a very unsteady kind of financial upbringing. So there was a lot of fear around there. My parents did their best not to let us know what was going on, but we could tell at different points that there was not always as much as we would have liked. And I went to a private school, which they still made happen through various very creative solutions. So I was, getting gross, giant black bags of hand-me-downs from. We live in the poshest suburbs in the metropolitan area complained that their dad bought them a BMW rather than a Jetta for their birthday.
So I felt very much outside, and then at 18, I was like, oh, I’m 18. I can explore my life and do whatever I want. Which resulted in. I’ll say a bold choice to leave college at the age of 18 and go on a multi-state road trip, living out of a truck and our jobs they,
Rick Mazur: Hey, You must do what you must do. Whatever felt right at the time.
Sarah Blanchfield: It did feel right at the time. I remember my mom came and visited me in my little teeny tiny studio apartment. And it gave me a lot of valuable lessons because, after you share a pack of ramen with another human being for three months, and that’s pretty much all you have to eat. Do you learn a lot about the value of what your finances can do for you?
The first apartment I ever had as an adult was awful. It had broken windows. And we had a drug dealer living upstairs, and these rats that would like crawl through the back of our stove and crawl up through the burners and. Yeah, a pack of ramen with, with my boyfriend at the time, it was fantastic.
And my mom brought me some leftovers from their Thanksgiving, and there was meat, and I just about cried. Like I was like, oh my gosh meat months, and so it’s, that has been a formative experience for me to realize that wow, I really, we worked hard and we got past that point.
And I remember when we could buy, we had enough grocery money to buy, like taco stuff with all the fixings, we had cheese, sour cream, and olives on there. Like I felt rich. I felt like I was making it. I was like, huh; there’s like a significant quality of life difference when you can figure out how to.
Have enough food. That was the start for me. It was like not being hungry makes my life better. It seems like the most obvious statement. From there, it just bubbled and bubbled. It was like, okay, now what can I do now? What can I do to get further now? What can I do to live in a better place?
What can I do to have a car? What can I do to have a better job? I ended up going through putting myself through college and got a degree in finance, and it all just blossomed from there. Cause I had this terrible experience at the age of 18. And then it was like, Ooh, I don’t want this to be my reality.
But I think I can do something about it. And to me, I need to figure out how to manage my money so that this does not remain my permanent reality.
Rick Mazur: for myself, I grew up with divorced parents as well and a similar, not exactly but similar stories as what you had just told us. But for me, I always felt like. Nobody was going to be there for me. I had to control myself because if I didn’t do it, I didn’t grow up with a trust fund
, so we always had three square meals on the table and stuff so that I can relate to your story. Still, I approached it from an aspect of, look, I can’t sit around and wait for something to happen because there’s nobody, it was, my mom and she wasn’t going to be taking care of me when I was an adult because she was paying her bills,
so I get that. So that, you decided then to get better with the financial side of things, take control of things. And then you decided obviously to become a financial therapist, and for people who don’t know, what does a financial therapist do? Exactly.
Sarah Blanchfield: It’s trying to take a holistic approach to help people with their finances. So traditionally, Finances have been approached as a numbers issue. So if you can make the numbers work, then your finances will be in order. And I’m sure that lots of people listening have done that.
They’ve tried that they’ve read the books. They’ve tried the apps, just like I did. I got a degree in finance. I learned all; I’ve had four years of indoctrination about how, if you can make the numbers work, your finances will be fine. And it frustrated me because, yes, I can make the finances work.
The numbers were great in the spreadsheet, but it doesn’t change my behaviors. It doesn’t make me stop eating when I put any of that money on my spreadsheet. Cause otherwise, the numbers don’t work. And so I became a financial therapist because they. Incorporate understanding the behavioral psychology components.
And like you mentioned, behavioral economics, understanding how our behaviors and how we feel about approach money, affects how we make financial decisions. And so it’s not all about the numbers. The numbers are. But we have a real knowledge gap and a real gap of understanding in the financial industry where we think it’s all about the numbers.
And then people get discouraged because they think, oh gosh, they tell me it’s all about the numbers, but I can’t seem to make that work in my real everyday life. And then they think it’s them that’s failing. They’re like, oh gosh, I’m a failure. I must lack self-control; I must be bad at money.
I must. And we turn it into this personal failing when it’s not a personal failing. It’s simply the fact that we have not understood the depth at which, as you mentioned in the beginning, the industries have been set up to capitalize on the fact that we don’t know how we make financial decisions.
