How to master psychological tricks to save money?
Behavioral scientist Wendy De La Rosa delves into the psychology behind savings behavior.
She shares practical insights that can help individuals improve their financial well-being by making intentional changes to their spending habits.
The impact of environmental cues
Environmental cues significantly influence our savings behavior.
Seeing income on a weekly basis instead of monthly, for instance, facilitates better budgeting throughout the month.
As human beings, we can be irrational when it comes to saving and spending and budgeting. But luckily, we know this about ourselves, and we can predict how we’ll act under certain environments. Let’s do that with saving. Let’s change our environment to help our future selves. – Wendy De La Rosa
Power of pre-commitment
The concept of pre-commitment can increase savings rates.
We often envision our future selves as perfect, capable savers.
Hence, making financial commitments for our future selves, like deciding on a savings percentage before filing taxes, can significantly improve savings.
Your savings behavior isn’t a question of how smart you are or how much willpower you have. The amount we save depends on the environmental cues around us. – Wendy De La Rosa
Utilizing transition moments
Transition moments can be used to boost motivation to act.
For instance, timing certain ads to coincide with significant life transitions can lead to higher response rates.
Control small, frequent purchases
Small, frequent purchases, like eating out, can accumulate and hamper our ability to save.
Unlinking credit cards from ride-sharing apps and setting usage limits can help regulate spending habits.
Change the decision-making environment
Altering the decision-making environment can lead to significant changes in savings behavior.
By understanding our irrational tendencies and predicting our actions under different conditions, we can make intentional changes to save more effectively.
