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The Ostrich Effect

Symptoms and cures for financial avoidance

Some of us don’t like budgeting. Some of us don’t like paying bills. Some of us don’t even open our mail until we see that pink paper in the envelope window (you know who you are). Some of us… are ostriches.

I’m an ostrich. At least, I used to be.

Ostriches are known for being ridiculous-looking creatures, and for their (actually fictional) habit of sticking their head in the sand when they sense danger. This is completely useless as a defense strategy, but it’s very useful as a metaphor. Us ostriches avoid the uncomfortable.

Ostriches don’t go to the doctor, because if we don’t have a diagnosis, we don’t have to deal with the fact that we’re sick. We avoid doing unpleasant things, like spending all of our hard-earned cash on paying school loans or water bills. Rather than face the ugly realities of life head-on, we ostriches prefer the comfort of a dark and stuffy hole. It beats paying bills.

Source: Excalibur/Shutterstock

In behavioral economics, the "Ostrich Effect" refers to the tendency to avoid negative financial information. From a psychological standpoint, the Ostrich Effect is the result of the conflict between what our rational mind knows to be important and what our emotional mind anticipates will be painful.

The ostrich’s method for solving financial problems is to ignore them for as long as possible, and then to respond in utter panic and agonizing stress when they are finally forced to act. Not only does avoiding uncomfortable truth keep them from solving those problems: It compounds them.

Consider the younger me, the ostrich me, who had the habit of willfully ignoring my bills until the disconnection notice arrived, and I finally swooped into action. My inner ostrich brought me lots of stress, and worse, lots of late payment charges, bounced check fees, and overdraft charges. By ignoring problems when they are small, ostriches make their problems worse.

Not all ostriches are as bad as I was. Some just avoid thinking about how they are going to pay for their retirement, because it’s still 20 years away, or they turn a blind eye to rising credit card balances until the payments become unmanageable.

How to Reform an Ostrich

Like most things having to do with psychology, the person needing to change has to want to make that change. An ostrich won’t reform themselves until the discomfort of our ostrich behavior becomes worse than the discomfort of changing. The long-term consequences of avoiding harsh reality are exhausting, so many ostriches will, eventually, decide to mend their ways.

If you happen to be an exhausted ostrich and want to stop the vicious cycle that avoidance brings about, there are a few ways you can set yourself up for success.

Automate Everything You Can

Automatic payments are a godsend for the ostrich. Once you set up an auto-payment, the rest takes care of itself. Yes, it can be a pain to track down all your usernames and passwords and to organize the dates you should pay each bill, but the cost in time will be rewarded by the fact that once you’re through, you can forget about due dates and rest easy. Honestly, it probably won’t take more than two hours, even if you have to call the companies directly.

Use Real Data, Not Estimates

One of the issues with us ostriches is that when we estimate the cost vs. the benefit of dealing with it immediately, we get those estimates all wrong. We overestimate the cost and underestimate the benefits, so in our mental calculation, procrastination wins out.

Combatting misjudgment with real data can help. For example, I hate unloading the dishwasher. I used to avoid it, and then one day, I decided to time how long it actually took me to do it. The result? Less than three minutes. Now, every time I notice myself putting it off, I tell myself, “Three minutes,” and it usually does the trick. Which reminds me, hang on a second…

(Three minutes later...)

On the other side of the equation, ostriches need to be better at estimating the true cost of avoidance. I’ve treated this topic humorously, but the truth is that the effects of ostrich behavior are very real and very serious.

Late payments on credit cards can seriously damage your credit and your financial standing. Unpaid parking tickets can triple in cost (not that I’d have personal knowledge of that). Lapsed auto insurance policies can leave you on the hook for thousands if you are in an accident, not to mention the possible legal repercussions. Unpaid bills or taxes can lead to heavy fines or even jail time. The damage that ostriches do to themselves and their loved ones is not funny at all.

Services like and some banking apps can show you how much you pay in a year on overdraft fees. CreditKarma can track your credit score to show you how your ostrich-like behavior may have dragged it down, and you can watch it rise once you automate your payments. Financial tracking services like these are great for putting real numbers to your estimate of how much procrastination costs you.

The cost in time and energy is also important. How long does it actually take you to pay a bill? If you do it immediately, either online or by writing a check and putting it right back in the mailbox, it probably takes less than five minutes. Really. Once that bill gets added to the Bermuda Triangle of a "to-do" pile, though, it’s done for. The pile grows and grows until it’s overwhelming.

Break It Down

Speaking of the Bermuda Triangle, you don’t have to tackle it all at once. Just one thing off your list is something, and it can get the ball rolling. Taking just five minutes to find the most urgent thing and paying that, even partially, is infinitely better than doing nothing. Inertia can work in your favor, too, because once you start, it’s easier to keep going.

Offset the Cost

I’ve posted before about temptation bundling. Sitting on the patio with a nice glass of wine while going through your bills can be a way of making the process less painful. Rewarding yourself with a slice of cheesecake or an extra episode of your favorite show can also motivate. Setting rules for yourself, such as, “I can’t curl up with my book until I’ve checked one thing off my financial to-do list,” is another way to put more focus on the reward and less on the cost.

Bottom line: Habits are hard to change. Give yourself grace and start small. Automate just one account. Pay just one bill. You know which baby step is the right one for you. Just do it. Take five minutes and do it now.

More from Sarah C. Newcomb Ph.D.
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More from Sarah C. Newcomb Ph.D.
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