Rick Mazur: And that was going to ask you, are there money myths that you run into a lot in your business that are particular red flags, that you see people coming to you with a lot that you can discuss?
Sarah Blanchfield: Oh, all the time. I think the biggest one is that people think that their money problems will go away. If they make more money,
That’s like the number one money myth that I try to bust first,
Rick Mazur: right.
Sarah Blanchfield: I always talk about it. Like the leaky bucket scenario, people use this Synology differently, but I prefer to finance.
So you have a bucket. It has a few holes because behaviors sometimes don’t always match what we hope for with our budget. And you’re dumping all of your income into this bucket, and you’re trying to fill it up. You’re trying to feel this abundant, great wealthy life, but it’s falling out the holes.
And if I had just dumped more water in the bucket faster, it will eventually fill up. But all it does is expand the holes in the bucket. And just find out more.
Rick Mazur: Yeah, exactly.
Sarah Blanchfield: money magnifies whatever behaviors you are currently doing with your money now. So if you have trouble with your money now, more money is not going to fix it.
Having more income. is not magically changing how you save your money or spend your money.
Rick Mazur: So in government, for example, the national debt keeps going up. They want to keep raising taxes as a solution. And I’ve always said, I believe it’s pretty simple that you have a certain amount of money coming in that you can spend. And, you can’t spend more than you have coming in.
So, if you make more than that, Great. But for everyday people, as you said, I know they think more will solve their problems. But still, they don’t know how to save or allocate their resources. And they’re in like an endless loop. So, could you speak a little bit about how someone would start to break that cycle?
What do they have to do?
Sarah Blanchfield: Yeah. I think, first of all, it’s important for them to understand why they’re choosing the behaviors they’re choosing. So instead of just saying, okay, I got to restrict my spending and save all this money. That’s that like bad cabbage soup diet mentality that never lasts more than a couple of days.
They need to understand why they’re making the choices they’re making. And that’s where the behavioral psychology and therapy components come in. Where is this coming from? Did you? Is this a belief that you’re holding onto from something that you learned when you were younger? Do you have a lack mindset around your income?
Are you nervous about your ability to make money? You’re afraid that your money will go away. And so you spend it as fast as possible. The first thing that we do in my program, Bulletproof for life, talks about money beliefs and talk about—reframing those money beliefs to make people feel better and thus have better behaviors around money.
So your behaviors are an outflow of your beliefs about things. And so, by changing your internal belief structure, you change your behaviors. So many people are focused on changing the habit, which is very external. But if you still believe that your money is all going to go away real soon or that you deserve a reward and that reward has to be monetary, or you’re trying to meet emotional needs by buying things at the store, which we all do.
So no judgment, then you don’t know how to accommodate that. There’s nothing wrong with giving yourself a treat for working hard, but you can build that into your budget. You can create structures that support you in the ways you need if you know what fulfills those. But most people are not discussing this.
They’re not thinking about why they’re making those financial decisions. They’re just trying to follow the general advice of the gurus that saving is good and spending is bad, and you need to pay off all of your debt, whether it works for them or not.
Rick Mazur: So that kind of goes to the old saying, more information doesn’t translate into better decisions necessarily. No, you can go on the internet, and there are millions of things, but you got to have the right information, and you have to have the right information specifically for you.
And I think many people go to YouTube and you watch a video, and everybody just generalizes, And it might not be the right solution for them. It might take somebody to get a bigger picture of what they’re doing so that they can hone in and make the right choices for themself.
Sarah Blanchfield: Exactly. That’s another reason people struggle with budgeting their money and creating a financial plan because of the advice in general. Don’t spend more than this percentage of your income on housing well depending on where you live. That’s crazy. That’s nuts.
And so, but then you’re caught in this trap of feeling like you have to abide by these rules that somebody made up somewhere that has no idea where you live. They don’t know your lifestyle; they don’t know what’s important to you. That is why I don’t have those rules in my programs because people create their financial plans based on their priorities, the things that are important to them, and the things happening in their lives. After all, that’s what’s going to stick. That’s what’s going to be sustainable.
Rick Mazur: I touched on it in the intro. And then you mentioned behavioral economics and behavioral finance, but can you tell us about behavioral economics and why it’s different from what we usually think of when we talk about economics and finance?
