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Here’s why it’s so easy to spend money

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Ever arrive home from your commute having totally zoned out about how you got there? You’re safe, thankfully, but you can’t remember making every stop or turn, or even walking the last 500 feet to reach your door. The same thing can happen when it comes to spending money, as many of us go into auto-pilot when it comes to being responsible with our finances.

“The overwhelming majority of our decisions are automatic,” says Mariel Beasley, co-founder of Common Cents Labs, part of the Center for Advanced Hindsight at Duke University. That’s not inherently a bad thing, as taking mental shortcuts can sometimes save us time and keep us from getting overwhelmed. But, when it comes to money, automatic decision making isn’t necessarily the best for your wallet.   

“Generally, what these shortcuts mean is we tend to prioritize what’s easy, follow what other people are doing (we take other people’s behavior as cues as to what we should be doing), and we have natural ways that we think about money,” says Beasley.

Here are a few examples of how those mental shortcuts can work against you when it comes to your spending, as well as some ideas for how to break free from that cycle.

We get stuck comparing apples to apples

“The rational way that we should approach spending decisions is by thinking about opportunity costs,” says Beasley. In other words, if you spend $500 today, you’re missing the opportunity to spend it later.

Calculating opportunity costs can be simple when there’s a clear trade-off. For example, it’s easy to understand what you’re giving up when you have to choose between a cookie and cupcake. 

However, given that there are always a variety of ways to spend the same money, it can make it harder to fully consider the benefits of spending (or saving) on one thing versus another. “It basically means that it’s very difficult for us to think about the optimal way to spend money,” explains Beasley.

Failing to consider the opportunity cost of a purchase is usually the first mistake. But there’s still another trap—even when we take the time to consider opportunity costs, we generally only  consider direct comparisons. For example, buying car X means I won’t get car Y, or buying drinks tonight means I can’t go out tomorrow night.

“When we think about these trade-offs, people should be thinking about different domains,” says Beasley. “It’s not one car or another, it’s a few vacations or a car.”

We only see what others buy

Our surroundings can have a strong impact on how we dress, what we watch, how we talk, and, of course, how we spend money. That’s probably not particularly surprising given that most of us have observed or experienced how spending can increase in an attempt to “keep up with the Joneses”. But, we often don’t know the Joneses’ entire situation. “We see what people buy, but we don’t see what people choose not to buy,” says Beasley.

“Across the board, people assume that everyone else is spending more than them,” says Beasley. “We assume that we’re better than others on things we do regularly. Partially this is because of overconfidence in ourselves, but it’s also because all we see is people eating out. We don’t see people eating at home.”

Remember that just because you may assume that others are spending more than you, the situation is generally more complex. Regardless, using others as a gauge for your spending is probably not the best course of action if you’re attempting to make better financial decisions.

We separate the pleasure of consuming from the pain of purchasing

Spending money can be a bit more difficult when you have to physically hand over cash. That’s why for some of us, the ease of paying with a credit card can feel deceptively painless, especially when you only have to click a little green button or simply tap your mobile device. 

“There’s research that shows if you do all your spending on a credit card, your spending goes up versus using a debit card or cash,” says Beasley. Although everyone can appreciate the convenience of a credit card, as well as the appeal that it can be paid off at a later date,  sometimes inconvenience is what keeps us from making purchases that we’ll regret later. 

We think of money in relative terms

Another way that our brain can trick us into spending more is by valuing the same amount of money differently depending on the context. Marketers and salespeople know this, which is why they may try to sell you lots of add-ons when you’re making a large purchase.

This “relativity trap” can come into play for day-to-day purchases as well. “If you’re thinking about making a purchase and you have $100 in your pocket and you’re going to spend $50 of it, it feels like a lot,” says Beasley. But, if you use a credit card that has a high credit limit, or it’s payday and your direct deposit just cleared, the $50 might not seem like so much. 

Sales and discounts take advantage of this mindset when they show an initial high price crossed out and replaced by a lower price. The initial price acts as an anchor, and you start to think of the sales price as a bargain relative to it.   

Thinking of money in relative terms can also be why adding a little more credit card debt onto an already large balance sometimes doesn’t feel like a big deal. 

What can you do to break the cycle?

Old habits die hard, and breaking any financial cycle can feel like an uphill battle. Fighting ingrained instincts that have evolved over thousands of years can feel even harder. And yet, both are possible, especially if you reframe your mindset with the goal of benefiting yourself financially. Here are a few ideas to help you get started. 

  • Join or create saving-focused communities.


    Some groups enjoy and celebrate savings as an achievement and connecting with them online or in person can help lead to a change in your mindset and behavior.

  • Find an accountability partner.


    Sitting down on a weekly or monthly basis and reviewing your purchases with someone else you trust can be a powerful exercise. When you’re about to buy something, being confronted with the knowledge that you’ll have to explain the purchase at a later point may deter you from making it in the first place or overspending.

  • Focus on shorter budgeting time frames.


    If you want to limit a certain type of spending (such as on eating out), try to set a shorter time frame in terms of your budget. “If you commit to spending X amount in a month, it’s too easy to spend a lot early in the month,” says Beasley. “It’s easier to control if you commit to weekly spending limits.”

  • Limit the frequency rather than the amount.


    If you’re setting a budget for a specific category, another trick is to limit the number of times you’ll do a certain activity rather than how much you’ll spend. For example, try to eat out twice a week rather than setting a total dollar limit and having to figure out how many (or few) times you can eat out. You may find that this helps you resist the urge to overspend in one sitting and be more thrifty each time after.

  • Reconsider your anchor prices.


    Knowing that relative amounts and anchors can influence spending, come up with your own anchor price


    based on your values


    and goals. You can then frame your purchases relative to those costs and principles. 

Reframing how you think about spending money is key to building a better financial future. If you can better understand the subconscious forces at work that may be the culprit of your overspending, you’ve already taken an important first step towards breaking the cycle for the better. 

Unless otherwise noted above, opinions, advice, services, or other information or content expressed or contributed by customers or non-Varo contributors do not necessarily state or reflect those of Varo Bank, N.A. Member FDIC (“Bank”). Bank is not responsible for the accuracy of any content provided by author(s) or contributor(s) other than Varo.


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