The Transfer Effect Hack (Willpower Series #2) – Why Getting Smart About Money Makes You Smarter About Money

Transfer Effect

Last Monday I wrote all about why you shouldn’t rely on willpower to make changes in your life – and today I’m going to tell you a secret about how you can make one good change can lead to another.

It has nothing – and everything – to do with willpower.

It’s called the Transfer Effect, and it’s the reason one good change in your life can lead to others.

Lets explore what this effect is, why it occurs, and how you can harness it to affect powerful change in your own life.

The Transfer Effect – What Is It?

I found out about this concept while reading a totally unrelated article about 15 things that can happen when you start exercising, and was immediately intrigued. The concept in the article related to diet and exercise, of course, but I immediately realized it could equally apply to financial changes as well.

This finding was based on a study published by the Journal of American College Nutrition, and the transfer effect is described in this article. It’s essentially when “…learning new skills, information, and attitudes in one behavior…transfers to a second behavior…”.

The transfer effect is also referred to as “transfer of learning” “transfer of training” or “transfer of practice”, and it doesn’t apply in just nutrition.  In fact, the concept has been around since the early 1900’s. There seems to be much debate about when it applies, how much it applies, and in what contexts. But there’s no doubt that the idea holds merit with many people.

The concept seems to be used most in education, where learning one thing can make it easier to learn other, related (but different) things. It’s a concept that we can hack to improve ourselves in our own personal lives, too.

How Does It Work?

In the case of the particular study I looked at, the theory was that exercising made people more health – conscious in general. This in turn caused them to eat more fruits and vegetables than they would have previously. They didn’t have to use as much willpower as before to exercise, as it became more of a habit, and they could instead turn to other healthy habits instead.

Now, I’m sure we all know people who defy this standard (hello, person who starts exercising to eat more pizza and beer!), but it generally seemed to hold true. And I’ve noticed the same is true in personal finance.

It’s not often that someone decides to get out of debt, make a budget, save for retirement, or invest more in order to blow more money. You rarely (but sometimes) hear of someone paying off debt aggressively so they can go buy a new boat.

No, instead you often hear about folks who get out of debt and then progress to improve other areas of their financial life. The things they learned while getting out of debt helped them in overhauling their finances in other ways. There are likely a few reasons for this.

First of all, they likely learned more about personal finance than the mechanics of debt payoff. While getting out of debt, they’re likely to encounter articles and stories about other financial topics. Things like saving for retirement, saving for college, investing, and so on.

Second, the things they learn while paying off debt easily transfer to improving their finances in other ways. Learning how compound interest works against them in debt, can help them see how compound interest can work for them in investing. Figuring out which spending categories don’t matter, and eliminating those, helps them spend intentionally when the debt is gone. Tracking expenses, and having a large amount of money left over every month, leads to a nice pot of monthly funds to be used for other goals.

Third, by the time the debt is paid off, you’re not using a tremendous amount of willpower on not spending money on junk. It’s become a habit, and a way of life. So you can use the willpower that you used to have to deploy to pay off debt, to instead focus on a different improvement.

Even if getting out of debt isn’t your specific situation, it still holds true that focusing on improving one area of your financial life can make it much easier to improve other areas.

How Can You Harness It?

The theory of the transfer of training talks about certain steps in the learning process. Understanding these can help you hack your way into transferable knowledge. A paper from Bransford, Brown and Cocking called “How People Learn – Brain, Mind, Experience, and School” identified four key areas you should know about:

  • Initial learning – You need a solid base of learning in order to get the transfer effect to kick in. You have to understand the topic, not just memorize or be exposed to it.


  • Abstract and contextual knowledge – You need to be able to apply the concepts you’ve learned to other situations.


  • Learning is active and dynamic –To keep actively learning, you need to force yourself out of your comfort zone to go above and beyond where you are today. Learning shouldn’t be considered a one-shot deal and then you’re done.


  • All learning is transfer – Learning new things builds on a base of older things you learned before. This is the answer we can all give our kids to the question of “when am I ever going to use this in real life”? The answer is, you’re learning how to transfer your knowledge to something else! Not very comforting, I know.

Understanding these four steps can help you turn a critical eye on your own money situation, and help you set yourself up for success.

How Might This Play Out in Your Money?

Last week, I told you to be sure to set yourself up for success by not relying totally on willpower.

I still stand by that. You want to make changing, and forming better habits, as easy as possible on yourself.

However, you can use the transfer effect hack to your advantage in improving your financial life.

  • Initial Learning – You’ll want to form a solid base of learning. Find books, articles, blogs, videos, and other material (from reputable sources!!!) to form your base. Join groups of like-minded people pursuing similar goals, and learn from them. Bookmark (or write down) material that’s too advanced for where you are right now – you’ll come back to those later.


  • Abstract and Contextual Knowledge – Look for other, not directly related places to use what you’ve learned. Maybe you learned about compound interest when paying your debt, and you can apply that knowledge to compound interest and investing. Or you’ve learned how to cut your budget in one area by negotiating – try negotiating for something else in your financial life.


  • Learning is Active and Dynamic – Don’t let yourself stagnate. Seek out material and information that presents a different viewpoint to what you believe, to challenge your own beliefs. Take the list of more advanced material from your initial learning phase, and go back to it. Don’t stop seeking out new material and perspectives just because you think you’ve mastered a topic. There’s always more to learn!

I can see the transfer effect and money playing out in real life something like this:

Jane wants to get out of debt. She’s tired of the credit card bills, student loan bills, and feeling behind every single paycheck. She decides to learn everything she can about getting out of debt, and getting smarter in managing her money. So she seeks out books, blogs, articles and videos all about getting out of debt. Some of the information she’s reading is too advanced, so she puts it off to later.

Slowly but surely, her knew financial knowledge starts to pay off. She’s able to cut down on her spending, ramp up the debt paydown, and she tracks her progress regularly. She continues to read about debt payoff, and is exposed to more information about retirement, college, and general investing as she does. Since she continues to build her base of knowledge, articles and information that once seemed advanced now seems easier.

After the debt is all gone, she doesn’t want to go back to her old habits. Instead she takes the money and skills she used to apply to paying down her debt, and leverages them to save and invest instead. She continues to learn, grow, and makes adjustments over time.

I Want To Hear From You!

Have you ever noticed the Transfer Effect in play – in your money, or in any other area of your life? How have you hacked it to improve yourself? Let me know in the comments!

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1 thought on “The Transfer Effect Hack (Willpower Series #2) – Why Getting Smart About Money Makes You Smarter About Money”

  1. It definitely is a psychological phenomena and I felt the transfer effect on me. Once I learned how basic finance and applied it to paying off my debt (first medical student loans and then mortgage) it created a feedback loop that caused me to employ the same methods to build capital and have interest work for me instead of the other way around

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