Psychology of Spending: How to Program Yourself to Save Money

In 1972, professor Walter Mischel published the results of a study conducted at Stanford University that would gain steady notoriety in the decades that followed, eventually becoming known as “The Marshmallow Experiment.” The study recorded and analyzed the behaviors of preschool students who were given an uncomplicated choice: one marshmallow now or two later. It was no shock to Mischel that the majority of children ate the first marshmallow as soon as it was in-hand instead of waiting for two, but the experiment did not end there. Researchers checked in periodically with the subjects until the children had grown well into adulthood. The retrospective findings were what made the experiment so fascinating. The few children who had delayed eating the first marshmallow to receive the second, as adults, were more successful and better adjusted than their less patient counterparts.


What the Marshmallow Experiment suggests is that there is merit in delayed gratification, more so than instant gratification. The same principle can be applied to saving money. As a chore that many adults struggle to do, saving money is delayed gratification in its most literal of terms. But how do we adults, with our bad financial habits and lack of discipline, become like those patient preschoolers? The answer: psychology. By understanding how your brain works during spending situations and practicing a few techniques, you can reprogram yourself to become a saver.

Know Your Nature

Evidence suggests that we all inherently tend to be either savers or spenders. Suzanne Kearns, writing for Money Crashers, cites a Journal of Consumer Research experiment where participants underwent a brain scan while pretending to make decisions about purchases. During these scenarios, the region of the brain that reacts when you experience unpleasantness, called the insula, became very active. When the insula is active, we usually try to stop doing whatever activity it is that causes that area of the brain to react. So those with high insula responses in the study tended to be savers and those with minimal responses tended to be spenders.

Although you may think that we should all strive to be savers, this is not exactly true. Though spenders tend to fall into financial trouble, savers tend to become miserly and later regret not treating themselves once in a while. Knowing where you personally fall on the spectrum can help you anticipate and control your behaviors when it comes to spending money.

Use Cash

Having physical money in hand when you spend helps make the spending a reality. When we just deal with numbers on a screen, we create distance between ourselves and our spending, making it easier to waste money. When we pay bills online, we can fall victim to aphenomenon called malleable mental accounting, which means that we manipulate ourselves into thinking we are saving money in order to justify spending more. For instance, if you switched car insurance providers, resulting in a “savings” of $50 a month, you will spend that $50 elsewhere. The fact is, though, that the money is not savings until it is set aside and actually saved. If you use tangible cash to purchase items and put actual cash into savings, the true amount of money you spend and save becomes more of a reality.

Spend Wisely

If you mentally focus on spending your money on developing memories instead of expensive collections, you break the habit of wasting money on stuff. “Stuff” relates to temporary items that we desire. A huge, flat-screen television, an expensive watch or a diamond ring are all part of this stuff category. These items may bring joy at the time of purchase, but it usually is fleeting joy. The problem is that we adapt to these items that bring us pleasure in the beginning, and when they lose their novelty, we lose our enjoyment of them. However, a high-quality and useful product like an iPhone may be necessary to buy because it improves your day-to-day life. You don’t have to cut out all the stuff in your life, just make sure it’s worth the money.

Your mind is a wondrous maze of behavioral patterns and inherent traits. Understanding those behaviors and traits helps you eliminate compulsions to spend money on unnecessary items and build your savings. This enables you to use money as it should be used — to enrich your life.


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