Much of what you know about human behavior and persuasion is wrong.

You believe you’re in control of your own behavior. Yet a skilled persuader could persuade you to not only positive goals — like donating to charity — but also unthinkably negative acts, including stealing, lying, and even killing.

You believe you know what you’re attracted to. For most women, it’s the classic “I want a man who makes me laugh” (and a laundry list of other generic characteristics). These “wishlist criteria” have little to do with the people we ACTUALLY end up with — yet we continue telling our friends the kind of guy (or girl) we want. Put simply, it’s unlikely that you can articulate what you actually like.

You believe that if “they” — crackpot Tea Partiers, or bleeding-heart liberals — just had the information you had, they’d realize you were right and come over to your side. You couldn’t be more wrong.

Today, 5 fascinating studies from the world of social psychology — and some of my favorites from my work in psychology at Stanford — that will show you the complexity of human behavior…and challenge what you believe about yourself.

* * *

Myth: “I know who I’m attracted to”

Reality: You often cannot articulate who you are attracted to, and your attraction is subject to many variables — including proximity and context — and subject to manipulation

Ask anyone what they’re attracted to — what their “type” is — and you’ll often get a laundry list of characteristics like “tall” “interested in the environment” and “he makes me laugh” (my favorite catch-all, since most guys are not funny).

Yet how many people do you know with a strict list of characteristics who throw them out as soon as they meet someone they’re attracted to?

It turns out that the characteristics we SAY we’re attracted to are quite different than what our behavior reveals. For example, in speed-dating trials by Simonson, Fisman, Iyengar, and Kamenica, there were substantial differences between what we “said” we wanted vs. what we actually found attractive.

From a report of the experiment:

“Men—rather predictably—said attractiveness, while women listed intelligence and sincerity.”
…However, when they moved through the speed dating process there was no appreciable difference between men and women. Both used attractiveness to make their decisions.
[...]

Another interesting finding was that women tended to be choosier the more options they had. In the smaller group (10 men and 10 women) both men and women said they would like to see any given person again approximately half the time. In the large dating group, men kept to the same proportion of yeses (10 out of 20 times). However, women only said yes 6.5 out of 20 times.”

Instead, here’s how attraction often works:

- We say we’re attracted to XYZ characteristics
- We meet someone and are attracted to them for whatever reason
- We cannot articulate precisely why, yet we believe we can, so we’ll create a list of reasons
- We systematically ignore or actively resist the suggestion that any external factors have anything to do with our attraction
- Later, we may return to our baseline claims of what we find attractive

The main point: Who you find is attractive is a mysterious force and is subject to many external forces. If you’re in a foreign country, or surrounded by many people, or online vs. offline attraction varies. Keep this in mind when you say the kind of person you’re attracted to. The next time someone asks you who you’re attracted to, a better response might be a shrug and, “I guess we’ll see.”

* * *

Myth: “I’m in control of my own behavior.”

Reality: Your behavior is highly susceptible to your environment and the context around you. You can unwittingly be persuaded to stay in a smoking room, shock someone to death, or donate more money — all things you would not “ordinarily” do.

In one 1979 study, researchers Beaman, Diener, and Svanum showed how a simple intervention could dramatically change behavior. On Halloween, research assistants answered the doors of local houses and told the kids they could take one piece of candy. Then they left the room.

34% of children took more than one piece of candy.

But when a mirror was present — forcing the children to see their own reflection — that number dropped to 12%.

Would you leave a room filling with thick smoke? You might think our behavior is predictable during life-and-death matters, but it’s not. In a study by Latane and Darley, researchers filled a room with thick smoke. In one case, 75% of people left the room as you would expect. But in another case through experimental manipulations, only 10% left.

Notice the clueless YouTube comments saying she was “dumb” for not leaving. These commenters miss the point — they likely would do the very same thing under the very same circumstances…which is a cornerstone of social psychology. Intelligence has nothing to do with it.

Finally, when you accuse “those evil people” of doing bad things like beating prisoners, torturing others, or killing, know that it’s possible for most of us to do the same behaviors under the same conditions. This is one of the critical lessons of the famed Milgram experiment.

The main point: Most of us believe that we are in control of our actions, yet our surroundings exert powerful control over us. People get extremely uncomfortable when confronted with evidence that they are not in complete control of their behaviors. A skilled persuader — including companies, marketers, professors, or yes even bloggers — can cause you to take surprising actions. Recognize what is going on around you.

* * *

Myth: “If [the other side -- Tea Party crackpots, bleeding-heart liberals, union members, management] just had the same information I had, they’d see things as I do. They’re just ignorant.”

Reality: Even if they had your exact information, they would not come to the same conclusions as you. That’s because we filter information through our own biases.

If you’ve ever wondered how Republicans get poor people to vote for tax cuts for the rich, you may have said something like, “Ugh, these people don’t even read! They’re voting against their OWN self-interest. God if they just read XYZ, they’d realize…”

You could say the same for liberals who vote for budget-busting legislation.

We love to believe that if the other side simply had the same information — that if they “took the time to understand the issues” — they would get it.

In the principle of naiive realism, Lee Ross et al write how most people believe the world works like this:

1. I see reality, and my actions and beliefs are based on a rational interpretation of reality.
2. Other people would share my view and actions and opinions if they had access to the same information that I do and if they have processed that information in a reasonable way like I do.
3. If others don’t share my views, it’s because:
* they have different information, and by sharing information we can reach an agreement
* they are lazy, or are not making rational decisions based on the information
* they are biased by ideology or self-interest, or some other distorting influence

Indeed, people in politics are especially guilt of believing that the other side simply needs to “understand” and “get educated” about the issues — so guilty that I’ve created an entire section on political marketing.

