Yahoo Finance Psychologist reveals 3 ways to trick your brain into saving
It can be tempting to go overboard with your Christmas spending, particularly after a long year of being stuck at home.
It’s also tough when struggling retailers are putting their sales on early to entice shoppers to spend big.
But there are a few things you can do to make sure you stick to your budget this Christmas, psychologist and author Phil Slade said.
Stick to cash
Studies show that the use of coins and banknotes engages and stimulates our sensory system. On the contrary, when we use our card or pay online, researchers found far less brain activation.
In fact, another study found that shoppers spend up to 100 per cent when they pay using their credit card instead of cash.
The lesson? Use cash.
“Taking out a certain amount of money, and only using that amount makes it easier to track spending,” Slade said.
“The ‘tap and go’ convenience often tricks our mind into thinking we are spending less than we actually are.”
Set up sub-accounts
If you do need to use your card, give your accounts specific titles like ‘utility bills’ or ‘holiday fund’, and transfer everything you don’t want to spend into those accounts, Slade said.
“Specific titles help you stop and think before transferring money back in the heat of the moment.”
The Barefoot Investor has long advocated for multiple bank accounts, which act as “buckets” based on your financial goals.
He also suggests you set up automated transfers into those accounts, so that when your pay comes in, it’s automatically distributed into your goals-based accounts. Whatever is left in your spending account is yours to spend.
Get creative
“Your brain tricks you into thinking being social has to be expensive,” Slade said.
“Instead, prioritise experiences (like gifting a family member a free day of babysitting) over monetary gifts.
“Rather than going to a fancy restaurant, consider catching up with a friend over a bottle of wine and picnic in a nice park.”
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