Thursday, March 7, 2019

What are Your Personal Finance Boundaries?

Research indicates that one of the best ways to stick with goals (e.g., New Year’s resolutions) is to set boundaries. In other words, draw a “line in the sand” and develop personal policies to help say “no,” resist temptation, and stay on course.

How can people set boundaries?  Consider this analogy from the world of NASCAR Motor Sports. Ever since a car wreck nearly killed hundreds of spectators in the grandstands at Talladega in 1987, when a speeding car went airborne, races at Daytona International Speedway in Florida and Talladega Super Speedway in Alabama have required drivers to use “restrictor plates.”  According to the official definition on, a restrictor plate is “A flat device with holes drilled into it designed to limit the amount of air that enters the engine.  This effectively limits the horsepower of the engine and slows the cars down.” 

Like Talladega race cars, people also need “restrictors” to slow them down so they can stick to their financial goals.  In other words, cues to limit spending because they’ve “had enough.”  Individuals need to develop, and enforce, their own restrictors.  If someone tries to restrict another person, they will usually resent it and rebel. 

Looking for some specific ideas?  Consider the following examples of financial restrictions:

§  Spending no more than $500 on holiday gifts and parties.

§  Charging no more than $300 per month on a credit card for new purchases.

§  Spending no more than $100 a week at the supermarket.

§  Buying a “new used” car, instead of a new car, to reduce the cost.

§  Depositing 5% of gross income in a 401(k) or 403(b) plan via payroll deduction (to “restrict” income)


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