Take this example, found on an internet forum:

He genuinely believed that she really needed to understand. But, of course, she didn’t.  And when he over-explained, her eyes glazed over.

Let’s take another example.

In a famous study, two researchers analyzed a 1951 football game between the Dartmouth Indians and Princeton Tigers. The game was unusually rough, with the Princeton quarterback being injured so badly that he had to leave the game.

One week later, researchers questioned students who had attended the game to understand their perception of what had happened. Who played dirtier? Who was responsible for the fouls and injuries?

When asked, “Do you believe the game was clean and fairly played or that it was unnecessarily rough and dirty?” a staggering 93% of Princeton students responded “Rough and dirty,” while only 42% of Dartmouth students agreed.
When asked, “Which team do you feel started the rough play?” 86% of Princeton students surveyed responded that Dartmouth had. Only 36% of Dartmouth students blamed their own team.

In a clever twist, the researchers then asked students to watch a film of the game and report how many infractions were made. Both groups watched the same game on video, but Princeton students reported twice as many infractions as Dartmouth students did.

These students watched the objectively same game, yet had astonishingly different perceptions of what “actually” happened.

Please read that last sentence carefully. You’ll notice that I wrote they perceived the game.

That is indeed what happened. Even though they physically “watched” the very same game, each set of students — Dartmouth and Princeton students — were unconsciously affected by their group membership and beliefs. Despite what we think, we do not objectively see what happens around us. You and I could be watching a clown walk across the street, and we would perceive two VERY different things. Our perceptions are colored by a variety of factors, including our beliefs, history, group membership, culture, and more.

The truth? Education is not the answer.

Even if your opponent has all the same information as you, they will likely still disagree with you because they filter information through their own biases and world view.

* * *

Myth: “I need more information to make the right decision.”

Americans love to believe that if they just had more information, they could make a better decision.

Yet more information can be crippling and cause us to delay taking action.

Sheena Iyengar studied contribution rates to 401(k) plans and found a surprising result: “For every 10 mutual funds made available, the rate of participation in 401(k) investing goes down 2%.”

There are other variables more important than “more information” that help ensure compliance.

For example, “high-fear” appeals are known to work well in particular situations such as smoking reduction. But there’s something even more important.

in an experiment by Howard Leventhal, he tested how to persuade students to get a tetanus shot.

In one case, he simply provided them information. 0 students got the shot.

In another case, he provided a “high-fear” appeal and 3% of students got the shot.

But when he added the “high-fear” appeal plus specific instructions — a map to the health center, times shots were available, and a request for the students to plan what time they’d go and what route they’d take — the number of students who got the shot soared to 28%. Even though these students likely knew where the health center was!

The main point: Simply giving people more information rarely leads to behavioral change. In fact, more information can decrease the chances of someone taking behavior, a finding you can investigate further in the excellent book, The Paradox of Choice. Another terrific book is Yes! 50 Scientifically Proven Ways to Be Persuasive. There are many other, far more persuasive, techniques besides “more information” to motivate change.

* * *

Myth: “I know what I saw”

Reality: Your memory is unreliable and easily influenced

If you believe that you remember what happened during childhood, that conversation last week, or even in that commercial you watched yesterday, you may be in for a surprise.

Many of us think of our memory like a videotape — it records what it sees. But we “filter” the information before it comes to us, affecting the memory before it’s ever “recorded.” To complicate things, time and other variables also alter our memories.

In Pratkanis and Aronson’s “Age of Propaganda,” they write about the way that memories are easily altered:

“For example, in her research on human memory, cognitive psychologist Elizabeth Loftus frequently demonstrates that memories of, say, an accident or a crime scene can be modified and changed simply through the questions asked about the incident.”

Loftus has shown that asking carefully phrased questions — “How fast were the cars going when they smashed together?” — can produce distorted memories of watching the film. (In this case, as Aronson writes, “Subjects who were asked about smashing cars, as opposed to hitting cars, estimated that the cars were going significantly faster and, a week after seeing the film, were more likely to state that there was broken glass at the accident scene (even though no broken glass was shown in the film.))”

The main point: Your memory is not a videotape. Instead, think of it as a constantly changing ribbon of material, easily susceptible to suggestions and rewriting.

***

Interested in learning more about the psychology of persuasion?

Tonight, 1/19 at 6pm Pacific, I’m holding a live 1-hour call with Stanford psychologist BJ Fogg, one of my mentors who taught me much of what I know. We’ll be discussing how to apply psychological techniques on a day-to-day basis, along with unconventional ways to influence others, get your dream job, and become an expert.

UPDATE: I just finished the call with BJ, check back Friday to find out how to get the full recording… the comments are rolling in:

Sign up below to make sure you get:

• A recording of the call if you can’t make it
• A bonus psychology study that reveals a surprise insight about attraction and arousal

(Can’t see the above form? Click here to sign up.)

P.S. Also remember to add your “WEEK 2 RESULTS” to this post by midnight tonight.

It happened again last month.

One of my friends told me an interesting factoid — “Did you know that Victorian houses in SF used to be considered cheap models, but now everyone loves them? — and I said “Hmm, interesting” and continued chewing my sandwich.

Two weeks later, I was walking with the same friend, and I said, “Hey, I heard something interesting…did you know that Victorian houses used to be —”

“GOD DAMNIT!” she said. “*I* told you that!”

