The Psychology Behind Your Spending Habits
Being financially adapt is not just about will power or conditioners. Brain chemistry affects your spending habits. The Insula is the part of the brain stimulated when you experience unpleasantness. Persons who have more insula stimulation are likely to spend less and be savers. However, those that have less stimulation in this part of the brain will be spenders.
Spenders feel a rush of pleasure from instant gratification and thus are more impulsive and prone to shopping sprees and overspending. Savers feel best when they can save money and create a nest egg. They can delay gratification for a better outcome/investment.
Understanding how our brain’s wiring will enable us to master our spending habits and finances by setting up systems.
Ways to Save More Money
- Track your spending daily
- Review spending weekly
- Identify where most of your money is going
- Try reducing or eliminating non-essential items
- Know your numbers by checking your bank account regularly
- Use cash when shopping
- Wait two days before purchasing something
- Create a budget
Creating a Budget
Below are questions to ask yourself when creating a budget.
- How much do you make?
- How much do you keep after taking of expenses?
- What are your fixed costs, the necessities for a satisfactory life? Calculate the total cost.
- What are your variable costs? These are non-essential or frivolous items. Calculate the total cost.
- What can you reduce? Go through your variable list of items.
- What can you eliminate? Consider things that you no longer use. What can you do without?
- Where to start? Choose one area or item to reduce or eliminate.
- What to do next? Decide which area or item you will work on the following budget.
Key take-aways from video
- Everyday account for daily, weekly and monthly expenses
- Life and Emergency account for quarterly, bi-annual, annual expenses and SOS situations
- Lifestyle account for things you want such as a phone, laptop, bag, and so forth
- Savings account for a long-term investment such as a down payment for a house
Thank you for reading.