Closing the Loop

If you’ve ever let Netflix auto-play several episodes of a show before, you’ve seen a variation of the image above. It’s the unofficial signal that you’ve entered “binge mode”.

Streaming content platforms, like Netflix, popularized binge-watching by giving us access to entire seasons or series instantaneously. To say that we’ve taken this access and run with it would be an understatement.

In 2015, Collins English Dictionary chose “binge-watch” as its word of the year. Additionally, Netflix CEO Reed Hastings declared their company’s biggest competitor to be sleep. There seems to be no doubt that we love binging shows.

Our preference for on-demand viewing stems from a psychological phenomenon known as the Zeigarnik Effect.

The Zeigarnik Effect, named after its first observant Bluma Zeigarnik, suggests that we have an easier time recalling and remembering details of tasks we get interrupted performing. Basically, our brain does not like unfinished business, which leads us to fixate. We desperately want to close the loop, and our brains are uncomfortable until we do so. It’s a bit like that feeling when you lose a sneeze.

TV shows leverage this effect via the cliffhanger. Unresolved story-lines keep us rabidly awaiting the next installment. Now, with the proliferation of on-demand streaming, the cliffhanger cycle is in hyper-drive. Wait a week for the next episode? Try 15 seconds for Netflix to auto-play it. Today, we get the same cliffhanger-induced fixation we always have, but nobody makes us wait, so we don’t. The next episode plays, “binge-watch” gets added to the dictionary, nobody sleeps, and it’s wildly popular.

At our firm, a lot of the financial stress and anxiety families initially come to us with are symptomatic of the Zeigarnik Effect.

In the absence of a financial plan, goals, like retirement, are entirely nebulous. It’s something we’re probably aiming for in some capacity. However, we don’t exactly know what it means, so, therefore, we’re unsure if we’re on track. And if we don’t know that we’re on track, how can we be sure what we’re doing is appropriate? If it’s not appropriate should we continue or make changes? What would changes look like, and why would they help?

This intimidating cascade of thoughts and questions can get out of control quickly. The ever-building tidal wave of unanswered questions is a gigantic financial-cliffhanger, except this one doesn’t automatically spit out resolution in 15 seconds. Left unresolved, the unclosed loop gnaws away at us and makes our brains uncomfortable. This manifests in stress and anxiety surrounding money, until something is done. We want to close the loop, but don’t know how or where to begin.

To be very clear, I am not suggesting that having a financial plan somehow permanently closes the loop on your finances (as if that is possible). As I’ve previously written, the details of your financial plan will be in constant flux until the very end. However, going through the financial planning process is a step in the right direction. By getting more specific about what your goals are, we can begin to quantify what it will actually take to achieve them.

The quantification step in this process is where we can make the Zeigarnik Effect our ally in stress reduction. We’ve found that summarizing financial planning meetings with actionable, specific “next steps” does just this.

While our overall objective remains the bigger picture goals, focusing on what we can do over the next 6-12 months is far more practical. It allows us to focus on closeable, shorter term loops that won’t drive us nuts. These are things we can realistically do, in the somewhat immediate future, to reassure our brain that we’re heading in the right direction.

We have the ability to create more positive feedback loops surrounding money, and we owe it to ourselves to try.