Ah, yes. I forgot. Again.

It’s become a running joke that I hear someone’s idea, then 2 weeks later mention it to the SAME PERSON…which drives my friends crazy. But for some reason, it seems hilarious to me.

So today I’m delighted to be able to OPENLY take credit for one of my friends’ ideas and tell you how it’s improved my life.

I met Paul Singh a few years ago, and I was so impressed that I hired him for my last company, moving him and his wife to the Bay Area.

Little did I know that he was one of the world’s premiere lifehackers.

After a few months of exchanging techniques, he shared a technique that I’d never heard.

“I put away $3,000 every year just to meet interesting people.”

“What do you mean?” I asked.

“I just put it into a separate account and force myself to spend it.”

“Interesting….” I said.

A little while later, I went to my 5-year college reunion. I met another friend, Steve, who was speaking on an alumni panel. He had moved to Seattle to work for Microsoft, but he had a particularly amazing strategy that I fell in love with.

“When I went to work for Microsoft, I knew I’d eventually want to move back to the Bay Area to start a company. So I made it a point of keeping my relationships warm.”

How did he do that? Here’s where it gets insanely awesome:

“I made a promise to myself that if anyone invited me to lunch, or even coffee, I’d fly to San Francisco to do it. I basically treated the plane flight like an hour-long car ride.”

How much did that cost him in a year? Maybe a few thousand dollars.

But guess what? Steve did start a tech company and, using his carefully cultivated relationships, he’s gotten terrific press for his company, which is profitable and killing it.

Yesterday, I wrote about recognizing and banishing the negative scripts from your life…and automating the positive scripts. Paul and Steve both automated positive scripts — of investing in themselves.

And of course, since I love to take credit for my friends’ ideas, I now set up a sub-savings account and force myself to spend on meeting interesting people.

Here’s an actual email I sent to somebody who I want to meet

[Initial email was the basics: Hi who I am, how I can help him, etc. We went back and forth. Then I wrote this:]

“If there’s anything more I can tell you, please let me know. If a phone call or even coffee in LA makes sense, just let me know and I’d be delighted to do it.”

I live in New York and San Francisco and it was important enough to meet him that I offered to fly to have coffee with him in LA. Even one meeting with him could change my business.

(Sidenote: He hasn’t responded after our initial back-and-forth, so I added this to my “Failures” tag. But I continue to send him updates on my business and I know eventually he’ll respond.)

If you read this and say, “Waa I can’t afford $3,000 per year to travel around and meet people, you’re missing the point. This is not about the amount of money — you could do the same with $20/month by taking 2 people out to coffee. The point is the mindset: Investing in your friends and relationships pays off, hugely.

We all claim relationships are important. But when you look at “objective” measures — your calendar (time) and spending (money) — are your actions really matching your claims?

* * *

3 case studies of automating positive scripts

1. Jackie Schmidt

Backstory: Jackie went from thinking she was horrible at business to creating a referral program that brought in so many clients she had a wait list a mile long that represented over $80,000 in revenue—and she did it in just 6 weeks

Old Script: “I’m terrible at business and can’t think of ways to improve it.”

Automation: Jackie used my Earn1k technique on “referral machines” to outsource her marketing. Most of the work was completed beforehand — as I teach in the course — and once she recognized the opportunity, it was a 5-minute email to seal the deal. I’ll be sharing a detailed case study from Jackie on my Insider email list.

2. Adam Baker

Backstory: Baker was a newly married family man accumulating debt upwards of $18,000. He made the decision to clean up his debt, sell everything he owned, and spend a year living in Australia. He paid off $18,000 in debt and saved over $17,000 before living overseas in Australia, New Zealand, and Thailand.

New Script: “The first step to living a life of passion…is to remove the barriers that hold you back.”

Automation: Baker’s mantra: Sell Your Crap… Pay Off Your Debt… Do What You Love… In the year leading up to the trip he sold all of his possessions (down to two backpacks) and payed down $18,000 in consumer debt. In June 2009, they left for what was to be a year in Australia, but quickly turned into more mobile travels through Australia, New Zealand, Thailand, and finally back to Indiana. And now he’s added “earning more money” to that list through terrific products.

3. Eva Motch

Backstory: Eva is a designer who wanted to find a better job for 6 months. She not only quit her job and received a $12,000 raise, but found work on the side at a $4,000-a-year clip (with more to come).

Old Script: “I hate my job and want to quit, but will wait until something better comes along.”

Automation: Eva implemented a plan to apply to leads on Craigslist systematically, and in so doing stumbled upon the full-time job and salary bump.

BY THE WAY, Jackie (#1) and Eva (#3) were members of Earn1k, my step-by-step on earning money on the side. Later this month, I’ll be opening up Earn1k 2.0 — an updated version of the course with powerful techniques to turn your existing skills into side income. As Eva told me, “Your class honestly and truly helped me, and I will make many times more in my life because of it. “

TO DO TODAY

1. Share your example of automating positive scripts. Make sure you’ve added your best example of automating positive scripts by leaving a comment on Monday’s post. Remember, the best entry by Wednesday, 1/12 (11:59pm PST) will get an iPad and a 15-minute call with me.