Sarah Blanchfield: Yeah. So I like to think about it like this. When we usually think about economics and finance. The traditional study of economics is based on the purest definition of logic, which is decisions made in a vacuum without emotion, without consideration for external circumstances, purely based on the information.
It was just needed to make that decision out of context. So I’m a huge Star Trek fan. So I like to tell my folks that it’s like Spock. So Spock’s making the pure logic decision, it’s not logical captain, but that’s economics. That’s why economics focuses purely on numbers. If the numbers work, then it’s great.
It’s happy. Traditional economics focuses on behavioral economics; by comparison, it studies how people behave when faced with financial decisions. And we are not logical. We’re not logical. We might be predictable, but we’re not logical in the purest sense because we cannot make purely logical decisions, devoid of emotion and devoid of considering all external circumstances.
Anyway, you’re supposed to be creating a life you want to live. And that’s a good thing. We should be considering the other circumstances, besides just the numbers we should be considering. Does this make me? Have a life that I want to live because that’s the reason you’re managing your finances.
The goal is not to make some person that created some financial rules happily. They don’t care whether you have three to six months of an emergency fund, but if it brings you peace of mind and makes you feel safer and more secure, that’s valuable.
Rick Mazur: Can you give an example or two that you might think of off the top of your head of how you’ve applied these techniques to help people or clients promote better financial decisions.
Sarah Blanchfield: Absolutely. So, one thing that we do so for example, with credit cards is the pain of paying is it hurts a little bit, when you part with the money, if you had the cash and you paid it all at once, you’d be like, oh, there it goes. But you use a credit card, and you’re not paying that money right away.
You can pay your little minimum payment, and it just doesn’t hurt so much. That’s how the majority use it. The pain of paying to remove paying further from the point of purchase so when you have to pay it. That’s why credit cards help us rack up so much credit card debt. So when my clients and I are talking about credit cards and trying to stop using them as much, we use a similar concept.
We create more friction from using credit cards. So you have to, we do easy things. Everyone does easy things. So if the credit card is in your wallet or it’s saved on your favorite shopping apps on your phone, so that when you’re scrolling late at night, and something pops up, and you’re like, sweet click, click purchase, it’s too easy.
We. The credit card information is out of the shopping apps. Maybe we delete the apps altogether. We take the credit cards out of the wallet. My credit cards live in the safe deposit box at my bank.
Rick Mazur: Smart,
Sarah Blanchfield: They’re not there. I can’t, and if I need them, they are available to me because I don’t think that credit cards are evil.
I think they’re a tool that can be used at the right moment if you need them.
Rick Mazur: but if
Sarah Blanchfield: that any strategy is evil, it’s there for me if I need it, but I can’t do anything spur of the moment because they’re like 10 miles away. And so late at night, when I’m scrolling the internet and see an ad pop up, I’m not a lucky man.
So we created more friction to reduce the opportunity to use them. And it’s not hard. It just makes it that much harder. To make it useful. We’re using the same tactics that credit cards use to make it simple. We’re just flipping it on its head. We’re just making it a little bit harder.
Rick Mazur: right. Even adults need it, but I have a 13-year-old, and he’s coming to me, and he’s like, dad; what age do I have to be to get a credit card? I’m like, you got a little ways to go. You can get a debit card, which is probably better for you anyway. So we’re looking into that right now, but that way, you’re not spending more than you have; it’s here’s your money, here’s your allowance. Here’s what you make. And if you spend it, you’re not going to get into any other trouble, any additional trouble. So, that’s interesting. So would behavioral economics involve labeling money or having goal-orientated pools of money. People can better control how they allocate things like saving for vacations, emergency funds, and stuff.
Sarah Blanchfield: Yeah. I do that as a part of my program as well. So like for example, my emergency fund is not labeled emergency fund; frankly, that has, that holds no emotional weight with me. That’s not motivating. Emergency funds are boring. Mine’s called peace of mind because that’s what it means to me. Because if I lose my income, that money is my peace of mind that my bills will still get paid.
And so that savings fund, that’s what that means to me. So we label things in the Bulletproof budget system based on what it means to us because that makes us more likely to want to save for it—having one general savings fund. Just, it looks like a pot of money that you can use for whatever you want.
So I don’t have an emergency fund. I have peace of mind for loss of income. And then I have another savings account that I use for all of those things that are predictable, but I’m not sure when they’re going to happen. So I save for car maintenance because of car repairs. Are not an emergency; unless you didn’t save for them, your car would break down.
