The Power of Smart Defaults

Have you ever used a personal finance app that asked you how much you could afford to save for your goals? Did you know the answer? Most of us worry that whatever number we come up with is too little or too much—also known as The Goldilocks Problem.


We’ve had that experience before, so we came up with a simple but common-sense way to solve it: Your Bills-to-Income ratio. The percentage of your income that is spent on bills is a clear indicator of how much you can afford to spend on everything else, such as your financial goals. A more effective approach might be to nag you into examining your bills and cutting unnecessary expenses, but you’ve probably heard that before. Maybe you’ve trimmed your expenses already or like things just the way they are. Either way, we prefer to take your financial situation as-is and figure out how to optimize it.

Because The System automatically determines your bills and your income, we can easily determine your Bills to Income ratio and present that to you as a suggested contribution amount. You are then free to tweak this number up or down, and immediately see what that means in actual dollars.

By presenting a suggested amount on a silver platter to our users, we are doing something called anchoring. Anchoring is when the first piece of information a user receives has outsize influence in their future choices. For example, when you see that a pair of $400 shoes are 50% off, $200 seems like a great deal because you are comparing it to the initial $400 number. What you may not know is that the shoes cost $30 to make, or that they rarely, if ever, are sold at the original retail price.

We use anchoring “for good.” By that, we mean we are trying to nudge you towards responsible, common-sense decisions that will benefit you in the long term. This is sometimes called Libertarian Paternalism, a concept of behavioral economics that uses defaults to influence behavior while still allowing freedom of choice.

Every day you encounter people, media, and software that are trying influence your behavior. Few of them have your best interests in mind. But some of them do :-)

Matthew Sallin