2. Mark your calendar: Live webcast on hustling tomorrow night (1/12). Tomorrow night (1/12), I’m holding a webcast with my friend Noah Kagan, founder of Appsumo (great deals), formerly of Facebook, Mint, and Gambit and I’m going to ask him about:

• How he got rejected for the job…and still became employee #4 at Mint
• How he turned a single cab ride into a $250,000+ payday
• How he convinced a famous venture capitalist to give a $25,000 speech…for free

Webcast details:

- The webcast will be WED (1/12) at 6pm PT (9pm ET).
- Please don’t ask about recordings or rescheduling it. If the topics above are important to you, I trust you’ll find a way to be around tomorrow evening. Noah’s tips have been priceless to me and I’m asking him for a big favor to appear for you.
- I’m only sending the webcast invite to people on my private list, which includes all-new material about hustling, psychology, earning more, and becoming a top performer.

How to attend tomorrow’s webcast

Sign up below to make sure you get the webcast invite email:

(Can’t see the form? Click here to sign up for the webcast on hustling.)

This week you’ll also get unreleased case studies on earning more and bonus videos on time management from my advanced Earn1K course.

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The most common New Year’s resolutions deal with health & fitness, money, career, relationships, and travel.

Sorry to be blunt, but if you’re not making steady progress at your top resolution right now — September 6th — you haven’t set up systems to maintain ongoing accountability, and chances are you’ll fail again in January.

On the other hand, if you’re systematically working towards a specific goal you set, the world is your oyster. What’s the next challenge I can set for myself? How can I top myself last time? Bring it on. These are the phrases of top performers I know.

The time to think about resolutions is not January 1st. It’s in the middle of the year, when nobody else is thinking about them.

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This is an oldie but goodie, and one of the most important videos I’ve posted in my 100+ YouTube videos.

In this 12-minute video, I show you how to set up your bulletproof personal-finance system to automate your accounts.

I cover the entire system in extreme detail in my personal finance book.

To find out about the psychology of automation — including how it affects your money — check out my section on automating your personal finances.

Join my FREE Private List on automation, investing in yourself and living a rich life

Automation is critical not just to making your accounts play nice, but to getting ahead in life overall. That’s why I created an exclusive (and FREE) Private List of advanced material that I never share here on the blog.

Each week, I’ll send you:

• Advanced psychological insights to dominate
• Detailed, tactical advice on negotiating
• How to use systems & automation to grow your money automatically
• Ways to earn more using skills you already have
• Much, much more

You can sign up for free below:

(Can’t see the above form? Click here.)

This post is part of a series on Automating Your Personal Finances. For more personal finance hacks and articles on money management, follow the links below.

« 5 myths of personal finance (plus: stupid advice)

Automating Your Personal Finances

Automating your money — especially entrepreneurs and freelancers »

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Let me show you how I handle stupid mistakes like traffic tickets in my automation system for personal finances.

 

One of the most common reasons people can’t get ahead is expenses they just didn’t expect. I constantly hear things like this:

• “I was just about to pay off my credit card debt FOREVER, and then I had to get a new ___ for my ___”
• “God, I didn’t expect to get that traffic ticket.”
• “Every time I think I’m getting ahead, my car breaks down or I have to replace some appliance.”

These “unpredictable” expenses are very predictable

Here’s the trick: A lot of what seems unpredictable is extremely predictable — over the long term. What seems like surprise expenses is actually not a surprise if you analyze your spending for the past 5 years. Which of course nobody does.

For example, that “surprise” car repair? It might not happen in the same month, but every year, you might average spending about $400 on car repair. That’s $33/month. Once you know that, set up an automatic deposit into your sub-savings account and you’re done.

Keep a “Stupid Mistakes” sub-savings account

I keep a sub-savings account called “Stupid Mistakes” in my ING account.

 

I’ll explain some of the other ones later

What I use “Stupid Mistakes” for:

• Traffic tickets
• Late fees or penalties that I can’t negotiate out of
• Re-buying things that I lost

I save $100/month into it. If there’s anything left at the end of the year, I take out 20% to reward myself, and roll the rest back into my main savings account.

Keep a “Stupid Mistakes” sub-savings account. Just the simple fact of having one will sharpen your focus on avoiding the mistakes in the first place. And when you do make a stupid mistake, you’ll be able to use your sub-savings account as a buffer to keep your automation system on track.

Get the complete automation system in my book.

Join my FREE Private List on automation, investing in yourself and living a rich life

Automation is critical not just to making your accounts play nice, but to getting ahead in life overall. That’s why I created an exclusive (and FREE) Private List of advanced material that I never share here on the blog.

Each week, I’ll send you:

• Advanced psychological insights to dominate
• Detailed, tactical advice on negotiating
• How to use systems & automation to grow your money automatically
• Ways to earn more using skills you already have
• Much, much more

You can sign up for free below:

(Can’t see the above form? Click here.)

 

This post is part of a series on Automating Your Personal Finances. For more personal finance hacks and articles on money management, go to the index page, or follow the links below.

« Personal finance is not about more willpower

Automating Your Personal Finances

5 myths of personal finance (plus: stupid advice) »

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Two years ago, I wrote a review of The Four Hour Workweek in a review called, “The book that changed my life in 2 hours.”

Since then, Tim Ferriss has become a good friend of mine and we’ve traded strategies on writing, testing, and automation.

The updated & expanded edition of his book, The Four Hour Workweek, comes out today. I convinced him to run the preface here — where he explains what’s new, including detailed case studies and updated resources for virtual assistants and automation. This is the first time you’ll see it anywhere.

If you haven’t already read the book — or even if you have — this version contains all-new material to help you focus on the things that matter, and ruthlessly eliminate the unnecessary obligations from your life. I’ve read the new edition and it’s very good.

