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I've Been Good, I Deserve It: Moral Licensing and Impact on Financial Behavior

I've Been Good, I Deserve It: Moral Licensing and Impact on Financial Behavior

Interesting thoughts on moral licensing and how it can impact financial behavior. Perhaps we’d all be better served by being a little more mindful…


“I’ve been good. I deserve it.”

If you’ve ever uttered those words, I want you to be honest about what happened next. Did you act in a way that helped you behave, or in a way that sabotaged your prior good behavior?

These two short sentences refer to something that psychologists call moral licensing. You may recognize it in the neighbor who everyone else sees as a pillar of the community, but when nobody’s watching, doesn’t pick up after his dog. It’s not so much hypocrisy as it is using our good behavior to justify our not-so-great behavior.

For instance, I have a friend who readily admits that she has to fight the whole buy-2-get-1-free deal, particularly when it comes to books. “I tell myself I’m saving money, so it only makes sense to buy two books so I get the third,” she said. The problem with that logic is that she’d save even more money if she only bought one book. But because it feels like she’s doing something good (saving), she feels O.K. doing something bad (spending more).

See what a contradiction it creates? But we’re really good at it, in large part, because it’s a habit for many of us.

Think about how it plays into our financial decisions. We saved $100 extra this month. Of course we deserve to spend a little more on our next shopping trip. We skipped buying coffee every day last week. Of course we can splurge on that shiny, new gadget.

Many financial decisions are about tradeoffs, but the tradeoffs shouldn’t lead to bad behavior because of unconnected good behavior. If we didn’t budget to spend more on our shopping trip, saving $100 extra shouldn’t give us the green light to do it anyway. The same goes for not buying coffee. Unless we explicitly chose to save that coffee money for our gadget, we’re simply moving our spending around.

So how can we counter our moral licensing? It comes back to something I believe is the cornerstone of a well-behaved financial life: mindfulness. Yes, it sounds New Agey. But it’s really about making sure we put our decisions in context and show awareness of why we’re doing what we’re doing.

Part of the reason moral licensing becomes a habit is that we stop thinking about it. We just act. However, we can interrupt the habit, with mindfulness, by asking ourselves a simple question: If I hadn’t done X, would I still feel O.K. doing Y?

In most circumstances, I believe this question will bring us to a screeching halt if we’re relying on good behavior to justify bad behavior. Now, we may still go through with it anyway, but I suspect it won’t be nearly as enjoyable as before when we thought we deserved it.

Behavior Gap Newsletter

by Carl Richards

July 24, 2014 

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