6 ways to train your brain to be money-smart

It’s empowering when you act on tips and advice and then see the fruits of your good money-management efforts.

But it can also be tedious, figuring out if you’ve got the money to buy that red dress, calculating the net value on a car hire contract or deciding between a holiday in Bali or the latest iPhone upgrade.

Lighten your load by internalising some general behaviours vis-à-vis your money. You won’t have to think about every single sen you turn over if you make some savvy habits second nature.

Here are some psychological tricks that can help you spend less and save more.

1. Spend on experiences

To maximise your personal value of money, spend on activities that make you happy. Invest in experiential purchases that increase your own self-value like an additional educational degree, music lessons or gym membership, as well as purchases that nurture your relationships, like a family outing.

Spending on selected material items can fulfil the same purpose. For example, you can choose to buy books, a musical instrument, a treadmill or a family pet.

To help you determine whether you should spend on an experiential purchase or not, the Money Smart website suggests you ask yourself three simple questions:

(i) Are you personally interested in this experience?

(ii) Is the price reasonable?

(iii) Are there cheaper ways to do it?

These questions can help you make sure that a particular expenditure is worth it for you.

2. Think positively

Rather than thinking about what you need to abstain from to save money, put a positive shine on the task and focus on all that you’ll be able to afford once you reach your financial goals.

Remind yourself of the reasons why you want to save. Do you dream of purchasing your own home in two or three years? Do you hope to make a European trip next summer?

Keep these aspirations in mind and you may find it easier to save more and spend less.

3. Assign a working-time value to your ‘want’ purchases

Whenever you’re tempted to spend on something that is not on your planned shopping list, try to convert the item’s cost into the amount of time you had to work to pay for it.

For example, if you are paid RM30 per hour, then that RM2,000 Michael Kor’s handbag you’re eyeing would “cost” you 66.6 hours of your life. Is that handbag worth so much of your time? If not, don’t buy it.

By thinking of how much time you need to work in order to afford the things you want to buy, you’ll put your spending into perspective and avoid spur-of-the-moment purchases.

4. Look at your potential losses

On the other hand, converting an item’s cost into work-hours may not work so well if you love your job.

An alternative is to look at other goodies you may potentially need to pass up on if you decide to buy a non-essential item.

For example, if you are tempted to buy that RM2,000 Michael Kor’s handbag, calculate how many RM30 meals at your favourite restaurant you would have to give up in order to pay for that bag.

This can discourage you from buying non-essential items that are out of your price range.

5. Try the ‘stranger test’

Business Insider recommends trying the “stranger test” whenever you are about to make a purchase. Much like the previous strategies, the “stranger test” forces your mind to focus on what is happening at the moment, and to visualise exactly how much you’re paying for that item you want.

Picture a stranger holding the item you are about to buy in one hand, and the cash of its purchase price in the other hand. If you would rather take the money, then you might as well not buy the item.

6. Make it a habit to track every single expense

Another way you can train your brain to make smarter money moves is to indoctrinate yourself to jot down every expenditure you make.

You can use an expense diary, or a mobile money application. Either way, the knowledge that you must account for every purchase can help dissuade you from making an impulsive spending decision.

This article first appeared in thenewsavvy.com

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