Below, see an invitation to get a private hour with Tim and me to answer any question you want – about virtual assistants, international traveling, automating your finances, marketing, or your own career questions.

Tim, take it away.

* * *

Tim Ferriss: Preface to the Updated and Expanded Edition

The 4-Hour Workweek was turned down by 26 out of 27 publishers.

After it was sold, the president of one potential marketing partner, a large bookseller, e-mailed me historical bestseller statistics to make it clear—this wouldn’t be a mainstream success.

So I did all I knew how to do. I wrote it with two of my closest friends in mind, speaking directly to them and their problems – problems I long had – and I focused on the unusual options that had worked for me around the world.

I certainly tried to set the conditions for making a sleeper hit possible, but I knew it wasn’t likely. I hoped for the best and planned for the worst.

May 2nd, 2007, I receive a call on my cell phone from my editor.

“Tim, you hit the list.”

It was just past 5pm in NYC, and I was exhausted. The book had launched 5 days before, and I had just finished a series of more than 20 radio interviews in succession, beginning at 6am that morning. I never planned a book tour, preferring instead to “batch” radio satellite tours into 48 hours.

“Heather, I love you, but please don’t $#%* with me.”

“No, you really hit the list. Congratulations, Mr. New York Times bestselling author!”

I leaned against the wall and slid down until I was sitting on the floor. I closed my eyes, smiled, and took a deep breath. Things were about to change.

Everything was about to change.

Lifestyle Design from Dubai to Berlin

The 4-Hour Workweek has now been sold into 35 languages. It’s been on the bestseller lists for more than two years, and every month brings a new story and a new discovery.

From The Economist to the cover of the New York Times Style section, from the streets of Dubai to the cafes of Berlin, “lifestyle design” has cut across cultures to become a worldwide movement. The original ideas of the book have been broken apart, improved, and tested in environments and ways I never could have imagined.

So why the new edition if things are working so well? Because I knew it could be better, and there was a missing ingredient: you.

This expanded and updated edition contains more than 60 pages of new content, including the latest cutting-edge technologies, field-tested resources, and—most important—real-world success stories chosen from more than 400 pages of case studies submitted by readers.

Families and students? CEOs and professional vagabonds? Take your pick. There should be someone whose results you can duplicate. Need a template to negotiate remote work, a paid year in Argentina, perhaps? This time, it’s in here.

The Experiments in Lifestyle Design blog (www.fourhourblog.com) was launched alongside the book, and within 6 months, it became one of top 1000 blogs in the world, out of more than 120 million. Thousands of readers began to share their own amazing tools and tricks, producing phenomenal and unexpected results. The blog became the laboratory I’d always wanted, and I encourage you to join us there.

The new “Best of the Blog” section includes several of the most popular posts from the Experiments in Lifestyle Design blog. On the blog itself, you can also find recommendations from everyone from Warren Buffett (seriously, I tracked him down and show you how I did it) to Mike Shinoda of Linkin Park and chess prodigy Josh Waitzkin. It’s a experimental playground for those who want better results is less time.

Not “Revised”

This is not a “revised” edition in the sense that the original no longer works. The typos and small mistakes have been fixed over more than 40 printings in the US. This is the first major overhaul, but not for the reason you’d expect.

Things have changed dramatically since April 2007. Banks are failing, retirement and pension funds are evaporating, and jobs are being lost at record rates. Readers and skeptics alike have asked: can the principles and techniques in the book really still work in an economic recession or depression?

Yes and yes.

In fact, questions I posed during pre-crash lectures, including “how would your priorities and decisions change if you could never retire?”, are no longer hypothetical. Millions of people have seen their savings portfolios fall as much as 40% or more in value and are now looking for options C and D. Can they redistribute retirement throughout life to make it more affordable? Can they relocate a few months per year to a place like Costa Rica or Thailand to multiply the lifestyle output of their decreased savings? Sell their services to companies in the UK to earn in a stronger currency? The answer to all of them is, more than ever, yes.

The concept of lifestyle design as a replacement for multi-staged career planning is sound. It’s more flexible and allows you to test different lifestyles without committing to a 10- or 20-year retirement plan that can fail due to market fluctuations outside of your control. People are open to exploring alternatives (and more forgiving of others who do the same), as many of the other options –- the once “safe” options — have failed.

When everything and everyone is failing, what is the resume cost of a little experimentation outside of the norm? Most often, nothing. Flash forward to 2011; is a job interviewer asking about that unusual gap year? “Everyone was getting laid off and I had a once-in-a-lifetime chance to travel around the world. It was incredible.” If anything, they’ll ask you how to do the same. The scripts in this book still work.

Facebook and LinkedIn launched in the post-2000 dot-com “depression”. Other recession-born babies include Monopoly, Apple, Facebook, Clif Bar, Scrabble, KFC, Domino’s Pizza, FedEx, and Microsoft. This is no coincidence, as economic downturns produce discounted infrastructure, outstanding freelancers at bargain prices, and rock-bottom advertising deals—all impossible when everyone is optimistic.

Whether a year-long sabbatical, a new business idea, re-engineering your life within the corporate beast, or dreams you’ve postponed for “some day”, there has never been a better time for testing the uncommon.

What’s the worst that could happen?

I encourage you to remember this often-neglected question as you begin to see the infinite possibilities outside of your current comfort zone. This period of collective panic is your big chance to dabble.

It’s been an honor to share the last two years with incredible readers around the world, and I hope you enjoy this new edition as much as I enjoyed putting it together.

