Cognitive science advice to stay on budget

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It’s easy to overspend – maybe even more during the coronavirus pandemic.

Many of us have turned to “comfort shopping” – buying things we don’t need to cope with the lingering fear and uncertainty we have had to endure for over a year.

And the finances of young adults are in a particularly difficult situation right now: nearly 6 in 10 Americans between the ages of 18 and 34 have been forced to postpone at least one major life event like getting a car, going to school, get married, buy a house, or have a baby during the coronavirus pandemic due to financial problems, according to a recent survey.

But with the company on the verge of reopening and the headlines declaring it’s time to shop, how can we take back control of our finances?

Cognitive science research can offer useful information that will help us stay on budget, increase our savings, and invest wisely. Here are a few to put into practice immediately:

Recognize and combat decision fatigue – Retailers use all the psychological tricks available to encourage you to spend money. Decision fatigue refers to how careful analysis of all the pros and cons takes effort and gradually wears you out as you make choice after choice. After hundreds of decisions about what to buy and what not to buy, our reserves of willpower run dry towards the end of a typical shopping trip, and we struggle to make smart choices. That’s why grocery stores, for example, try to create a relaxed atmosphere that encourages customers to take their time and let go of their guards. Popular staples like milk and eggs are often placed in the back of the store, so you’ll come across plenty of other attractive items along the way. And by displaying beautiful flowers prominently near the entrance, pumping the scents of fresh bread into the air, and playing soothing music, they are able to put guests in a tranquil and suggestive state of mind. . When finally faced with impulse purchases in the cash register like candy and magazines, it is no wonder that many of us opt for these unintentional purchases. The fix? Create a list of what you need before you start shopping and stick with it!

Don’t be tempted by introductory offers – Credit card companies are particularly notorious for taking advantage of the fact that many people are stressed out by the prospect of cutting the numbers (around 93% of Americans report at least some level of mathematical anxiety) and our eyes tend to flare up when we see the fine print. That’s why it’s very easy to fall for the Zero Percent Annual Rate (APR) teaser rate, where after just a few months credit card companies can increase it to 20% or even more. And if you’re not careful about paying your bill in full each month, you could end up owing more interest than you do on the principal. The solution is to let your income, not your credit limit, have the final say when building your budget.

Avoid social media channels that arouse envy – The desire to keep pace with the Joneses is nothing new, but staying tuned to social media channels that constantly show you lifestyles that are out of reach will easily contribute to overspending. Instagram influencers, for example, have been blamed for putting some young people in huge debt as they tried to emulate an insta-perfect life. But even if big brands don’t pay social media influencers, including celebrities, to promote their products and blur the line between content and advertising, we’ll still have the problem of stretching budgets to fit. their peers. A 2019 survey found that the vast majority of Gen Z and Gen Y are influenced by their friends’ flashy social media feeds, 72% and 74%, respectively, wondering how their friends can afford the experiences. expensive that their peers have published online. The best course of action might be to limit your time on the channels that trigger your urge.

In summary, there is a lot you can do to get your finances back on track if you understand the basic psychology of what’s leading you astray. If you are a student, see if your institution offers workshops on mastering finance. At Barnard College, we prioritize financial wellness over wellness by giving young women the knowledge and tools they need to take control of their finances and make smart decisions about their life. money in our new Francine A. LeFrak Foundation Center for the Well-Being. Until financial literacy is part of the standard curriculum in public schools – there are two dozen state legislatures currently considering bills on the subject – and everyone can learn these skills before they go. reaching adulthood will require young adults to prioritize.

It takes work and discipline to stay on a budget, save money, and invest wisely, but the rewards in reduced stress and better mental health are well worth it.

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