The Tidfjord Experiment

This week, I am sharing a fascinating social experiment from the nineties with four twists (the fourth is particularly relevant to your journey to financial freedom).?

The Tidfjord experiment was named after the picturesque hamlet of Tidfjord, Norway. In the late nineties, researchers gifted 50 randomly selected residents with prepaid cards worth 72,000 kroner (~$5,000 at that time). The rules were simple:

• The cards could only be used in the hamlet's lone department store.
• Participants could spend a maximum of $100 daily and only on themselves. They could not transfer money, buy gifts, or use it for household expenses.
• They were expected to spend the entire amount, preferably as soon as possible.?

Thrilled at this windfall, most participants treated themselves to goodies at the store. The excitement lasted a few days but then started waning. People soon returned to their routine, and while some would occasionally stop by the store, shopping wasn't a priority.?

The First Twist

The researchers didn't send reminders, and three months later, to the shock of the participants, they abruptly called off the experiment. The cards were deactivated and any balances forfeited. Researchers found that less than 20% of the residents had spent the $5,000, most losing over half the amount.?

The Second Twist

The experiment was then conducted with a fresh group of 50 residents; the only change was that rather than $5,000, the cards were loaded daily with $100 (~1440 kr). There was no carry forward, and any balance was forfeited at the end of the day, and a fresh 1440 kr was credited for the next day.?

It took people a few days to find their rhythm, but spending under this construct was observed to be much more structured. No one wanted to forfeit money, and most made time to swing by the store unless they were unwell or in an emergency. Six weeks later, when the experiment was called off, almost all participants were spending their $100 reasonably efficiently. Only a handful forfeited a small amount on the day the experiment ended.?

Money is a valuable asset, but people appreciate it even more if they understand that it is finite and will be lost.

The conclusions drawn by the researchers were intuitive. Money is a valuable asset, but people appreciate it even more if they understand that it is finite and will be lost. They weren't as efficient when they had a relatively large sum to spend over an indefinite period. But with a smaller sum they would lose at the end of every day, they planned their spending better.?

The Third Twist

Some might have guessed–there is no such hamlet or experiment, and I have made this all up. But I do have a point. Substitute:

• ?Krone with time
• The Tidfjord participant with yoy

If money is important, time is priceless, and we are given a finite amount to spend on living life. It is up to us how we want to plan and make the most of it. We can be in the first group and procrastinate on things that matter and give us joy until, one day, we realize that it is all gone. Or we can be in the second group, appreciating that we start each day with 1440 minutes, irrespective of our demographics, wealth, designation, or social status. We can either maximize this time or lose it and start afresh the next day; the decision is ours.?

We start each day with 1440 minutes, irrespective of our demographics, wealth, designation, or social status. We can either maximize this time or lose it and start afresh the next day; the decision is ours.?

The Final Twist

This entire year, we have been discussing strategies to get to financial freedom. But here is the final twist: for most people, the journey to financial freedom is not as difficult as the journey after it! One can have all the time and resources one needs, but if one doesn't know what to do with them, it is all a waste.?

The journey to financial freedom is not as difficult as the journey after it!

Therefore, you must develop hobbies and passions and find the time to engage in them, irrespective of your busy daily routine. And that is another reason you need to get into the habit of using your daily 1440 minutes effectively–to prepare yourself for financial freedom.?

We are all given a prepaid card loaded with time. How do you plan to use it?

Rishi Piparaiya?has held senior leadership positions in wealth management, strategy, sales and marketing with leading financial services organizations, including Citi, Aviva and Banco Santander. He left his corporate job at the helm of his career to pursue his passions. He is now a?bestselling author,?world traveller?and?angel investor. His latest book,?Three Pigs to Financial Freedom, demystifies financial planning and offers an incredibly easy system to manage your money for a comfortable, worry-free life.