“Don’t save what is left after spending but spend what is left after saving”
A simple life rule. So why can’t we seem to stick to it? Well, the good news it isn’t all our fault!
Psychologists have a few theories to explain why our brains forget our budgets.
The Law of Scarcity
It is said absence makes the heart grow fonder but nothing like scarcity does.
Marketers are particularly skilled at using the scarcity principle to incite us to buy.
You may be familiar with the online pop up when shopping, “only 2 left” or “limited supply”.
How does that make your shopping target look?
How urgent does it feel?
Next time you see the limited time or limited supply sign step away from the shopping website and come back in 24 hours. This will give your brain time to reconnect with your budget.
Heard of “keeping up with the Joneses”?
This is a powerful positive driver when it fuels our competitive spirits, however when it starts to impact our budget and our shopping habits, it’s time to revisit our life goals and check that we are still on target to live the life we want and not the life we think we need because our peers have it.
Have you ever noticed that good habits practised early in the day seem easier.
This is why Hal Elrod’s Miracle Morning process and the 5 am wake up club can be so successful.
It means doing the difficult things and making the hard decisions when our willpower is at 100% capacity and leaving the easy tasks and decisions for when our willpower is running low.
This ties into everything in our lives, our exercise routine, our eating habits and importantly our finances.
Avoid online shopping and making big financial decisions later in the day.
Practice a “sleep on it” mentality and tackle things when you know you are fuelled up with willpower to make optimal decisions.
Although humans have been able to develop new technologies at breakneck speed, our operating system still has software running from 2000 years ago.
This means our brain’s caveman tendencies kick into play regularly.
One of these is the drive to grab onto our “needs” immediately rather than delaying gratification and getting a larger reward in the future. The caveman couldn’t afford passing up the small bunny rabbit that had hopped into his trap in the hope that a much larger meal would come along.
We don’t have the same constraints, in fact we operate in a world where we can afford to delay gratification around the things we want and can benefit from doing so.
Although we still operate with that old software popping up, let us not overlook the fact that our brain’s operating system has also had a few upgrades over time and we have evolved super high tech software on top of that old prehistoric one that enables us to reason, to weigh the pro’s and cons of waiting and to make intellectual decisions that can direct our lives to where we want them to go.
Our caveman brain may be the fastest to respond being the part that focuses on our basic needs, but if we have created habits that enable our rational brain to intervene, we can take the time to assess the benefit of delaying gratification. An example would be to delay our purchases until we have had time to consider whether they fit within the plan we have for our finances.
The fallacy of the spending win
Have you ever been seduced into spending on something you didn’t need because you saw a “can’t miss” mark down. Was £100 now £50.”
Or bought way more of an item than you will ever use because of a 10 for the price of 8 offer when you only needed one?
Didn’t you feel the victory of the saving you made as you walked away with your prize of something you never intended to buy?
Advertisers know we love the feeling of accomplishment we get from finding the “bargain” and our brains tendency to focus on words that make us feel like we are being model citizens of savviness;, “save, bargain, discount”.
Beat the advertisers at their game by remembering this, you can NEVER save money by spending it.
We have all been sabotaged by our brains tendency to take the easy route and when it comes to shopping advertisers know all the tricks. But, once we are aware of our brains pitfalls and can recognise the related marketing traps, we can be vigilant and improve our decisions going forward.
Want to build better spending habits? Grab the freebie “Should I spend” Checklist and start creating those habits.