Financial Advice Blog

6 ways our subconscious affects our spending

Think you’re mindful with your money? Scientists might prove you otherwise with their findings on common human cognitive biases that greatly impact spending behaviour.

Thanks to the likes of Dr Joe Dispenza and Todd Sampson, becoming aware of our subconscious has never been cooler. But are you really as ‘woke’ as you think you are and aware how your subconscious affects your spending?

Studies by behavioural scientists intent on drilling down into the human psyche reveal that much of our daily behaviour occurs entirely subconsciously. From the moment you wake up until you slip into slumber, your brain is making millions of tiny decisions on your behalf.

Here are some ways our subconscious affects our spending and other money decisions.

1. We want instant gratification

Remember that time as a 2-year-old you screamed because you had to wait for your treat? Okay, we don’t either, but according to scientists, our desire for instant gratification is hardwired from birth.

Studies have shown that children find it hard to stop themselves eating a treat, even with the prospect of getting a bigger and better treat if they wait. Why? Because we value immediate rewards over delayed gratification.

But this isn’t something humans just grow out of. Unless you’re aware and consciously choose to change this pattern, it’s likely it will follow you into adulthood and impact the way you spend and save money.

Think about it: how many of you choose to spend the money now for a quick buzz, rather than save for retirement? You know it’s important to save for your future, but are you letting instant gratification get in the way?

2. We hate to lose

Scientists have discovered that humans feel the pain of a loss much more than the pleasure of a win.

This subconscious reaction to negative experiences that involve losing something, like money, explain why people find it so hard to pull their money out of falling stocks, bad investments and even gambling losses. It hurts too much!

3. We’re pack animals

We love to stick in packs when it comes to societal norms and follow the herd, often completely unconsciously.  How many times have you seen a line for a restaurant and found yourself queueing up too, despite the hour waitlist?

This mentality drips into our financial life as well, providing another example of how our subconscious affects our spending.  Think about Boxing Day sale madness, crowd-funding campaigns suddenly going viral, or why stock market instability can cause everyone to sell off their shares in one day.

4. We’re overly optimistic

How many times have you seen a story on the news or social media and suddenly thought that could happen to you? According to scientists, this happens more regularly than you think.

As humans, our brains are wired to see something and believe the chances of it happening to us are high, but in reality that’s not actually the case. This phenomenon has been intensified with the development of social media because we’re all so much more connected online. But while this can work in our favour for positive events, it also impacts us negatively too.

For example, investors who experience a market crash like the GFC may over-estimate the chances of the same thing happening again, even though statistically it’s unlikely. It can lead to people changing their investment preferences to lower risk investments, even though this may not be in their best interests as their long-term returns struggle to keep pace with inflation.

5. We get caught up in anchoring bias

‘Anchoring’ describes the common human tendency to rely too heavily, or ‘anchor’ on one trait or piece of information when making decisions, and when it comes to shopping, it gets us every time.

Here’s an example: When you first see a pair of jeans for $400 and then a similar pair for $200, it’s easy to anchor on the first amount and perceive $200 as a great bargain. Or you see stocks plummet in value and think it’s a bargain buy without doing your due diligence first.

The question is, are these really good purchases or has an anchor embedded itself, leaving you with an unwanted purchase or investment? To counteract this subconscious mind-wizardry, set a price in your mind before heading to the shops (or buying stock) so you’re not caught out by anchors.

6. We’re reluctant to change

How many of you know you could get a better mortgage deal if you just shopped around? What about a super plan? Or cheaper electricity?

Another way our subconscious affects our spending is through ‘status quo bias’.  Humans are more likely to stick with what they know (even if they can get a better deal elsewhere) rather than inflict the extra hassle associated with changing on themselves.

The key here is to divide and conquer, splitting all your ‘life admin’ tasks into sections and working through them one by one, rather than trying to tackle everything in one go.

Share this article


More articles

Talk to us, guaranteed value

We’re so confident about creating value for you quickly, that we guarantee it with a 100% money-back guarantee.

Book a complimentary financial strategy session.