Smart Money Opinion: Spending Wisely

financial happiness

It can be hard to make pay packets stretch to pay for everything you need or want in a given month. Fortunately, there are a lot of approaches one can use to make sure their money goes as far as it can down to the last quid.

First of all, there is a lot of wisdom to be found in the article, “8 Psychological Keys to Spending Money Wisely” on PsyBlog. As the article states, in a rather humorous study done on people who took a massage, those who took a break during the massage found more satisfaction. The reason given is because psychologically, we gradually adapt or get used to things that please us.

However, if you break up the time periods or only indulge once in a while, this may link to increased happiness. Therefore, it can be more rewarding to spend your extra money on those sweets you enjoy from the neighbourhood bakery as long as you don’t make it a steady habit. Surprise yourself and you won’t be wasting money on frivolous things — it leads to being able to appreciate the small things more and thus get more satisfaction out of cheaper things.

Jeremy Dean, psychologist and author of PsyBlog, mentions another pitfall consumers routinely and unconsciously fall into: fake security. Everywhere you look on the telly, there are advertisements that aim to create a psychological need in the viewer, preying on the human intelligence that does not like to miss out. Extended warranties and the like are part of that. They make you anticipate the worst-case scenario, creating stress in the mind. In order to alleviate that stress, consumers make purchases.

However, research shows that events in the future are often not be as bad we anticipate. Most of the time, that warranty is simply not needed, and it might even extend into minor forms of insurance that are overkill compared to the percentage of victims who claim it. Of course, not all warranties and insurance are useless — a boat racer who does not take out vehicle insurance is certainly suspect, if not illegal, and it might be a good idea to take out an extended warranty on a laptop computer if a life in the mountains out in nature is where you intend to use it. However, a warranty for that generally reliable MP3 player that doesn’t often break? Consider dropping these psychological safeguards and saving the returns.

Indeed, many of the tricks for spending money wisely are often psychological. Everyone has heard the saying “time is money,” but it is true in a frugality sense as well. Spend all your time comparison shopping to squeeze that little more out of your budget and watch your free time go down significantly, which may raise stress and lead to binge spending in order to alleviate that stress. Instead of endless comparison shopping, establish a few shops in your local area and maybe one or two beyond your local area you consider very special. Limit most of your everyday spending to these shops because they stock items you personally enjoy at reasonable prices. The prices need not be the best, just better than a quick alternative. The time you save will help you enjoy your money more.

Most of us have already decided the big things: where we’ll live, work, and how much the “maintenance” of our absolute needs will cost us each month. The remainder can be sorted into recreation, extended social lives (such as supporting a family), and how to deal with rare one-time costs or emergencies. While the occasional disruption of the standard living you enjoy each month has many variables that are hard to give advice for, the balance between play and extended social life is not.

Research shows that when we spend money on others we feel more fulfilled, so put your family or room mates first and devote money to them before you think about yourself. At the same time, create a minimum happiness level budget, so you have a rough idea about your individual satisfaction. Let it waver from month to month but focus on the small pleasures that make your life worth living.

In the article “How the Lives of 10 Lottery Millionaires went Disastrously Wrong,” the author shares horror stories about millionaires who, after the novelty of extraordinary social events they held in rich splendour wore off, returned to their more fulfilling job at McDonald’s of all places. It even speaks of one who lost contact with family members due to their money. As such cases show, it’s clearly not about the amount of money you have: it’s how you spend it.

Some Extra Reading Material:

Image Credit: News Genius

Leave a Reply

Your email address will not be published. Required fields are marked *

The Skint Scot 2015