What Lucie can and can't fix

Back in April I wrote that often the hardest part of managing money isn’t knowing what to do; it’s actually doing it. I used two confessions from my own life to make the point: I couldn’t tell you how many streaming subscriptions our household pays for; and I’ve set up budgets half a dozen times in my life and stopped using every one of them.

The obvious question is whether Lucie will fix things like that. Well, some problems, hopefully yes; that’s the point of building it. But not all of them, and I’d rather set out which is which now, than only have this emerge after we launch.

Managing money can be tricky - but not for just one reason

Something I’ve come to understand while building Lucie is that while my two confessions might look like a similar pattern, in fact they aren’t. And when I looked more deeply into it I found that the behavioural research has studied at least six distinct ways in which day-to-day money management can go off the rails. My two confessions are just two of them.

First, the subscriptions. They’re a task. A small, discrete task. But a bit boring to be honest. I know exactly what to do; it would take me ten minutes; and I haven’t done it. I just haven’t gotten around to it (even though I’ve written articles about it for heavens sake!). If I’m honest, there’s a word for that: procrastination. The behavioural research has a precise explanation for this. We’re present-biased: doing the task today always costs more, psychologically, than doing it tomorrow would. And we consistently misjudge our own future behaviour: we believe we’ll do it tomorrow, and tomorrow we believe it again.¹ Combine the two and a small task can be put off indefinitely (without me ever actually reviewing my subscriptions).

Second, the budgets. They’re different. Setting them up was the easy part; almost a bit of fun actually. What killed me every time was all the stuff that came after: the monitoring, the updating, the need to check on categories, etc. Week after week. Forever. Keeping a budget alive can take sustained attention, and my attention repeatedly decided it had better things to focus on. The research on self-tracking of every kind (diets, fitness, money) finds the same curve: people start, and within months most have stopped, because the ‘keeping-it-up’ is a cost we decide not to pay.²

Third, there’s the purchase made in the moment; the thing in the cart (or at the bar) at 11pm. Nobody consults a budget at that point; the decision takes seconds, probably feels great, and gets analysed later. Or never. The research calls these hot-state decisions.³

Fourth, there’s the spending nobody ‘decides’ at all. The coffee on the way to work, or maybe the same takeaway on the same night (Tuesday tacos!). That isn’t a decision; it’s just what you do. It hasn’t been considered in maybe years, if ever. The research term is automaticity: behaviour triggered by context (the place, the time, the routine) rather than chosen, which is a different thing again from the hot-state purchase, where at least a decision is happening.⁴

Fifth is the practice of not looking at all. You don’t look at your bank account when money’s tight. Or that month’s credit card statement is left unread because it’s going to be bad news. Researchers call it the ostrich effect, and it’s measurable: people check their finances more when they expect good news and less when they expect bad.⁵ It isn’t procrastination; procrastination is putting off a chore you know about. This is not wanting to know. I do this.

And the sixth isn’t a behaviour at all. It’s the unplanned $1,400 car repair. The fortnight where the rego, the insurance and the school costs all arrive at once. When we surveyed young Australians before starting to build Lucie, we found that this was the biggest hurdle they named: not income (which was a surprise). Researchers who tracked low- and moderate-income American households for a full year found them averaging five or six months a year in which income ran at least a quarter above or below its normal level.⁶ You can be doing everything right and still get knocked over by variability.

Six different things. From the outside, they all just look like varying degrees of not managing money as well as you might want.

There’s also a seventh thing, deliberately not on this list, because it isn’t a ‘management’ problem at all; it’s more important… simply not having enough money. I’d suggest that most people feel that way some, if not most, of the time. And for a lot of people it isn’t just a feeling; it’s a basic fact of financial life, and it’s serious. I’ll come back to it, because it sits underneath everything else I have to say.

Different problems respond to different fixes

So how do we help with some of this?

Well think about me procrastinating… a nudge at the right moment can shift postponed tasks like that. There’s a well known phenomenon that highlights this: when a bank replaces someone’s card (if it’s been lost or stolen) and the cardholder has to login and record their new card details… cancellations jump.⁷ It was never that people wanted all the subscriptions; it was just that no moment ever forced the choice. I’m not saying the solution is to steal somebody’s card… but just that a nudge at the right time can have a profound impact.

