Trick yourself into being good with money with 4 mental hacks

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US consumers spent 8.4% more in February 2022 than a year earlier, according to Morning Consult.

Some experts refer to this as “revenge spending,” or trying to avoid going out for two years by spending more than usual on leisure activities. People are more or less looking to buy happiness, says Nashira Lynton, a board-certified financial advisor and the CEO of Breaking Cycles.

“I hear a lot from people who are recovering from the pandemic and are looking for all the things that bring them joy,” she says. “You feel like a part of yourself that has long been repressed.”

Not all unnecessary spending is bad, but too much of it can lead to bigger problems, such as: B. going into debt or using up your emergency fund. “Ultimately, many end up overspending again, which is known to lead to more financial stress in the long run,” she says.

To avoid these financial stressors, there are some fairly simple steps you can take, says Alex Melkumian, a financial psychologist who works with clients who have impulse control and excessive spending habits.

You can unlink your credit card from your payment method on your phone and laptop. Or you can automate a transfer of money from your checking account to a savings account on payday, so it’s out of reach before you can spend it.

Another effective way to reduce spending is to use some mental tricks that can “fool” your brain into becoming more responsible.

1. Create a mandatory spend line item

When Melkumian coaches his clients, he lets them create budgets and mark line items in an unconventional way. For those who spend too much, a position that simply states “discretionary spending” or even “fun spending” can still feel restrictive and therefore difficult to adhere to. Instead, he lets them label a line item as “mandatory spend.”

“We thought ‘mandatory spending’ was something that was really fun and sounded really inviting and motivating,” he says. “Although our customers are now saving as they should or, in their view, a lot compared to what they used to save, they are not necessarily worried or stressed about being able to buy something they want.”

He’s noticed that changing the name of the line items can slowly change the behavior. Initially, his customers are quick to spend the amount earmarked for “obligatory splendor,” but after about three months, many are having trouble finding a use for it.

“Little by little, they’ve tricked themselves into thinking better, thinking better, and then the behavior follows,” he says. “Language plays a big role in how we perceive things.”

2. Don’t use the words “need” or “want”

Certain words have negative connotations. Even the word budget triggers the same brain response as the word “diet,” making people feel like they are robbing themselves when they create one.

For this reason, Saundra Davis, founder and CEO of Sage Financial Solutions and a specialist in financial behavior, does not use the words “needs” and “wants.” The latter has judgment, and if you judge yourself for buying something, you could be depriving yourself of it and overspending later.

Little by little they have fooled themselves into thinking better, thinking better, and then the behavior follows.

Alex Melkumian

financial psychologist

Instead, she says, “recognize that there’s a difference between the cost of living and lifestyle spending.” By changing the word “want” to “lifestyle cost,” you’re acknowledging that a purchase that changes your life improved, has value even if you don’t necessarily need it.

If you are considering a purchase, ask yourself what category it would fall into. Even within spending categories like “food,” there’s a difference between a purchase you need to survive, like groceries, and a purchase that improves your life, like a nice dinner.

3. Think about it: What are you saying “no” to when you’re saying “yes” to this purchase?

Budgets can help curb spending, but those who overspend often find their best money plans get thrown out at the store or restaurant.

So, as you add items to your cart, think about what you’re saying “no” to if you’re saying “yes” to that purchase, Davis says.

Say you come across a handbag you like, she says. “I can stop and say, ‘Okay, Saundra, you’re buying this handbag because it’s pretty,'” she says. “‘You love this color and it gives you a warm, cozy feeling just thinking about wearing this handbag with one of your new outfits.’ Then I could say, ‘If I buy this wallet for $200, what am I saying no to?’”

Then it becomes a compromise: “I’m saying no to adding $200 to my emergency fund,” Davis says. “I say no to adding $200 to my retirement account. I’m saying no to four meals this month.”

You may be fine with these sacrifices, but putting them that way can change your perspective on whether you still want to buy the purse.

4. Set up a “hassle free” emergency fund account

Having an emergency fund is smart, but contributing to an account whose label suggests you might be dealing with a crisis can backfire, says Melkumian, because who wants to plan bad things?

He suggests tagging accounts with phrases that appeal to your positive emotions instead.

“We recommend a ‘Sleep Well’ or a ‘Stress Free’ account to many of our customers,” he says. “You want to trick your brain into thinking about these accounts differently so you’re not stressed, thinking about an emergency, but you’re thinking about being stress-free or getting a good night’s sleep.”

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