How to Trick Your Brain Into Making Better Money Decisions
You’re not alone if you get a little anxious when you think about your financial situation. We all know we need to save and spend smart (and we may even know what we need to do to get there!) but there’s often a gap between how we want to behave and how we actually behave when it comes to our money. But, by better understanding how the brain works, we can start to make psychology work in our favour.
1. Don’t forget about the future.
It’s easy to worry too much about the present and forget that we also have a future self that we need to take care of. To keep future-you front of mind, try to regularly think about your dreams and goals. What’s on your bucket list, and when do you plan to tick those adventures off? By envisioning your future, you’re reminding your brain of everything you want to achieve. Make your goals as concrete as possible by determining exactly how much money you need to get there and give yourself a timeline to work towards.
2. ...you won’t miss anything!
It’s time we talk about FOMO. That nagging worry that we might miss out on a fun night and be filled with regret. This can become a problem when it leads to spending money on things that aren’t really that important to you in the long run. The next time your friends invite you to a big karaoke night – when you didn’t have heaps of fun the last time – remind yourself that the money you’ll spend is money that can no longer go towards that South America trip you’ve been trying to plan for years. Resisting FOMO will help you say no and stay focused on your personal goals.
3. Avoid thought traps.
A common example of a thought trap is comparing a sale price to the original price of an item, which can make you think it’s cheaper than it is. But in the end, it leads to buying things just because we’re scared to lose out on a deal. So the next time you see something on sale, ask yourself if you would buy it at the original price. That’s a good indicator of whether or not you really need it.
4. Stop postponing.
Maybe you need to make a budget, switch savings accounts or take the time to compare prices when shopping. ...so why aren’t you doing it? Procrastinating or delaying behavior often occurs when we face a task that feels uncomfortable. Because our brain wants to avoid negative feelings, it tries to make us feel better by finding fun things to do instead, like scrolling on Instagram. To make tasks less daunting, try breaking them down into smaller tasks. This will make it feel easier and not as tedious. You can also try rewarding yourself to stay motivated.
5. Surround yourself with responsible people.
Like it or not, we’re influenced by our surroundings. Spending time with people who have good financial habits will also affect yours. Try hanging out with people who care about personal finance and are willing to share their own tips and tricks. Invite them over for dinner and discuss and learn from each other. You can also share your financial goals and keep each other motivated during the journey.
6. Change your habits gradually.
To change your finances, you need to change your behavior. This is easier said than done, and a pretty common mistake is going too hard at first. It’s good to be ambitious – but this also increases the risk of giving up when it becomes too tough. It’s important to remember that small changes over time can have a major impact on your finances. Try cutting down on a few coffees a week instead of setting lofty savings goals that might be tricky to maintain.
Want to learn more about money decisions? Check out our post on the psychology behind credit card spending here.