When it comes to improving your money management knowledge and skills, a little unconventional thinking can go a long way. Instead of simply being a victim of your impulses, spend your hard-earned money in a more conscious manner.
Here are three strategies that can help you:
Shop Smarter, Guided by Practicality
Gone are the days when your location and a store's sales limited your shopping habits. Thanks to online shopping, the options are endless, making good bargains more accessible than ever before. You no longer have to wait for Black Friday to get the best deals on your holiday shopping, either.
But avoid emptying your bank account for the sake of fulfilling your holiday shopping list. To save more money around the holidays, downsize your list and check everything off before the holiday madness begins. Get creative by giving gifts you can create on your own. Or, if you must buy something for someone, make it as practical as possible. For instance, instead of buying your spouse a new iPad that they don't really need, buy them a new set of winter tires for their car, or a new winter coat. Necessities are the new "fun" gifts.
Think of the Future like the Present
Many of us fail to save as much money as we could — and should — due to plain old procrastination. Why do it today if you can put it off until tomorrow, right? But that line of thinking — the assumption you have plenty of time to save money — is precisely the problem, and it sneaks up on you.
UCLA behavioral economist Keith Chen found a direct link between our failure as a culture to save adequately and the manner in which we understand the future is near. Chen divides languages into two categories: futured and futureless. Like the English language, futured languages have different verb conjugations for the future tense. However, in futureless languages, like Japanese, Chinese and German, the same verb forms are used when the speaker is expressing something in the present or future tense.
This seemingly minor difference actually makes a major impact in how we perceive the "future" based on our native tongue. Those who speak futured languages tend to view the future as something significantly different from the present, thus making it easier to disregard its imminence and the need to save for it. Meantime, futureless language speakers view the future much more similarly to the present and, as such, tend to be much more successful at saving money for the future.
In order to better manage your own personal finances and savings, try to adopt the same concept of the future that futureless language speakers have. In other words, think of the future like it's tomorrow or just months away and allow it to positively impact your bank account so you can enjoy the benefits.
Question Your Motivations
Many industries are taking advantage of an emerging field called behavioral finance, which combines principles of cognitive and behavioral psychology. In business, the concept is used to manipulate consumers into doing what big business wants: for you to spend more.
To avoid falling for these behavioral finance ploys, it pays to be conscious of when your emotions are signaling you to make a purchase. Companies often use or take advantage of consumers' emotions in order to influence their decision-making and override their rationale. Instead, consumers like you should be especially mindful of their instinctive reasoning. Instead of going with the flow and following the herd mentality, be especially prudent of potential purchases if you know other people who have recently made the same purchase. A little extra caution will go a long way to help you better manage your money.