How to change

THE WAY YOU THINK ABOUT MONEY

Trying to keep your spending in check, but willpower and budgeting spreadsheets not lasting long-term? You probably need to change your mindset. Dan Ariely, professor of psychology and behavioural economics and co-author of Small Change, shares his ideas to change the way you think about money, so your spending habits improve for good.

REMEMBER THERE’S NO SUCH THING AS SAVINGS

Saving can sometimes seem too abstract, distant and joyless. But don’t think about your money as spending vs saving; instead, think of it as spending now vs spending later. If we spend too much now, we’ll have less to spend later on. Bearing this in mind will help you make smarter decisions.

MAKE CONCRETE TRADE-OFFS

When deciding whether to buy something as opposed to not buying it, you’re essentially imagining something concrete vs something abstract. Instead, you need to think about something concrete vs something else concrete. For example, if you love going to the theatre and tickets cost £80, every time you think about buying something at the same price, make yourself a trade-off. So you’d think, is this thing as good as going to the theatre? If it’s not, then don’t buy it.

IGNORE DISCOUNTS

Just because a dress has been reduced from £100 to £70 doesn’t mean it has gone up in value. Train yourself to look at the reduced price as if it never cost £100 in the first place. Are you still interested in it?

The fact that it used to be expensive is irrelevant.

VALUE EXPERIENCES OVER THINGS

If deciding between going scuba diving or buying a sofa, the tendency would be to choose the sofa as we think we’ll have it for a longer time, so we’ll get more out of it. In reality, we get used to “stuff” quickly; the amount of happiness that sofa brings will decrease over time. On the other hand, we get to enjoy experiences three times; we have the anticipation, the event itself, and the memories. We end up enjoying experiences for longer than we expect, meaning they have a greater value.

BE CONSCIOUS OF FUTURE HABITS

We’re all creatures of habit and if we try something new, there’s a good chance we’ll continue on that path. For example, deciding to buy a very expensive moisturiser might seem like a one-off, but you’ll get used to it, and you’ll integrate it into your life and standard of living. So don’t take every decision as a one-time thing – think, do I want to do this for a long time? It will make you tread with greater caution.