Money is a funny thing. It can bring us joy and security, but it can also cause stress and anxiety. And while we like to think that our spending habits are rational and logical, the truth is that our emotions and psychology play a huge role in how we handle our money.
One of the most powerful psychological forces at play when it comes to money is something called “loss aversion.” This is the idea that we feel the pain of losing something more than we feel the pleasure of gaining something. For example, imagine that you’re offered a gamble: you can either take a 50/50 chance of winning Rs.1000 or losing Rs.500. Most people would pass on the gamble, because the thought of losing Rs.500 is just too painful.
Loss aversion can also affect our spending habits. We might hold onto things we don’t need or use because we don’t want to feel like we’ve wasted the money we spent on them. Or we might be hesitant to invest in something that could potentially earn us more money, because we’re afraid of losing what we already have.
Another psychological force at play is something called “social comparison.” This is the idea that we constantly compare ourselves to others, and we base our own happiness and success on how we measure up. When it comes to money, this can lead to feelings of inadequacy or envy when we see others with more than we have. It can also drive us to spend more than we can afford, in an attempt to keep up with other people.
So, what can we do to overcome these psychological roadblocks and make better spending decisions? One strategy is to take a step back and try to detach our emotions from our money. Instead of thinking about how much something costs, think about what it will bring to your life. For example, instead of buying a new car because it’s the latest model, think about how it will make you feel to have more reliable transportation.
Another strategy is to focus on the long-term, rather than the short-term. When we’re thinking about spending money, it’s easy to get caught up in the moment and lose sight of our long-term goals. But if we can remind ourselves of our ultimate financial objectives, it can help us make better spending decisions.
Finally, we can try to be mindful of our spending habits, and be honest with ourselves about what we really need and what we’re just buying to make ourselves feel better. This can be difficult, but it’s important to be honest with ourselves about what we’re really getting out of our spending.
In conclusion, our money habits are deeply influenced by our psychology, but understanding these forces can help us make better spending decisions. By being mindful of our emotions, focusing on the long-term and being honest with ourselves, we can overcome the roadblocks that hold us back from achieving our financial goals.