It will occur. So we should plan for that. So we plan for that. We plan for car repairs. I plan for something at my house to break because eventually something will break and I’ll have to pay for it. So I plan to travel. I plan for clothes. I plan for pedicures. I plan for my husband recently. He wanted the PS5 when it came out for PlayStation is very excited about it.
Eighteen months ago, we put money aside to make sure he could have the system. He wanted the new controllers, the charging thing; I’m not a game person. So I don’t know, Several hundred dollars for games we planned for because it was important to him. So it doesn’t matter that I don’t play video games; I save money for clothes.
He’s been wearing the same clothes for ten years.
Rick Mazur: That’s a guy thing. I
Sarah Blanchfield: a guy thing. Fine. But we save for the things that matter to us. And we label them that so that there are little buckets of money set aside for different things that are important in our lives. So we know what that money is for when it’s there; it’s not a giant bucket of saving money that we could just spend on whatever we want. When we think about money, it’s delegated, set aside, and that in our brain, once you assign money to a category, you’re far less likely to spend. Because in your mind psychologically, you already have it set aside for a specific purpose.
And so that’s a way of using behavioral psychology to help you not be as likely to spend that money. Now, it doesn’t mean you can’t have an emergency that you could not possibly foresee, like a global pandemic. And you reallocate things, but you’re far less likely to do so, and I see it with my clients all the time is once they something they’re invested. They want that money to go to that thing. They want the trip to Europe. They want to be able to buy their new car. They want to be able to have that set aside for their quarterly clothing splurge. They’re excited about it. And so they don’t want to touch it. So they make the other money work because they’re excited about what they’re doing over here with her savings.
Rick Mazur: So, do you agree that logging all your spending will tend to help you spend less over time or at least be more aware that the money goes into those specific pools? Or is that not necessary?
Sarah Blanchfield: I think it’s helpful to a point. I have a hard time doing it manually because that’s a lot of effort, truthfully, and I don’t like to do things that require a lot of effort. It’s probably weird from a finance person, but I don’t want to spend a whole lot of time managing my money. I want it to work automatically.
So I have income that comes in through automatic deposit. I have saved money automatically put into my savings funds, and I have a separate checking account for spending. So all my bills get paid out of a checking account. My savings gets funded automatically. And I have another checking account, it’s the only count I have a debit card for, and that’s my spending money. That’s all I track. But it’s like you were saying with your son, when the money’s gone, it’s gone.
Rick Mazur: Correct. Yeah, he’s going to learn. He has learned, but teenagers, it’s new.
Sarah Blanchfield: Yeah. Another way of doing it for myself. That’s my spending money. And that’s the only thing I have to keep track of the rest of its bills, getting paid on auto-pay and my savings getting funded on autopay. And I don’t have to think about it.
Rick Mazur: always say that you can’t solve a problem unless you admit that you have one, but by the time folks consider coming to someone like yourself, they kind of know, deep inside they need help, but they might not fully understand. For example, why they’re even having the issues that they’re having.
There could be complex things that they’re dealing with internally, stopping them from reaching their goals. And therefore, some may discount the need to have a professional like yourself come in and help them. So I just wanted to talk about a few areas where they may feel like they lost some control, and they wished to the right the ship, so to speak, to get things back on track.
So I’m just going to mention a few items, and you can feel free to either comment or expand on them, agree or disagree as you wish.
Sarah Blanchfield: Okay.
Rick Mazur: The first one is that if you feel overwhelmed with too many options, it can be easy not to decide decision paralysis.
Sarah Blanchfield: That’s why I think it’s so important to make your finances as simple as possible. It doesn’t have to be complicated. I think the; honestly, I think that the banking industry and the finance industry thrives on making it complicated.
Rick Mazur: Of course. Yeah,
Sarah Blanchfield: because they don’t want you actually to think about it. So you manage your money.
Rick Mazur: And do you have peoples that sometimes come to you and have a problem with they call it tunneling where you’re only paying attention to kind of short-term emergencies or needs rather than looking at the bigger picture?
Sarah Blanchfield: Yeah, I think we’ve all been there at certain points in our lives where we feel like we’re just managing one emergency after the next because we feel like we can never get ahead. It’s Lady. I can’t think about saving money. I’m barely making it.
I work with people like that. And it’s sometimes that’s why you need someone to come in with a different perspective because you’re stuck.
You’re stuck in that place where you can’t zoom out to see the bigger picture, to see the options that might be available to you, even where you’re at right now.
