Innovation isn't just about big companies coming up with shiny new products. We can also apply innovative practices to improve the management of our personal finances.
Dr Amantha Imber is a psychologist, founder of Australia's leading innovation consultancy, Inventium, and successful author. In a recent interview, she shared the secrets of her science-based methods to increase the quality, and frequency, of both personal and corporate innovation.
By applying Imber's innovation methods to personal finance, we can overcome common challenges to reach our money goals.
Find the sweet spot for a financial challenge
When we set ourselves a challenge, we open the door for progress. According to Imber, the key lies in setting the right type of challenge. In work, life or finances, when we set the bar too high, things become stressful. If we set the bar too low, complacency can set in. We need to find the challenge sweet spot.
Goal clarity also plays a huge role in successful innovation. Imber pushes back against the notion of organisations applying vague "blue sky thinking" to innovative goals and when it comes to your finances, it's not enough to simply say you want to "save money". It's essential to get clear on the end goal and detail the steps to get there.
Predictability and Routine
Imber points out that companies we associate with prolific innovation, such as Google, are structured to be extremely predictable. Even animation studio Pixar, one of the world's most creative companies, has some strict rules, for example about the size, shape and pin positioning of the images on their famous storyboards. This is all about reducing low-value distractions, releasing mental bandwidth for innovative insights.
The same is true for our finances. If we want to have the mental energy to be creative with money, like starting a business or investing in higher risk ventures, we are best to build upon a bedrock of solid financial disciplines. The more we automate - for example, putting in place a monthly "sweep" to pay off our credit card in full, or recurring contribution to a savings program - the more we remove these more mundane tasks from our consciousness and save this precious mental space for higher uses.
Explore innovative banking apps and digital wallet solutions
Imber believes there's often a link between tech savvy and the ability to quickly solve small, daily problems. Getting on board with innovative banking apps and digital wallet technologies can revolutionise day-to-day financial transactions and create effective financial routines. Income allocation, cash sweeps and payment alerts are just a few of the digital solutions at your fingertips.
So much is going on in this space. For example, Australia is hosting a fintech festival, Intersekt, between October 27 and November 3 in Melbourne.
Track the progress of your financial wellness
You've set a big, clear money goal but it's how you track your progress that may be the difference between reaching your objective or giving up. In her book, The Innovation Formula, Imber recommends leaders apply a "progress principle" for team projects; breaking an organisation's big goal, or mission, into smaller steps and celebrating wins along the way to maintain momentum. We can do the same for our finances.
Tracking your net worth is a fantastic way to get an overview of your current state of financial wellness and updating at regular intervals, such as annually or half yearly will demonstrate the impact of your financial disciplines.
Tracking the progress of smaller financial goals can be as simple as using an app like Unsplurge or StikK, developed by Yale University economists. Don't forget to celebrate each small win along the way to achieving your big goal.
As Ben Mitra-Kahn, chief economist at IP Australia points out, innovation is important because it drives productivity growth. Productivity growth is what determines our long-term prosperity. It determines our wellbeing in the future. This is as true for us as individuals as for the economy, so learning how to be innovative is a key component of financial security in our rapidly changing world.