The Psychology Behind Spending and Saving
Ununderstanding your financial decisions’ psychology may help you build better savings habits.
How we think about money is an ever-evolving set of beliefs and emotions influenced by life experiences, social pressures and advertising.
1. You’re afraid of missing out
FOMO (the fear of missing out), also known as social anxiety, affects individuals of all ages and may lead to significant stress as well as unhealthy habits such as binge drinking or risky driving.
Depressive and anxious states are mental health conditions that are difficult to manage, yet should not be ignored.
Your beliefs, emotions and actions around money all play a part in how you spend and save. “Money scripts” change over time according to Brad Klontz, founder of Financial Psychology Institute in San Francisco.
If you want to make changes, it helps to understand what causes you to behave the way that you do. Pinpoint your triggers–people, places, events or emotions. Try altering these if possible–it might even be useful to work with a therapist on this process.
2. You’re worried about your future
Have you been hit by car repair bills or needed to cover large expenses like buying a house or planning a wedding? Having savings available to you is one way to weather unexpected financial storms as well as for retirement planning purposes.
Spending and saving can be complex processes, so the best approach is to take a step back and consider the big picture, advises Sheila Dowd, PhD, a psychologist from Rush University Medical Center. Doing this helps prevent unnecessary distractions that can hinder progress.
Most of us approach life with an open mind and heart, realizing our ultimate goal of having a life that makes us truly contented and fulfilled. That is why you should take time to figure out what makes you truly contented before working towards reaching your goals step-by-step.
3. You’re motivated by safety
Are You Motivated by Safety? Are You Driven to Save for Tomorrow, Medical Emergencies or Decreasing Income? Saving up for rainy day may be seen as healthy action or it could indicate that an abundance mindset exists – the belief that there will always be enough money for all.
Safety can also be financially motivating if you work in business and are concerned about worker injuries. That is because high-risk industries generally incur similar expenses, and companies that manage their safety costs ahead of the competition may reap business advantages as a result.
For this motivation to work, you’ll need to engage in some serious soul searching. Begin by considering your spending and saving habits honestly; that way you’ll make money psychology work in your favor and set aside more savings and reduce unnecessary purchases.
4. You’re motivated by status
People often seek ways to increase their savings or spending when it comes to spending and saving, though the psychology can sometimes be complex. One effective strategy for improving financial health is being more mindful in the choices you make regarding what you spend and save.
Doing your financial part doesn’t mean becoming wealthy or spending frivolously; rather, it requires being aware of when and how you should save for big purchases in life – such as setting aside a portion each week or month towards creating an emergency fund as well as creating a budget with automatic savings plans.
Add a bit of prestige into your daily routine by dressing for success or choosing technology-laden work attire – these small steps could make a dramatic impact on both your finances and self-confidence!
