It’s the end of the year, which means the holiday shopping season has really started. If you haven’t already seen your spending increase, opportunity is looming.
And you’re probably concerned about spending your money wisely.
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In addition, shopping can be a harrowing experience and our attitude towards money is connected to all kinds of feelings.
Based on psychology, here are three tips on how to spend your hard-earned cash better this holiday season.
Before you buy – Patience is your friend
One of the amazing qualities of the human mind is that we can mentally travel through time: we can imagine what the future will bring feeling how. Scientists call this “affective prognosis”.
Thinking of a future journey—imagining the warm sun, the sand between your toes, seeing yourself smiling—is an example of such mental time travel.
It turns out, however, that we’re not very good at affective forecasting. Not only do we confuse the emotions we are about to experience, but also their intensity and duration. Lottery winners are a classic example – contrary to expectations, many are not happy or not happy for long.
More importantly, you can derive happiness from just that anticipate future experiences. For example, one study measured the happiness of 974 people who take a trip compared to 556 people who don’t take a trip. As was to be expected, holidaymakers were relatively happier – but only before the trip.
So how can we use our ability to mentally time travel?
Tip #1: Pay now, consume later. Today, fueled by the proliferation of “buy now, pay later” options, we can consume whatever we want instantly. However, this instant gratification robs us of an important source of happiness: anticipation. A better strategy is to commit to buying something and then wait a little before actually consuming it.
When purchasing – note that you are paying
An inevitability of any purchase is spending money. This represents a cost, both in terms of monetary value and in terms of being able to buy other things.
Cost is a form of loss, and we don’t like losing things. This is why it hurts mentally to spend money. Scientists call this the “pain of paying”.
According to a shopping theory, we decide to make a purchase after calculating in our heads: Is the expected pleasure of consumption greater than the expected pain of buying?
This calculus is even represented in the brain. For example, a study examining the brains of people using fMRI while they were shopping for groceries found neural activity in areas associated with higher-order affective pain processing, which correlated with the magnitude of the price.
How did you pay for your last meal? Did you have to dig through your wallet or purse to pull out the right combination of banknotes and coins? Maybe you just pulled out a plastic card and swiped it over the reader? Or maybe you absentmindedly held your smartphone to the machine.
It turns out that your payment method affects how much pain you feel. In one study, researchers asked some university employees if they would like to buy a mug at a reduced price. Half were only allowed to pay in cash, while the other half had to pay by debit or credit card.
Those who paid cash self-reported having more pain when paying. So how can you use this to your advantage?
Tip #2: Increase the pain. Worrying about overspending this holiday season increases the pain of paying. You can do this by using cash or get a notification every time money leaves your account.
After purchase – stop chasing rainbows
A fundamental human trait is that we are adaptable – we adapt to the new normal easily. This also applies to our purchases. Scientists call it “hedonic adaptation”: Consuming the same things brings less and less happiness over time.
Do you remember the day you got your smartphone? Perhaps you felt joy as you caressed the smooth aluminum back and watched the light glitter on the pristine glass. Now look at your phone. What happened to the joy?
It’s normal to experience a hedonic adjustment. One problem, however, is that we don’t expect it.
Do you remember the affective prognosis? Because satisfaction is a function of expectations relative to performance, if we don’t adjust our expectations in the face of inevitable hedonic adjustment, we become dissatisfied.
The second problem with hedonic adaptation is that the obvious solution seems to be to buy something new. Maybe you need a new smartphone to replace your slightly scratched old one? If you think so, you’ve just jumped onto the hedonic treadmill.
Now the only way to keep your happiness up is to spend more and more money to get better and better versions of everything. So how do you get off that treadmill?
Tip #3: Buy experiences, not things. It turns out that people end up being happier when they buy experiences rather than things. For example, a study that tracked how older adults spend their money found that only one category of spending was related to happiness: recreational purchases such as travel, going to the movies, and cheering on sporting events.
One reason is that we adapt more slowly to buying experiences than to buying tangible things.
So next time you’re torn between buying tickets to a festival or buying the latest gadget, grab your scratched smartphone and buy some festival tickets for you and your friends in advance.
This article first appeared in The Conversation
Adrian R. Camilleri is Lecturer in Marketing at the University of Technology Sydney