![[Behavioral Economics] Why can't I save money? “Wasteful spending trap” set by the brain](https://images.unsplash.com/photo-1518770660439-4636190af475?w=800&auto=format&fit=crop&q=80)
[Behavioral Economics] Why can't I save money? “Wasteful spending trap” set by the brain
“Even though it’s payday this month, I’m already worried about my balance…”
"Even though I am determined to save money, I find myself shopping at convenience stores and online shops."
Do you have such troubles? If you are blaming yourself for having a weak will or lack of self-control, please stop and think about it for a moment. In fact, the reason we waste money is not just a matter of individual personality, but is deeply related to the way our brain works.
Modern society is full of clever tricks that exploit our brain's weaknesses and encourage consumption. This time, from the perspective of behavioral economics, we will explain why our brains fall into the "waste trap" and introduce specific measures to protect your money wisely.
Chapter 1: The true nature of “cognitive bias” that the brain falls into
Even when we think we are making calm decisions, we are strongly influenced by our brain's automatic thinking habits, known as ``cognitive biases.'' There are three main factors that cause waste:
1. Sunk cost effect
It's a psychology that causes people to continue to act irrationally because ``we've come this far'' or ``we've paid this much.'' For example, this includes obsessions like ``I bought this set of products, so I'll keep buying them until I have them all,'' or ``I can't cancel a gym membership I don't use much because I'm paying a high membership fee.'' This trap is when people become so regretful about the costs (time and money) they invested in the past that they fail to foresee future losses.2. Prospect Theory
Human beings have a tendency to react more strongly to ``losses'' than to ``gains.'' How this affects shopping is that our sense of ``if I don't buy now or here and now, I will lose out (miss out on an opportunity)'' makes us lose our rationality. When faced with a situation where ``you will lose money if you don't act now,'' such as a limited-time sale or point award conditions, your brain prioritizes ``preventing opportunity loss'' over ``gaining a profit,'' and justifies your impulse purchases. **3. Framing effect
This is a phenomenon in which decision-making changes even when the content is the same, depending on how it is expressed (frame). For example, if someone says, ``You can buy this product now for 1,000 yen off,'' it feels like a better deal than if someone says, ``If you buy this product, it's worth 1,000 yen.'' Or, if you are offered an installment plan for an expensive item that you can get for just ¥00 per month, your brain will misinterpret it as ``cheap'' and become less conscious of the total amount you will pay.Chapter 2: “Clever traps” set by stores and online retailers
In the world of business and marketing, many techniques are used that take advantage of the characteristics of our brains. By knowing these things, you can increase your "defense" when shopping.
1. Anchoring effect (anchor psychology)
This is a phenomenon in which the first number presented (anchor) has a strong influence on subsequent decisions. A typical example is the message ``List price is 50,000 yen, special price is 29,800 yen!''**. In this case, our brain does not judge the amount of 29,800 yen on an absolute basis, but first compares it with the presented ``50,000 yen.'' As a result, even if the purchase is actually expensive, you fall into the illusion that you bought it at a much lower price, and your wallet becomes loose.2. Creating a sense of limitation and urgency
Words like "Only a few left," "Only today," and "Book now" send our brains into a state of panic (or irritation). Normally, we should consider things calmly, but when we are presented with this ``limitation'' effect, our brain skips the logical process of ``thinking about it later'' and prioritizes the emotional response of ``getting it now.'' Countdown timers in online shopping and promotions of "limited quantities" on social media exploit this psychology.Chapter 3: “Savings Hacks” to Overcome Brain Traps
Our brains have a system that has existed since primitive times to prioritize immediate pleasure. Therefore, it is very difficult to try to overcome temptation through willpower alone. ** The smart way is to solve the problem using the environment and mechanism, without relying on will.
1. Forcibly guard with “pre-emptive savings”
The most powerful measure is to move your savings into a separate account as if they were ``not there'' the moment you receive your paycheck. By letting the system handle the process before your will intervenes, you can automate the rules for living within the amount of money you have left. By doing this, you can eliminate the whole conflict of "Can I indulge this month?"2. Thorough implementation of the “24-hour rule”
The most effective rule for online shopping and impulsive purchases is ``Even if you want something, leave it in your cart (or leave the store) and wait 24 hours.''** The dopaminergic rush that our brains send out, telling us “I want it now!”, subsides over time. By leaving it on overnight, you can regain the leeway to calmly decide whether it is really necessary.3. Visualizing the budget and verbalizing the “purpose”
Create a system where you ask yourself when you spend money: Is it for my future self or for momentary pleasure? Use a household account book app or notebook to visualize your expenses by category. Furthermore, it is also effective to write down specific goals such as ``to go on a trip'' or ``to have peace of mind in retirement'' and post them in a visible place. By focusing on your purpose, you can have a mental shield to see through the traps of "anchoring" and "framing" right in front of you.Summary: It's not your will, let's change the system.
If you have wasted money and failed many times in the past, it is not because you are a bad person. The "survival strategies" that our brains have adapted to survive tens of thousands of years ago have simply been hacked by today's highly developed marketing technology.
The important thing is not to fight against your own willpower, but to build a system that prevents you from falling into the trap.
- Reduce the number of decisions through automation (advance savings).
- Use the 24-hour rule to cool down your emotions.
- Constantly reaffirm your purpose through visualization.
We support you in making smart choices that will lead to a secure life several years from now.