What do you do? Do you treat yourself today or put the money away for the holiday of a lifetime?
At the same time, you’re trying to save every penny you can to go on holiday in a few months time. You’re in a shop and you see something that you really want (but don’t really need) for £30 or so. However, we thought we’d pick out three interesting ideas about the psychology of spending habits that go some way to answering: what makes us want to spend money? Things that make us want to spend money #1: Delayed Reward Discounting It won the Nobel Prize a few years ago, and it’s amazing), so we’re not going to bore you with every single way your brain makes spending decisions. Now, millions of words have been written on the psychology of spending habits and how we make decisions (if you’re interested, we highly recommend reading Thinking, Fast and Slow by Daniel Kahneman. 😉) Digging deeper into the psychology of spending habits (That means the next time you come home having had a bit of a shopping spree, you can just blame your unconscious mind. In fact, Harvard Researcher Gerald Zaltman says in his book How Consumers Think that “when it comes to buying, 95% of our decision making takes place in the unconscious mind”. It doesn’t matter if we’re talking about something of relatively little importance (like which t-shirt to buy) or a massive life-changing decision (like choosing a partner), we’re hard-wired to take cognitive shortcuts whenever we can and as often as we can to save our brain the effort.Īnd the same thing applies to how we spend money, too.
In other words, your actions are almost always decided by a set of unconscious and automatic processes our brains have picked up and developed from when we were children. (That explains a lot of recent world events, doesn’t it?) In fact, this theory, according to what Susan Fiske and Shelley Taylor said, is a good explanation for why ‘humans are often less than rational’. In other words, everybody - including brainy people like Stephen Fry - are naturally lazy thinkers that make 90% of their decisions without really thinking them through at all. (This is a hangover from the days when we used to have to be constantly vigilant for sabre-toothed tigers and bears lurking in the bushes.) Well, we only have a finite amount of energy to use, and spending lots of time rationally processing whether you want a latte or a flat white takes energy away from other important things like spotting danger… In other words, we hardly ever carefully consider our actions most of them are made by our brain on autopilot.
Instead, our brains are incredibly lazy and will always choose the decision that is the simplest and requires the least amount of effort.
However, in the 1980s, two psychologists named Susan Fiske and Shelley Taylor claimed that we humans don’t make rational decisions at all. And to this day, that’s how most of us think of ourselves as careful thinkers that make all of our decisions based on reason, not emotion and certainly not laziness. Now, in the late 1950s, psychologists argued that every decision we ever make, whether that’s about who to marry or what coffee to order, is dictated by complete and utter rationality. Psychology of spending habits: how we make spending decisionsīefore we look at how we decide to spend money, it’s important to get a quick understanding of how our brains make decisions on a day-to-day basis. In fact, the way all humans make decisions - especially the decisions we make about money - isn’t very rational at all. We all overspend, we all ignore our budgets and we all impulse buy. Have you ever found yourself wanting to spend money even though you know you really shouldn’t? Or you’ve been in a shop and found something on sale that you absolutely had to buy so you don’t miss out on the offer of a lifetime? Or maybe you’ve ended up completely blowing your budget on a night out with friends, even though you swore you wouldn’t?Įven though we like to think of ourselves as rational, thoughtful creatures, the truth is, most of the decisions we make about money are anything but rational.
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