I am, and will continue to be, a humble student of you all.

Un abrazo fuerte,

Tim

April 21th, 2009

San Francisco, California

* * *

Get a free, private hour with Tim Ferriss and Ramit Sethi.

Buy the new edition in the next 24 hours and you’ll get access to a special live 1-hour webcast where Tim and I will answer any question you can throw at us, including questions about finances, starting a business, writing a book, using virtual assistants, optimizing lifestyle design…or whatever you can come up with.

1. Buy The Four Hour Workweek expanded & updated edition today, December 15th, 2009
2. Forward your receipt to 4hww@iwillteachyoutoberich.com and I’ll send you instructions on attending the private webcast

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Do you ever wonder how people who read I Will Teach You To Be Rich actually implement the strategies for huge savings and earning increases?

Below are 7 stories, straight from readers just like you, who have saved and earned thousands of dollars using I Will Teach You To Be Rich techniques. The stories include details on how they got out of debt, saved more, and earned more so they could travel, buy a house, and live a richer life.

Remember — tomorrow I launch the I Will Teach You To Be Rich Boot Camp (early details), where I’ll unveil a 6-week course and curriculum to force you to take ACTION and automate, invest, and start thinking about entrepreneurship.

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Jason Demant saved $50,000 in 2 years and is now taking a 1-year vacation

“The reason I’m writing is to thank you for your help in automating my money, getting my 401K properly allocated, and pushing me to sell my crap to make some cash. Using your step-by-step instructions and advice, my girlfriend and I have been able to save over $50,000 the past couple of years and now, in a couple weeks, we will be quitting our Silicon Valley jobs and traveling around Asia on an extremely extended vacation (1-year minimum)! I’ve been reading your site for a few years now and I’ve never properly thanked you for the help, so I decided it was time. Thank you!”

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Terry Martin got off his ass and paid off thousands in debt — and earned more

“I’m writing you to let you know how much your blog has helped my wife and I take charge of our finances. I’m actually embarrassed to say this, but we were some of the people you mentioned in tip #25 of the save $1000 in a month challenge. We would complain about our financial situation, but did nothing to change it.

After I realized this, I got to work. I read all your tips and made a game plan. I saved $100 a month on cable, $20 on our cell phone bill, created several ING savings accounts, my wife got serious about cutting coupons (she has a 3 ring binder!), I sold an old camcorder on craigslist, and cut off my Sirius account (but when I called to cancel it, they gave me 3 more months free with the option to cancel it for good afterwards—who would have thought?). We cut back on eating out except we each get twice a month at lunch time. My wife got overtime at work along with a raise, I started a side job, and I will start teaching night classes soon. Not only did we cut our spending drastically, we also have more money coming in. Our debt will be cut in half by the end of the year and eliminated by the end of the next!

Update: “Right now we are just over 18,500 in debt not counting my wife’s newly added student loan which would add about another $8000 . By the end of the year, we will have paid about $14,000 off while putting at least $500 a month in savings for a down payment on a house and 50 a month into another savings. This is, of course, things keep going as planned.

But not only are we saving money, we are increasing how much we make too! I have started a side business, while its not bringing in a lot of extra money now, things are starting to pick up. I also talked my company into paying for training classes for a certification that will greatly increase my value $15 to $20K a year in the workplace. Especially helpful during these tough times. My wife is also getting her company to pay for most of her classes to get her bachelor’s degree so she can move up to a new, higher paying position. During this whole process, we have been saving for a down payment on a house and I’m happy to say we are closing on our first home July 20th.

I would personally like to thank you for website and your book. The tips were inspiration to get up and do more than just complain about our financial situation. Although we are not rich money wise, we love where we are at and what the future holds. You have truly taught us how to be rich. Thank you.”

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Christopher P. is saving hundreds of dollars and earning more

“I would say i have saved: $320 from cutting my cable bill by 40 dollars last 8 months (they raised it again 2 months ago. I just called right back and got it lowered . I put $30 a week into savings accounts (960 total saved 8/months)

8 months ago i decided that i would earn more money. First I asked for a 5% raise at work and got it. (This was scary because we had just had 3 rounds of firings.) Then i sat down and figured out what interested me and I could make money doing. I was in love with the iPhone but too poor to buy one. But I taught myself to program for the iPhone anyways and just 2 months ago finally purchased one. It was slow going at first and the amount i was putting away seemed pretty insignificant. But 8 months later looking back i am really seeing the transformation that took place.

Two weeks ago I finally finished and started selling my first app. It has been such a great experience and your website gave me the kick in the pants i needed. (Thank You) I haven’t done any advertising and on my first day i sold 17 copies! Not enough to quit my job but extra income. Since then the amount of units I have sold has been slowly but steadily increasing. (It’s been rated 5 stars)

People all over the wold have purchased my app now. (Japan, Canada, Great Britain, Australia, Netherlands and United States so far) In the first two weeks after Apple’s cut i made $200. October looks like it will be a much better month!”

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Brian Drolet is saving $2,880/year

“Big wins =

• Dropping cable $40/month
• $1 raise at work = $240/month extra
• Closed checkings account = $13/month extra
• Automated my cell phone bill = $7/month

I’m saving $720/year just from those 3 things and earning $2880/year extra.”

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Misha has turned her savings around

“I wanted to write to you and say thank you. After reading your book I was able to get a good handle on my finances. I think the most helpful was the chart you use to show the movement of the money and the automation. Check out a snapshot of my my mint NET INCOME.”

