The Epiphany
By: Tabrez Syed
Tags: Startup, Personal Finance, Money Mindset, Money Management, Psychology

If you’re just joining us, this is part 2 in a series on how Mazlo came to be. You can read the first part here (“The Nudge”).

Don’t want to go back? The TL;DR: A chance encounter with a push notification about a croissant sparks an “a-ha” about how we manage money. Turns out: a lot of us actually don’t. While 60%+ report financial anxiety, less than 5% consistently use money apps. Curious about understanding this disconnect we start talking to people. Our learnings reveal a need in the market that inspires us to start Mazlo — a new kind of money app. In this article, we’ll share what the our user research unveiled.

“Talk to me about your money”

I opened my notebook and nervously looked across the table at her.

I had read the stats — Americans are notoriously averse to talking about money. Yet here I was researching how people managed their money… and asking them about it directly. Would this go over like a lead balloon? Would I get past the being polite and be able to really connect?

To my relief and surprise, people opened up and talked. As I hopped across coffee shops (and later Zoom calls), I found most people refreshingly honest, introspective, and curious.

These meetings qualitatively validated my initial research. Financial anxiety is in fact wide-spread. Most people wanted to be better about managing their money, but actually doing it felt like a chore so they didn’t.

One size doesn’t fit all

I quickly discovered that I was having two types of conversations depending on if people generally made enough to cover their bills (an estimated 40% of the population is in this group) or not.

Their needs evolved as they started to get towards break-even. They started to be less worried about cashflow questions (will I have enough in the account to pay the bill this month) and more interested in values and purpose (Am I spending wisely and on the right things? Is this what I want for myself?)

Turns out the money apps in the market were singularly focused on the basic accounting details and failed to help with the higher order needs. They were accurate but not helpful.

Budgeting feels like dieting

The fundamental truths in life seem simple but incredibly hard to put into action. In nutrition it’s eat less than you burn. In money, it’s spend less than you earn. Naturally we try to bring these principles to life as diets and budgets. But research has consistently shown, diets don’t work.

We lose weight in the short-term, but in time we return to the scale with the old weight and saddled with guilt. Budgets seem to have a similar trajectory with people being “New Year’s budgeters” — starting the year full of vim and vigor to see it fizzle out along with other resolutions come February. Like with diets, there are of course plenty of examples of people who seem to pull it off — which makes us feel worse 😢.

Why we spend > What we spend on

By focusing just on categories (what we spend on) apps overlook why we spend. A coffee isn’t just always just coffee. It could be a networking meeting (viewed as an investment it might have no spending limits) or building community (seeing an old friend). And — it could be just coffee.

Without this perspective we end up looking at expenses like a general ledger — lost in the minutiae wondering what it all adds up to.

We tune out the fire alarm

“I don’t care if I spent $5 more this month!” insisted one interviewee as he rolled his eyes at the excessive alerts his budget app sent him.

Known as alarm fatigue, this is a phenomenon where we get desensitized to the repeated attempts to attract our attention (typically with fear or urgency). In medical and construction settings this can have a realtime catastrophic impact. But in areas where the result is in the long term we can and do tune it out without immediate consequences. In fact, there is research that shows that in some cases warnings can even backfire (eg: those morbid anti-smoking ads could end up driving the behavior).

In the tension between long-term desires and instant gratification, it seemed that I-want-it-now had the upper hand.

What’s that on your wrist?

Photo by Gian Prosdocimo on Unsplash

As I heard about how they had tried but failed to keep using money apps, I noticed something else.

Apple watches.

Fitbits.

When I asked (and sometimes when I didn’t), people were happy to talk about the rings they completed and how it worked. They seemed happy to track and appreciated the nudge to stand up. (Full disclosure: I’ve had a Fitbit on my wrist for 6 years now).

As they were telling me about the inability to be consistent with managing money they were actually happy and engaged with their fitness apps. So what was the catch? In both fitness and personal finance we’re asked to choose between instant gratification and the long-term goals we have for ourselves.

What was different? It seemed to be in the narrative.

What story do you tell yourself?

In his book, Atomic Habits, James Clear says the lasting habits are centered around how you see yourself. Want to become a better writer? Then he says see yourself as the kind of person who writes every day. We act in accordance with our identity so a missed day doesn’t turn into “I’m bad at this. I might as well not try”. It’s just “I missed a day”.

The fitness apps were helping people see themselves as health-conscious. “I track my steps. I try to be active”. They encouraged. They didn’t chastise. Everyone has a best day afterall.

Contrast this with money apps where the story seems to be “I’m not good with money”, “Look at that — I spent too much again”.

But changing an identity isn’t just about banal affirmations. You have to prove it to yourself with action.

Photo by Lindsay Henwood on Unsplash

Little steps. Big impact.

One way to sneak past our brain’s fear and aversion to change is to start small — really really small. Robert Maurer (author of one of my favorite books, “One Small Step Can Change Your Life — The Kaizen Way”) illustrates how getting started on a fitness regimen could begin with a trivial start like marching in place for a minute.

Fitness apps do this by helping us celebrate simple wins — getting to a step count or being active during the day. While hitting a step count and being rewarded with a badge doesn’t in itself achieve our health goal, it sets us up to believe our new identity.

What if?

We began to wonder. What if we look to the lessons from behavioral psychology (as the fitness apps did) and applied it to managing finances? (This link between psychology and money is being studied with greater interest. In 2019, Financial Therapist became an official certification.)

This turned out to be a linchpin that seemed to allow the answer to almost uncover itself. Pieces that seemed hard to reconcile seemed to align themselves. And we started to get awfully excited about the possibility of what it could mean for people.

Tune in for next part of the journey where we’ll introduce you to what the key principles of a solution could look like.

Eager to learn more sooner? We’re starting to roll out an early version of our app to those who are most curious. Join the waitlist here.