Rick Mazur: Exactly. Do you work a lot with couples like husband and wife comes in, and I know one of the first, I don’t know, the top one or two reasons for divorce is because of money issues they say? So do you see that a lot of couples come in and have a different set of issues?
If you’re by yourself and you have financial issues, that’s one thing, but when you add a spouse into that mix, I can imagine that would be a little bit more maybe complex to deal with or get them to agree on things and stuff.
Sarah Blanchfield: it is, it can be. And I think one of the main reasons it can be so frustrating is because people generally focus on the surface issues. I want to save, and he wants to spend, I want this. And he says, no. Which is not dealing with why you want those things or why you feel that’s important, or any of the actual emotional needs that display themselves as financial behaviors, which is why we talk about those things.
So we talk about the emotional things first, so that you can understand that she does not want to spend because she’s trying to make your life hard And he’s anting to do something. After all, he thinks that saving doesn’t matter. We do things where we attribute something to someone’s character, which is called fundamental attribution.
So when you see someone do a behavior that you disagree with, you tend to attribute it to their character. You attribute it to some flaw in who they are as a person instead of understanding the reasons behind why that surface-level behavior might exist for them. And so, by diving beneath the surface of the financial behaviors and where they’re coming from, couples want the same thing most ninety-nine percent of the time.
They’re just trying to go about it with different strategies. And so we can find a place where we can balance those strategies
at the same time, so that they feel like both of their needs are being met, and they’re both being heard, and that when they come to that level of understanding about why they feel the way they feel, and that they’re actually on the same team.
The evening out of needs happens quite organically.
Rick Mazur: And that’s why I wanted to bring it up because if you’re by yourself and you finally admit that maybe you need some help, that’s one thing. If you’re a husband or a wife, then now you have to convince your partner as well. Hey, we need to see somebody. And that can be a little bit; you need to make sure whoever you go to.
Wow. That is great. Has experience in dealing with all different types of individuals, couples, everything like that. But unfortunately, as we’ve been mentioning and stuff, many people will put it aside; they don’t really. There are many reasons why someone might need financial help.
They either put aside analyzing their spending because it can be painful, they want to avoid it but, I want people to know that you can delegate this task to a professional like Sarah. Why don’t you tell me a little bit more about the programs?
I know you have my Bulletproof budget.com. You’ve got your other services. Why don’t you give us a little rundown of what you have and what you can do for people?
Sarah Blanchfield: Yeah. So, my main program that most people go through or start with is called Bulletproof for life. Available in two different ways, you can take it as a self-study program. So it’s online. You can watch the videos and do the worksheets and things like that. You can do it on your own if that’s something that you prefer. You can also do it with me, and I walk through it with you.
So sometimes that is more. Supportive in the environment where people want to ensure that they get the one-on-one support they need. So it’s not done in a group. It’s you and me, or me and you and your partner talking through things, working through the material together. And it works through all of the different components of why you relate to money the way you do.
And. We go through all of the different aspects of finance: saving, spending, income, debt, and retirement. It walks through absolutely everything. And in the end, you are personally sustainable, and the automated budget works for you. And then you have ongoing support after the program is over.
And I support a lot of businesses, business owners. And so I also have done for you business services where I have a day rate service, where people can come. If they’re looking for a little financial tuneup, a little clarity Hey, I know my business is pretty good, but I just want some strategy around getting my business to the next level.
And I also do something I call the anti-CFO lovingly because I work with many creative business owners. We’re anti-corporate people over here, and because many creative business owners do not get into business to manage finances and numbers and spreadsheets and reports and all of that stuff. And so, I work on a monthly retainer with creative business owners to manage their finances for them. And be strategic around their finances, but they know it’s important. And so that’s a task that people frequently want to delegate. And so I have those services available as well.
Wonderful. Wonderful. That’s great. Thank you for being on the show and if anybody wants to know more about what Sarah can do. Again we’ll repeat my Bulletproof budget.com. You can also see and check out Sarah on Instagram at my Bulletproof budget. And I also make sure the links are on the episode page, in the show notes on the website so that everybody can check it out there.
Rick Mazur: So it’s been great speaking with you, and I hope you have a great rest of your day; and hopefully, we will maybe get a chance to talk again in the future.
Sarah Blanchfield: thank you so much. It’s been a pleasure.
Rick Mazur: Thanks. Bye, Sarah.