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Josh G has saved $14,000 in a few months

“I have saved 14k so far since I started May 2008 and I’m on track for 20k by the end of the year!
Fear kept me from automating my savings previously. I had bills and it seems that was all I thought about every month.

There was a blog post that you did which you mentioned using ING Direct to create sub accounts. It was in that post I decided to try the full automated savings because I could do sub accounts for future purposes.”

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Michael Hagan saved hundreds from March to July of this year

“I’ve saved: $900 in savings since March, $700 towards Roth IRA since March. I started the whole thing around February/March

I would say that the things that held me back the most was a) not knowing what to do in the first place b) getting out of college saddled with massive credit card and student loan debt (working a full-time, unpaid internship in LA was expensive!) c) messing around in high school just enough to where I couldn’t qualify for scholarships and being just too middle class to get gov’t $$ for college, and finally d) trying to keep up with all my friends that had good jobs and nice things. A fool’s game!”

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The difference between these people and others is they took ACTION. It’s easy to read blog post after blog post, but when you decide to take action — and you have a clear plan of which Big Wins to attack — the results can come quickly.

The Boot Camp will include a step-by-step plan to take action on your finances, automate, create a plan to pay off debt, and more. I’m including psychological techniques to use against yourself to lock the behavioral changes in. Plus, live video webcasts from me each week (where I’ll answer your questions), as well as guest speakers to cover entrepreneurship topics like marketing, pricing, and critical business mistakes to avoid.

Check back tomorrow, when I’ll open up Boot Camp registration.

This post is part of a series on How To Negotiate. For more articles on negotiation skills and techniques, go to the index page, or follow the links below.

« David negotiates away $200 of overdraft fees with one phone call

How To Negotiate

How to negotiate your debt (video) »

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What are the most common mistakes in personal finance — especially among blog readers?

I recorded a 30-minute interview with Flexo and Tom over at the Consumerism Commentary podcast with extensive notes below. It’s called Stupid Financial Advice + The 5 Myths of Personal Finance.

Stream the interview or download my melodious voice here.

Notes:
[00:00] Introduction from Flexo
[00:50] Interview with Ramit Sethi about stupid financial advice
[01:50] — The Reddit community
[03:27] — Frugality
[05:09] — Big wins
[08:03] — Knee-jerk behavioral change
[09:41] — The “buy and hold” strategy
[13:10] — Financial magazines leading up to the recession
[16:48] — Finding decent financial advice
[19:01] Ramit’s five myths of personal finance
[20:01] — Myth #1: Personal finance advice is only about spending less than you earn

– Sort of meaningless pablum that lets people feel better about themselves but get nothing done
– And you can just see that’s true by asking a few questions: Are you happy with your finances? How much do you spend on eating out and loans? What’s your system for getting ahead? What are your goals?
– Just knowing a fact doesn’t make it implementable. As we say in persuasion, “informational influence is one of the least persuasive methods available”
– Make it tactical: How do you get the right accounts? Dominate your credit card? Automate your money? Pick the right investments? Handle money and relationships?

[21:33] — Myth #2: Personal finance is about more will power

– If I just try harder…
– Reminds me of weight: If I just try harder to diet…
– Every choice has a cost. Trying to save on 50 things vs. 5 things…
– How has that worked for you over the last 1-2 years? 10 years? Most of us are fat and in debt
– It’s about building systems that handle your weaknesses so you can exploit your strengths. Automate, earn more, cut costs

[22:55] — Myth #3: You can’t save any more money

– Yes you can
– We under-report how much we eat, just as we under-report how much we spend
– You can’t out-frugal your way to rich
– Saving: CEO
– Tracking is #1
– Setting goals is #2
– Automation is #3
– Earning more is #4

[25:18] — Myth #4: Everyone is like you

– MSN readers criticizing my frugality tips, saying frugality is about a lifestyle choice
– “Ridiculous to spend $28k on weddings”
– Silo effect: Sites like Reddit make you surround yourself with people who (1) don’t know anything, (2) act like they do, and (3) they ALL have the similarly kooky opinions!
– Solution is to read multiple CREDIBLE sources

[27:43] — Myth #5: Frugality will make you rich

Myth: “I can save $10 by not buying that book! Ha Ha!”
– Pay for value
– Not just sticker price, but value
– Why it’s crazy for people to try to find these extreme deals on books. If you implement even 1 tip, you’ll save/earn 1000x the money
– Same people who don’t pay end up spinning their wheels
– Would it be worth it to buy a $10 book that has saved people thousands? Scrooge for a few bucks/month if it helps you earn $300/month? Or to buy a course at a community college for $500?
– Focus on value, not cost

[30:26] End

Random notes

BUY AND HOLD

- Unprecedented what’s happened, lot of people to blame (including ourselves)
- But there’s a knee-jerk reaction: BUY AND HOLD DOESN’T WORK!
1. Ok, so what does?
2. The people who pull out of the market now are going to face another, more serious phantom risk: Running out of $. (SEE BELOW)

AVAILABILITY HEURISTIC

- We tend to overvalue what’s easily remembered — so you might say, “VWs are terrible cars” when in fact Consumers’ Reports prove otherwise (I do this)
- People are freaking out and removing their money from the market — driven by fear, not educated moves
- Change asset allocation. Change regular contribution amounts. Diversify. Earn more. But PULLING YOUR $ OUT? Worst thing you could do
- And people will face another fear they don’t know today: Running out of money. Not as obvious as losing 40%, but you can’t do much when you’re 82 and out of $
- Focus on the most important things and work, step-by-step, to hit them

BUY AND HOLD 2

- Compare equity returns to any other measure and you’ll see over the last 70 years have shown equities to return the best. PAST PERFORMANCE IS NO GUARANTEE…
- But I prefer to use data unlike the other handwavy arguments that involve the gold standard, doom and gloom, and tin cans

Listen to the interview here:
Download MP3 here.

