Friday, December 1, 2023

What keeps us from achieving our Financial Goals

Our affair with money lasts almost all of our conscious lives. And, as a romance should be, it isn’t without its difficulties. These difficulties grow out of our thinking habits. Let’s break down what habits of thought lead us to financial difficulties.

Habit one: devaluing future gains. What would you rather have: $100 right now or $150 a month from now? If you are as settled as most people are, you would want the money right now. It’s more important for a person to get the benefit immediately than to wait, perhaps for a better offer, but some time later.

Thinking in the logic of immediate gain is a more ancient mechanism of human survival than worrying about future gain. Ancient humans survived through quick reactions: if they saw prey, they grabbed it without thinking about the fact that maybe a more well-fed antelope would meet a little later. Every child follows the same path: they need to learn to think about the future and to control themselves so that they are able to give up pleasure now for future gain. For example, putting off playing at 22Bet login for the sake of good results at work.

Loans, debts, lack of retirement savings are all the result of striving for immediate gratification, to the detriment of the future. I’d rather buy a phone right now, and I’ll deal with my debts later. I’d rather spend the money on a restaurant than save it for a hypothetical old age or possible illness.

Deferred gratification (savings, freedom from debt, investment gains) is a gift to myself. But not to today’s self, but to the future self.

Next time you’re going to spend money unwisely, apply this logic: Can I make a gift to my future self? It helps think constructively about your financial future.

The second thinking error that can strain our budget is the belief that new is better than old (scientists have called it the innovation effect).

The new iPhone came out – you should buy it, it’s definitely better than the old one, you need to update your closet every season, the new version of headphones – it’s surely a technical breakthrough, without which you can not be happy, and let’s not even talk about new movies, all new things must be seen urgently!

The endless upgrade of everything in the world deprives you of peace of mind and makes you spend extra. It makes you spend too much money and too much time chasing something new.

A good tactic is to check yourself for the “new is better than old” mistake: before you buy new, ask yourself questions: what real benefit will it bring me? Is it worth the money?

An important aspect of striving for new things is keeping a person’s self-esteem high. If you absolutely need new things to feel as cool as possible, think about the fact that your underlying self-acceptance is very unstable and you are trying to “get” from the outside a sense of importance through owning fancy things. The secret is that self-acceptance does not come from the outside and all the novelties of the world will not provide peace of mind. A novelty will be followed by another and then the next. It’s a race without a winner.

Why We Tend to Spend Spontaneously

Researchers have studied all the thinking mistakes that lead us to impulse spending. Who do you think was the main customer of these studies? That’s right – those who produce and advertise products. You may not know anything about how your brain traps your own finances, but salespeople know this well. They understand what will motivate you to spend, and they use it to their advantage, which is hard to blame them for.

One of the main tactics used in sales is the anticipation of happiness (more scientifically speaking, the dopamine response). Marketers use techniques that turn on the anticipatory pleasure response in our brains. To name the main ones: discounted price tags, food, smells, and holiday paraphernalia. These things activate in us a response of persistent search for satisfaction, and we find it in the new purchase.

What keeps us from achieving our Financial Goals
People make financial plans, but many are not destined to come true. Thinking mistakes are to blame. Why does our own brain prevent us from achieving our goals? Let’s find out why we tend to impulse spending, what’s wrong with stress relief shopping and what is the hidden power of cash.

When we see and feel all these things, the mechanisms of financial discipline weaken, and the urge to discharge the anticipation of happiness intensifies – we spend and often spend extra.

There are two reliable methods to avoid dopamine spending:

  • Don’t go to malls and supermarkets for fun. This not-so-intelligent entertainment is bad for your wallet, even if you hadn’t planned on shopping. There are traps waiting for you there that you are sure to fall into.
  • Watch for signs of self-management: shouting signs about discounts, offering two items for the price of one, smelling chocolate are all dopamine lures designed to open your wallets. By tracking down these lures like a detective, you’ll become more resistant to impulse spending.

Why You Shouldn’t Relieve Stress by Shopping

It’s a paradoxical fact that when we are told that our financial well-being is at risk, we tend to comfort ourselves with shopping. Depressed by our financial woes, we need solace, and shopping is a way to comfort ourselves.

It’s illogical, but that’s the way human beings are built. We are prone to temptation when we are sad and anxious. Being in debt, a person may go on a shopping spree, which will only increase the debt, a behavior driven by the search for pleasure as opposed to stress.

KENSAP taps Ksh. 8B in Financial Aid from Top American Universities for High-achieving Kenyan Students

The solution to this issue can be a conscious set of stress-relieving techniques. To resist temptation, you have to have other methods of self-soothing, and they have to be practiced. Simply applying willpower won’t last long and you’ll soon slip into habitual ways of relieving stress, such as impulsive shopping. Sports, socializing, and hobbies can bring pleasant emotions and steer you in a sensible direction.

Why Hidden Expenses Can Ruin Everything

Imagine you get an invitation to an expensive resort that you can’t afford yourself. You’re glad you did, because you’re enjoying an experience that exceeds your income. The only thing you have to pay for – the tickets, and they cost a pretty penny. Then it turns out that you don’t have the right clothes, and you have to buy them (later you can not use that cocktail dress and it will lie in the bottom of the closet dead weight). You also have to get off work and lose some of your income. In addition, you need to put a pet and pay money for the care, too. At the resort in a pleasant company, you will have to order food much more expensive than what you are used to, in order to keep up with society. How profitable was your trip? It may turn out that not so much as it seemed at first. It’s all about hidden costs, which we often underestimate.

Buying an expensive car entails significant maintenance costs. Going to an expensive restaurant means not only the price of the meal, but also increasing tips, expensive housing has a number of hidden costs, which month after month will have to be paid.

It’s said that in ancient India, when a ruler was displeased with his retainer and wanted to ruin him, he gave him a white elephant. This high status animal demanded gigantic sums of money for its upkeep and ended up ruining its master. The white elephant is a symbol of hidden costs.

Before you decide to buy, estimate the hidden costs, think about all the associated costs, ask yourself what it will really cost you.

Connect With Us


Latest Stories

Related Stories