Anchoring

Anchor

I'm broke. 

Being broke is something that I think a lot of college students go through. Something that they become used to, it becomes their norm. 

For me, I have recently realize the value of money, and how much that has changed in the last few years. In high school, when I was under my parents wings, $100 was a lot of money. Nowadays, that hardly buys me groceries for a couple weeks. 

Anchoring is a social psychology that describes some reasons for why people make the decisions that they do. To give you a quick synopsis, it means that in your mind, you create a norm, and that is what influences your decisions. You get used to a certain amount of money, a certain type of lifestyle, and any less than this is not good enough. For example, in college, you become increasingly aware that Top Ramen is the norm. Hopefully, when you get out and have a steady job, Ramen will no longer be your top choice. 

The way I think about it, is a financial floor. What you are used to becomes the floor, and when you drop your anchor it can only go so far down. Once you start making money, or become used to more (or less) the floor will change heights. Anything below this floor, you will find satisfies you less. If you want more in depth explanations about this, check out this article. 

Now that we know what anchoring is, whats the point? The point is that anchoring can be bad. That it can cause you a lot of stress, and cost you a lot more money. When what used to be enough, no longer satisfies you, it can put you in a financial pinch. Either that, or you try and buy happiness. And as the saying goes, "money can't buy happiness." 

The point is that anchoring can be avoided...

Shocked

Yeah, its true. It's not easy, but its true. 

First you need to realize why anchoring is bad. Read about it, and come up with reasons for yourself. Then all you have to do is commit to avoiding anchoring in your life. Here are my steps for avoiding it. 

1. Pick a floor.  

floor

This is the hardest step. But the one that absolutely needs to get done. It's a simple step, and just means that you need to choose a lifestyle that is comfortable for you. You'll need to realize this while you are living that lifestyle, and you may need to settle on some things. Find a financial situation you feel comfortable staying at for some time. 

2. Don't let the raise, raise you.

Raise

If you find yourself successful in your career, chances are you are going to receive a raise. The trick is to not let this raise, raise your floor. Instead of using that extra money that you aren't accustomed to - to raise your bottom line - put more in savings. Continue living within the means that you are used to, and save more money. this will allow you to be more financially sound, and it will stop your anchor from rising. 

3. Raise it slow.

Now I understand that it is extremely hard to live within means your whole entire life. Especially when you are making more and more money. With that said, if you must raise your floor, raise it as slow as possible. Continue to save more and more money, and realize when you are buying things that you don't need. 

Now I realize that this list is only 3 steps... 

I know, not very much, 

and I'm sure it didn't even mean much. But there is a problem. Anchoring can make you rely your happiness on things that won't satisfy you. Material objects will never satisfy you perfectly, and you will always be wondering if something out there is better, or if someone has something nicer than you. Realize why anchoring is going to hurt you. Realize that you can stop it, and that you can live a better life. Find things that make you genuinely happy, and allow those things to thrive. Instead of sinking your anchor into things that don't matter, drop your anchor into the things that are the most important to you.  

We all have a choice, and for that, we should all rejoice.

Raise the Roof