The financial decisions we make daily can be influenced by various mental traps that affect our perception of the value of money and lead us to spend more than planned. Identifying these traps and understanding how they work can be key to making more informed decisions and avoiding falling into impulsive or irrational behaviors.
1. Anchoring bias
Anchoring bias refers to the tendency to base our decisions on initial, or "anchor" information, which may be irrelevant or imprecise. For example, when seeing an item on sale with a high original price, we may feel like we are getting a big discount, even though the discounted price is still high compared to the actual value of the product.
Strategy for avoid it:
Before making a purchase, investigate the real value of the product or service and compare prices in different places to avoid being influenced by an artificial anchor.
2. Herd Effect
The herd effect occurs when we make decisions simply because most people do, without critically evaluating the situation. For example, buying an item just because it is popular at that moment, even if it is not really necessary for us.
Strategy to avoid it:
Before following the crowd, reflect on whether the decision is really beneficial and is in accordance with your needs and financial objectives.
3. Illusion of easy money
The illusion of easy money leads us to overestimate the ease with which we acquire income, which can lead us to spend more than we can really afford. For example, thinking that an unexpected bonus is "extra" money and allocating it to unnecessary purchases instead of savings or investments.
Strategy to avoid it:
Reevaluate your perceptions about your income and expenses, and maintain a realistic budget that reflects your current financial situation.
4. Sunk Cost Fallacy
The sunk cost fallacy refers to the tendency to justify continuing to invest in something (such as a project or product) just because we have already spent time, money, or effort on it, even though we have no economic sense to continue. For example, continuing to pay for a membership that we no longer use just because we have already paid for it.
Strategy to avoid this:
Evaluate whether continuing to invest in something makes sense in terms of future benefits , and do not cling to the idea of recovering what you invested as the main reason to continue spending.
5. Confirmation bias
Confirmation bias leads us to search and value mainly information that confirms our pre-existing beliefs, ignoring objective data that may contradict them. In the context of expenses, this can lead us to justify unnecessary purchases based on biased opinions.
Strategy to avoid this:
Adopt a critical attitude towards your own financial decisions and seek objective and varied before making a major purchase.
6. Loss Aversion
Loss aversion leads us to value the loss of something more than the equivalent gain, which can affect our spending decisions. For example, preferring to keep an investment that is generating losses instead of selling it and accepting the reality of the situation.
Strategy to avoid it:
Evaluate your financial decisions based on objective analyzes of risks and benefits, without letting yourself be carried away by the fear of losing something that you already consider yours.
7. Placebo effect of offers
The placebo effect of offers occurs when we feel that we are getting a good deal just because there is a promotion or discount associated with it, without evaluating whether the product or service is really worth it in terms of of quality and necessity. This can lead us to accumulate objects that we will not use just because of their reduced price.
Strategy to avoid this:
Analyze if you really need the product or service on offer and if its quality justifies the purchase , beyond the attractiveness of the price reduction.
8. Shiny object syndrome
Shiny object syndrome refers to the tendency to be attracted to new and attractive products or services, without considering whether we really need or will use these objects in the long term. This can lead us to spend on fashion or technology items that quickly become obsolete.
Strategy to avoid this:
Before buying something new, reflect on whether it really fits your needs and lifestyle. long-term life, instead of getting carried away by the emotion of the moment.
9. Future emotional discounting
Future emotional discounting refers to the tendency to discount the value of the emotional consequences of an impulsive purchase in the future, focusing only on immediate gratification. For example, buying expensive clothes to feel better in the moment, without considering the concern for long-term finances.
Strategy to avoid it:
Before making an impulsive purchase, reflect about the possible long-term emotional and financial consequences, and assess whether it is really worth the expense at that moment.
10. Availability bias
Availability bias refers to the tendency to overvalue the importance of information that is easily available in our minds, to the detriment of more relevant but less accessible data. In terms of expenses, this can lead us to base our decisions on recent experiences or shocking advertisements instead of objective analysis.
Strategy to avoid this:
Gather varied and objective information before making a purchase, and do not be carried away only by the first option that comes to mind or that is sold to you as the best.
11. Financial cognitive dissonance
Financial cognitive dissonance occurs when our actions and beliefs about money conflict, generating stress and anxiety. For example, spending on luxuries while worrying about our future finances, creating a feeling of emotional discomfort.
Strategy to avoid this:
Review your beliefs and attitudes towards money regularly , and seek a balance between enjoying the present and ensuring your long-term financial well-being.
12. Lack of financial self-control
Lack of financial self-control refers to the difficulty of resisting the temptation to spend impulsively, without considering the long-term consequences of our decisions. This can lead us to go into debt or spend more than we earn, affecting our financial stability.
Strategy to avoid it:
Set clear financial goals, create a realistic budget and practice self-control when resist the temptation of impulsive purchases, prioritizing your long-term financial goals.
By identifying and understanding these mental traps that lead us to spend more money, we can make more conscious and accurate financial decisions, avoiding falling into behaviors detrimental to our economic stability and emotional well-being.