How to stop wasting money: 4 tips from economists
Use the "tipping" points, correctly budget and set a limit on purchases.
Everyone knows that you need to save money, but few people succeed. And it's not a matter of motivation and will. The amount of deferred funds is highly dependent on external incentives. Here's how to wrap them to your advantage.
1. Plan your budget for the week, not the month
In 2017, an economist de la Rosa conducted a study using Mental Models to Manage Food Stamps Efficiently.among people receiving food subsidies. Participants were divided into two groups: one showed the number of benefits for a month, the other for a week. It turned out that the latter is better at planning expenses. Although the amount of the subsidy did not change, they had enough money for a longer period.
A simple change of context helped people. Food allowances are usually awarded once a month. There is a false sense of security: it seems that a lot of money. Because of this, it is very easy to spend them unreasonably, and by the end of the month limit yourself to everything.
We are all prone to this mistake of thinking on payday. To avoid it, try to divide the monthly income into weeks. It’s easier to plan expenses.
2. Cut back on small but regular expenses
Researchers at Common Cents Labs conducted several surveys to figure out which expenses people regret the most. In the first place, it turned out common Cents Lab Unveils Millennial Financial Regret Spending Report eating out. Coffee and snacks on the go for a month add up to a decent amount that could be deferred or spent on something more important.
You may not be drinking coffee at all, but you probably have expenses that you regret. Define them. Then change something in your environment to make these purchases more difficult. For example, remove bank card information from sites where you spend too much. If the application can make an order without a card, delete it from the phone.
You can also set a limit for yourself. For example, a taxi only five times a month and visit two or three films, not more.
3. Engage yourself in saving the future
Usually, we perceive ourselves in the present and ourselves in the future as two different people. Moreover, we have more optimistic forecasts about our future version. We believe that it will be she who will begin to play sports and postpone her retirement, but for now, we can not worry. But you in the future - it's, all the same, you, and you need to put it off now.
Researchers have concluded how Pre-commitment Leads to Better Tax-time Savings that this is easier if we make a decision in advance. They interviewed two groups of people: some before they received the tax deduction and others after. Everyone was asked the question, what percentage of the amount they are willing to postpone. In both cases, the participants assumed obligations that cannot be waived. They knew that the promised amount would go to their savings account.
It turned out that those who are just waiting for the deduction are ready to postpone about 27% of the total. And those who have already received money - only 17%. Pretty big difference. The fact is that the first group answered, thinking about a future version of themselves. Naturally, it seemed to them that someday later they would be more responsible and economical.
Use this principle to your advantage. Decide how much you will postpone, not after receiving a salary, but in advance. For example, set the percentage in the banking application that will be automatically transferred to your savings account. And treat this as an obligation that cannot be waived. Because your future largely depends on it.
4. Make financial decisions at “tipping points"
Researchers have proven their benefits by conducting an experiment. Using Age Milestones to Motivate Behaviorwith advertising. They posted on social networks two advertising banners for a site that helps older people rent and rent housing. Both were aimed at people aged 64 but used a slightly different approach.
One said: “Years do not standstill. Are you ready to retire? It’s easier if you share housing with someone. ” And on the other: “You are 64 now, will be 65 soon. Are you ready to retire? It’s easier if you share housing with someone. ” They clicked on the second banner twice as often, and the number of registered on the site also increased.
The fact is that he focuses on a turning point in life - retirement and related changes. In psychology, this is called the "blank slate" effect. At the beginning of the year, on Monday or birthday, motivation usually increases, we want to act. Use this effect to achieve your financial goals.
Create an event on the calendar the day after your birthday. Choose the goal that is most important at the moment. For example, open a pension contribution or pay loan debt. Reminding you of this goal at a “tipping point" will help you get started.