So why do we find saving so hard, if we know it’s good for us? Instant gratification – that’s the simple answer. We want things now and we aren’t prepared to wait. And these days, with credit cards, deferred payment plans and loans you don’t necessarily have to wait.
Our brains are hardwired to look for the immediate pleasure of buying now. And any longer-term thoughts of “I need to save for my retirement” get pushed to the back of our minds. After all, the here and now is much more fun!
In their book Scarcity, academics Sendhil Mullainathan and Eldar Shafir explain that feeling restricted and deprived actually changes the way we see the world.
“Scarcity focuses the mind onto the here and now; if there isn’t enough of something, then I want it here and I want it now! In this mindset we overestimate the joy and benefits of instant gratification and underestimate the value of the long-term goals we so carefully set just hours ago.
It requires mental strength to resist temptation, and yet mental strength is depleted when we’re worrying about scarcity”, says Victoria Nikulin in her article The psychology of Saving: How your brain works against your wallet.
Nigel Latta, in his series Mind Over Money, tries to explain why saving is boring. He actually states that it cannot only be boring, but also make us unhappy. When we put money aside for saving, it seems like we are ‘losing’ the money as we can’t see it or spend it. It can be a big challenge to train our brains to think about our future self.
So instead of having to re-think and convince yourself every time you want to buy a pair of new shoes, or the latest high-tech gadget, here are a few simple tricks to get you started.
- Set goals and celebrate – if you have short term goals, like a holiday, you can easily calculate how much you need to save and work towards that goal. And then celebrate your efforts with a well-deserved break. Long term goals like retirement savings can be harder to picture. KiwiSaver is of great help here, you don’t have to do it on your own.
- Save little and often – it’s easier to commit to a saving target you can work with. Just like diet or exercise, start small and work towards getting better.
- Automate – bank apps today can make saving a lot easier by setting up automatic payments to your savings account. Some people also find it easier if they can’t ‘see’ their savings, they’ll be less tempted to dip into that pot.
- Avoid impulse buying – easier said than done, we know. But allowing yourself treat when reaching a saving goal is a better way to do it. Also, if you are in to online shopping, delete your cookies, so that ads for the things you been looking at do not keep following you around.