5 Ways Psychology Helps You Save Money

14-10-2018 | Dojo |

5 Ways Psychology Helps You Save Money

In the past decades therapy has started to get more popular and psychologists are called to help people navigate the hard times in their lives.

From childhood trauma to addictions, post traumatic stress disorder, various mental illnesses and so on.

With the life running at a faster pace and breakdown of a proper support system in the recent times, many people develop certain problems which rest deep down and break their mind down, causing them various problems.

A psychologist will help to uncover these hidden issues and allow people to feel happier and better. Kevin Colwell is one of the most well-known names, noted for his techniques and sensitivity to deal with such people.

It’s interesting to note that finance and psychology are quite related, even if it seems they are worlds apart.

Our brain does quite a job to modify our behavior with money and there’s a lot of information you can find on it, just by typing ‘behavioral economics in your search engine of choice.

We already touched this subject in our two articles dedicated to mental accounting: Mental Accounting Examples and How It Ruins Your Finances and How to Stop Mental Accounting and Gain Control over Your Money Again.

Let’s delve more into this and find out how psychology can help us further save money.

Use cash instead of credit

A cool psychology trick is to carry cash, instead of using your credit card to make purchases.

Apparently we seem to be more attached to the physical money, than our bank accounts. That’s just numbers to us and we tend to get reckless with it.

It makes sense, I have also noticed that I tend to overspend when paying with a card or, online, with Paypal. 100 bucks on a credit card or a payment processor is just a number, but I really fell bad if I ‘break’ a hundred bucks banknote for instance of my cash ‘stub’ gets thinner.

Wait for a purchase, until it’s no longer an impulse buy

Impulse buy – not a fancy word, but actually a huge issue most of us deal with.

As soon as you see an advertisement online or on television, you suddenly feel the ‘need’ to have it. Sounds familiar?

It’s another way our minds tricks us to make purchases we don’t really need.

Right now, I try to wait for at least a week until making a purchase to get the chance to see if it’s a real need and not a want. This helps save money faster, since all the money not spent can be directed towards your financial goals.

Set automatic payments

I have a tendency of forgetting to make payments. Got my business account locked twice, because I forgot to pay my taxes, although the money was in my account and all I had to do was to make the payment.

If you tend to be as forgetful as I am, set automatic payments and deductions.

Automate your savings. Automate your payments. Automate everything you can to avoid forgetting and misplacing money.

How many hours do you need to work to pay for this?

Do you ‘need’ to pay for a 100 bucks shirt? No problem.  How much time do you have to work for it?

Is it an entire day of work? Is it an hour of work?

Calculating how much you have to work exactly to afford an item will allow you to steer away from impulse purchases and know your true worth.

Another trick I employ is to actually calculate how many laptops it costs. Don’t laugh, if a smartphone is priced closer to a laptop, I’ll never buy, since my laptop is earning me my income, while the phone is just something I use to call people.

These are just 4 psychological tricks to help you save more money. Do you have any new ones?

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