3 Psychological tricks to help you save money

Day 42 / 365

I’ve learned 2 things since I started getting a regular paycheck.

• Paying taxes hurts a lot.
• No matter how much you earn, saving money is always hard work.

Which is why this Ted Talk caught my attention.

Most of the time it is not our will power or our knowledge that causes us to be bad at saving. The environment cues around us matter a lot. For example, In a study, a group of people was shown their income on a weekly basis while another one was shown the same info on a monthly basis. It was found that the first group was able to budget more efficiently and save more than the second group.

Wendy shares three ways we can leverage such psychological tricks to better manage our money.

Harness the power of pre-commitment

We think very highly of our future selves. We might be lazy now, but we always think our future versions would exercise, get in shape. We should use this illusion to our advantage. Find out ways to sign up your future selves to do something that might seem hard to you at present. SIPs or automatic monthly deductions are a good idea.

Use transition moment to your advantage

People always feel motivated at the start of a new year, new semester, or when they move to a new city. This is known as the “Fresh Start Effect”. You should identify such moments for you in the future, for instance, your next birthday, and attach a financial goal to it. The fresh start motivation will make it more probable that you achieve it.

Get a handle on small frequent purchases

Surveys have shown that the purchase that people hate the most, after bank fees, is eating out. You would be surprised at how much you might be spending on meals, and how cheap it is to cook for yourself.

You might have a different small expenditure that you do quite frequently, that you can probably live without. For me, it would probably be Uber. It is important to keep such expenses in check.

One good way to is to limit the number of times you do these purchases. If you make it a rule that you will only eat out 2 times a week, you will eat out only when it’s absolutely necessary. You can also make it difficult for you to order stuff online, just uninstall the food delivery apps from your phone.

I’ll say it again, saving money is a tough job. So one needs all the help he can get.

Annual income twenty pounds, annual expenditure nineteen six, result happiness. Annual income twenty pounds, annual expenditure twenty pound ought and six, result misery— Charles Dickens

This story is part of my 365 Day Project for 2019. Read about it here

Yesterday’s blog — Are you a giver or a taker?