October 15, 2013

How to improve your economy by blogging

Let's say you have accumulated a large financial debt and you feel that you can't find a way to decrease the debt. This is a common problem, and a growing solution to the problem is "self shaming." In Sweden, we have a popular television show called Luxury Trap where people with a large uncontrollable debt can apply for help to learn how to become more financially stable. Another growing trend among those with poor financial conditions is to start a blog. These blogs range from "How to become rich" to "How to go from a huge debt to no debt at all."

When one of the "shelf shaming" bloggers discovered that she owed $22,302 on her credit cards, she could not wait to spread the news. The same blogger is ashamed of her personal debt and doesn't talk about it with her family and friends. But she's talking about her problems on her anonymous blog Blogging Away Debt (The blog has now changed author to a couple who also want to decrease their debt). 

The interesting part is that "self shaming" can also work if you have no financial trouble and would like to become rich. In 2006, I found an anonymous Swedish blog called Millionaire before 30. The author's life-goal was to become a millionaire in SEK (150,000 USD) before age 30. But he didn't stop there, he wanted to have three millions at age 35, and ten millions at age 40 (still in SEK). To fulfill the goal, the author's strategy was to invest a large part of his salary in the stock market. He was disciplined and followed his strategy even when the stock market collapsed in 2008. And because he followed his strategy, he became a millionaire before 30 when the stock market recovered in 2009.

The reason why "self shaming" is working can be found in the book Influence by Robert Cialdini - a classic book on persuasion. According to the book, there are six universal principles of influence:
  1. Reciprocation – we feel obligated to return favors performed for us
  2. Authority – we look to experts to show us the way
  3. Commitment and consistency – we want to act consistently with our commitments and values
  4. Scarcity – the less available the resource, the more we want it
  5. Liking – the more we like people, the more we want to say yes to them
  6. Social proof – we look to what others do to guide our behavior
"Self shaming" fits within category Commitment and consistency. The theory is that if I can get you to make a commitment, you will automatically be "forced" to act consistently with that earlier commitment. There are certain conditions that have to be present for a commitment to be effective. The commitment should be active, public, and you should feel an inner responsibility to fulfill the commitment. Blogging is a sort of confirming action. It provides evidence that you have committed to what you have written so it becomes harder to deny and forget the commitment. One of the bloggers explained how the blog has helped her to become more financially stable. 
"I think about this blog every time I'm in the store and something that I don't need catches my eye. Look what you all have done to me!"