Or consider the budget problem; it needs something else entirely. For most people that ‘something else’ is ‘something to take the work off you’.

And the 11pm purchase? Well it’s the hardest to reach: interventions around those sorts of things work best inside the moment itself, or else they have to have been set up in advance, in a calm moment, as limits you choose for yourself.⁸

As for habits, well they barely respond to information at all. What shifts them is a change in the cue: which is why habits tend to break mostly when life changes (a move, a new job) and barely otherwise.⁴ And they only shift if the person wants them to change at all (a point I’ll come back to).

For avoidance, the research is clear that the pattern exists, and much less clear about what fixes it.

And volatility often can’t be ‘fixed’ at all of course. Sometimes the best you can do is see it coming where possible, try to weather the storm and get through it.

So what will Lucie actually do about each of these?

The honest answer is a different amount for each of the six.

The ‘postponed task’ is mostly a timing-and-friction problem, so Lucie is being designed to catch the right moment for you: to watch what’s going out, spot the subscription that’s crept up or sits unused and raise it with you at a point where you can actually deal with it.

The ‘budget problem’ is an attention problem, so the design intent is that Lucie takes over the ‘attending’. Tracking, categorising, watching that things are going well, noticing when they aren’t: the idea is to make that Lucie’s job, not yours. The intent is that you get the information you need when you need it - and asked what you want to do about it. The whole premise, which I’ve written about at length before, is that attention is the scarce thing in money management, and Lucie is being built to absorb the load rather than add to it.

The 11pm purchase is a different story. Being there at the moment of decision is exactly where Lucie is heading: helping you make the decision well while it’s still being made, and in time, if you want it, acting within limits you’ve agreed. That’s the idea we call permissioned agency, and it’s core to the longer vision. But it’s the direction, not the first release. At launch, Lucie won’t be in the purchase flow, and I’d rather say that plainly.

Habits, Lucie can only ever half-fix. Lucie is being designed to show you spending patterns honestly: what the daily coffee actually adds up to, whether it’s growing, what changed since last year, that sort of thing. But whether the habit is worth keeping is your call of course, not Lucie’s. And this is the point I said I’d come back to: if the daily coffee is something you love, it is none of Lucie’s business to disapprove of it. Lucie is being built to serve your goals for your life and your money, whatever they are.

And then there’s the not-looking problem, where I need to be extra honest. In theory, an agent that watches your money so you don’t have to is built for exactly this. If the barrier is that ‘checking feels bad’, something that checks for you and only speaks up when it matters addresses that barrier directly. I believe that. But the research on what actually helps people who avoid their finances is thin, so this is an hypothesis, not a finding I can point to. We’ll find out in time.

The volatility problem is different again. Nobody can predict the car breaking down. But a decent share of what feels like surprise was never really a surprise: the insurance renewal comes every year, and the quarterly bill comes every quarter. Lucie is being designed to see the foreseeable ones coming in your own transaction history and raise them while there’s still time to do something, and to help you see genuine trouble sooner when it does arrive. What that can do is reduce the number of foreseeable costs that arrive as surprises.

There’s one more thing I want to address, and that’s debt. A lot of what I’ve described gets considerably harder when it happens on borrowed money. An impulse purchase on a debit card is done when it’s done; the same purchase on a credit card or a buy-now-pay-later keeps costing until it’s paid off. And plenty of people are juggling several of these at once, along with a loan or a mortgage, with interest and fees running on all of them the whole time.

At launch, the help Lucie is being built to give here is in managing it: bringing everything you owe into one view, whoever you owe it to, and helping you plan around it. Over time, we want that help to extend across the whole of a person’s money life; and for a lot of people, debt is right at the centre of it.

Which brings me back to the seventh thing; the one no tool can fix. If the problem is simply that there isn’t enough money, better watching and better timing and even better management help only at the margins. Of course those margins do matter more, not less, when money is tight: avoidable fees, unwanted subscriptions and bad timing all cost proportionally more. But no tool like Lucie will fix fundamental income stress. Some fintech marketing implies otherwise; I think saying it plainly is more useful.

The honest scope

So will Lucie fix your money management? It depends on what’s wrong with it and I’d rather you knew that from me.