Avoid these 5 biases to save more money
Let's imagine you find an Rs.500 note on the streets. What will you do with the money? Spend or Invest. There's a very high chance that you will spend it. Right? The answer lies in the way we think and perceive money. We are social beings and many instances affect the process of decision making. In terms of money, we are exposed to certain biases which cut our pockets, and controlling these biases can help save us a lot, literally a lot.
Let's discuss a few of them :
1. Choice Supportive Bias
Do you purchase things from only one brand without considering other brands in the market? Then maybe you're afflicted by choice-supportive bias. This bias makes you justify your purchase even if there's a cheaper and better alternative available in the market.
How to overcome this - Try out new products in the market and don't dismiss a product offer because you use only one brand. The new offer might save you money and be better.
2. Confirmation Bias
As humans, we have our personal beliefs and we like to stick with them. We like it when a brand validates our beliefs and so we get more inclined to use their products, even if it costs us more. Brands often use this bias to identify and capitalize on their beliefs.
How to overcome this - Research products and other brand offerings before making a purchase. Also, try out brands that do not conform to your beliefs and it may turn out to be beneficial. Remember the goal is to save money and not satisfy your beliefs.
3. Present Bias
Many of us want to live in the now and fulfill our present wishes without considering the future. That's why things like BNPL, Credit Cards, Sales, and discounts are fond to us. We get so blinded by these offers, that we tend to buy things that we don't even require now.
How to overcome this - Don't buy things immediately. Wait for some time, maybe a day or two, and analyze if you need the product. If yes, go for it. Otherwise, not. If you have decided to buy the product, the best possible action you can take is to consider the purchase as a savings goal and save for it.
4. Restraint Bias
Every person can restrain from buying while being allured by the brands in the market. Few of us overestimate our self-control when it comes to impulse purchases. So, even if we have a budget, we spend more than that.
How to overcome this - Have a shopping list when you go to purchase and create budgets and place control over it.
>>> You can surely use Spac to assign budgets to the categories you spend on and limit your spending. Get it now!
5. Social Desirability Bias
Do you care about how you're going to fit in the society? Have you ever asked yourself what people will say? You must have. Every single one of us faces this question. We want people to admire us and to fit in the group we also risk ourselves financially. We spend more so that people around us talk good about us, this often makes us pour money out of our budgets. Remember spending money on your crush and buying them expensive gifts, it's this bias that played with you. Also let me warn you, the majority of the people fall into a debt trap because of this bias.
So, how to overcome this - Create a circle or have friends who care less about your financial position. Stay away from people who make heavy demands and try not to imitate someone's lifestyle. Live life and spend on things you want and not what others want.
So, how does it feel to understand how biased are you in terms of money? Take some time and do a quick analysis of yourself if you haven't done it so far and you will find bizarre ways of how you've been spending all these years. It's maybe time to make changes to your preconceived beliefs and notions. Change for the better and pay money for your good.
Happy Spending Folks!
Avoid these 5 biases to save more money
March 2, 2023
Tracking isn’t enough, start controlling your money.
February 10, 2023
5 Crucial Reasons Why Budgeting Should be Your Top Priority
March 1, 2023