Stop reading and start doing. Thousands of people have already bought my book and dominated their personal finances. If you haven’t already bought my book for about $10 (Amazon), take 10 seconds to do it and learn how to turn all this information into a 6-week plan to dominate your personal finances. If not now, when?

(Make sure you forward your receipt to iboughtthebook@iwillteachyoutoberich.com for a bunch of bonuses, including something new coming up soon.)

This post is part of a series on Automating Your Personal Finances. For more personal finance hacks and articles on money management, go to the index page, or follow the links below.

« Money management tip: Add a “Stupid Mistakes” sub-savings account

Automating Your Personal Finances

My 12-minute guide to automating your accounts »

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I’ve been hammering on the idea of focusing on the big wins instead of worrying about $3 lattes here and there. It’s far better to focus on cutting 25% off the two biggest areas of your spending than to worry about saving 5% on 50 things.

Any time you make a major purchase, there is a huge amount of money to optimize. And buying a house is the best example of this.

Even though buying a house is usually not a good investment, once you have a mortgage, you can optimize the hell out of it.

Today, Andy Jolls from videocreditscore.com is going to show you one way to save $71,000+ on your mortgage.

Dominate Your 30 Year Mortgage in 25 Years

Can’t see the video? Click here

01:16 — Typical Mortgage Payments
01:36 — Extra Payments
02:07 — $71,000 Savings
02:23 — What if your credit is worse?
03:29 — Scrooge Strategy members can learn more

Today let’s see some real world examples of how you can save money on your biggest-ticket item: housing.

Instead of paying off your mortgage once per month, set up a system to pay it twice per month. I’m not telling you to double your payments. I’m saying that paying every two weeks WILL mean several years less of payments.

Here’s how it works with Bank of America [Countrywide] and I’ll assuming it works this way with others. BofA has a plan (PayPlan/26) which means instead of making 12 payments a year you are paying 26 payments a year. Note the math. It seems like you should be paying 24 payments a year, but that’s not how the calendar works, so you make extra payments. But, that’s a good thing. It’s like you are making 13 payments a year [the way BofA does it, more on this below*] Let’s take a look.

Scenario 1: Typical Mortgage

APR: 6%, $300K, 12 monthly payments of $1798.65, total interest paid over 30 years, $347,514.57

Scenario 2: Making an extra payment each year

APR: 6%, $300K,? 26 bi-weekly payments of $899.38, total interest paid over 25 years, $276,591

You just saved almost $71,000 in interest payments. Wow, that’s like 18,000 lattes or one every day for the next 50 years.

What’s happens if you have bad credit and have higher interest rates than 6%. Moving to every two weeks helps even more. At a 7% interest rate, you will shorten your loan by 6 years instead of 5 years for the 6% rate. Better yet, you save from paying $98,545 in interest.

Scenario 3: Making extra payments each month

Okay, this doesn’t save you a lot more, but you stop payments 5 months sooner and your interest payout is $273,852 for an extra savings of $2739.

The problem with the scenarios above is unless they are automated, most of us will never do it. That’s why the BofA PayPlan/26 plan is great. It’s automatic.

Here’s what sucks about the plan. One, they charge a $4 fee every month. Okay that’s $2600 over the course of the loan. But, the bigger issue is this. They don’t apply your mid month payment right way, rather, they hold your money like a bank and then make a payment with your two payments at the end of the month. Thus, the plan really is a 13 payment plan. This is pretty downright snaky in my book and I think [hope] the regulators jump on this. According the scenarios above I should be saving another $2739, but I’m not.

I’ve seen many posts that complain about the fact that the banks charge for this service in many different ways. I agree with these complaints, but I want to point out that I disagree with the advice most posters give. They say, get a bunch of envelopes and be disciplined about this. I just don’t think “discipline” is realistic for most busy people. (Note from Ramit: See Personal finance is not about more willpower.) Sure, I’m bummed about paying $2600 for something I should be able to remember to do, but that $2600 is saving me $71,000. So, it’s a tradeoff I willingly accept.

But all this said, the upside totally outweighs the downside. It’s an automatic way to save you more money than you could save almost anywhere else and you’ll be paid off 5 years earlier.

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Andy is an ex-FICO executive and Chief Educator at VideoCreditScore.com. Check out these videos:

• Do apartment evictions impact your credit score?
• Avoid Cell Phone Scams
• Student loan debt vs. credit card debt
• How to translate your credit score into an interest rate.

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See the specifics: If you liked this, Andy recorded a more in-depth premium video for Scrooge Strategy members, which shows specific tactics, phone numbers, and an additional tip for saving $117,600 on the lifetime of a typical mortgage. Sample screenshot:

My Scrooge Strategy members get proven, specific tips like this every week — and if the tips aren’t useful for you, you get 100% of your money back. See how to focus on the big wins and save thousands — no risk.

This post is part of a series on Buying a House. For more articles on house buying and real estate investing, go to the index page, or follow the links below.

« My friend was about to buy a million-dollar house with no research

Buying a House

Is it better to pay off your mortgage early or invest? »