Have you ever been to a grocery store or farmer's stand where free samples of food are available? It is great to work your way from one end of the samples to the other. But afterwards, did you buy any of those products?
My wife and I just returned from a trip to the Idaho panhandle. One our stops was a fruit and vegetable stand where lots of free samples of homemade jams were available. As I was looking at the samples, I remembered an old study I had read about offering so many free samples that people did not buy anything. While we drove back home I mulled over how this relates to people wanting to get out of debt but never truly starting their plans.
"The jam study" was done in 1995 by Sheena Iyengar, a professor of business at Columbia University. She set up a booth at a gourmet market and sold jams with free samples offered. She alternated every couple of hours between offering samples of six jams and 24 jams. She noted the number of samples each customer tried and how many purchases were made.
On average each customer sampled two jams. Regardless if 6 types were on the table or 24. So more samples did not lead to more taste testing.
The key finding in the study was that more people bought jams when only six samples were on the table. Professor Iyengar's conclusion was that "the presence of choice might be appealing as a theory but in reality, people might find more and more choice to actually be debilitating."
Are the number of choices and options out there preventing you from starting your plan to get out of debt? Look at just two fundamental parts of your debt plan and the number of choices which are available:
Creating an emergency fund:
- What type of account should I use? Checking, savings, money market, CDs?
- Do I use a physical bank or an online account?
- How much should I put in my emergency fund? One person says $1,000. Another says $2,000. Someone else says three months of expenses.
Determining the order of paying off debts:
- One person says pay off the smallest balance first Others say I will save more money if I pay off the highest interest rate first.
- Do I apply for a 0% APR credit card and consolidate my other credit cards onto this one?
- Then which card do I choose? How much balance transfer fee is there? How long does the 0% promotion period last?
We spend lots of time analyzing each of these options, trying to figure out "the best" plan. Unfortunately we spend all of our time doing the research and never actually START the plan.
We study and study but never take the first step forward. This has been termed the "paralysis of analysis."
If you want to move forward to get out of debt, then make a decision and implement it. There is no perfect method! If you decide that $600 is what you want in your emergency fund and later decide $1,000 is better, then make that change. But if you do not start saving for the $600, you will never get to $1,000. So do not worry about having to choose the "perfect" amount. Decide on an amount and get started.
Remember that you can always change your plan. And that no plan is ever perfect! Don't be afraid to make a mistake, other than the mistake of not starting your plan.
As Professor Iyengar learned with jams, more choices lead to fewer decisions. Use the lesson from her jam study to start getting out of debt. Don't succumb to the paralysis of analysis.