How to Train Your Brain to Behave Financially
Haste Makes Waste
"Your brain doesn't give you very reliable signals about when you should spend and when you should save, and the implication of that is that you really need to think it out," Loewenstein says.
That's why impulse buys are a no-no. How many times have you bought something only to regret it? You can return it, but that's energy—and often money, in the form of shipping or gas—wasted.
Research shows we tend to get more pleasure from experiences than things.
A vacation gives you memories you can think about over and over. A new watch you may not really need? Not so much. That doesn't mean a ban on buying, but when money is tight, you need to put more thought into not only whether you spend it, but how you spend it.
The Peanuts Effect
If an expenditure is small, it may feel like we're not spending at all, Loewenstein says. In your brain, these don't register as purchases.
While it's true a small treat won't blow your budget, indulging every day could—the same way a slice of cake probably won't hurt but, if you make it a daily habit, you may have trouble fitting in your pants.
What kind of shopper are you? Take the quiz.
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