Wrong handling of money
As the information portal Arbeits-Abc states, people are less inclined to suffer financial bottlenecks if they were brought up to take personal responsibility for money at an early age. According to the portal, only a few people can handle money. Above all, people for whom financial wealth is a high priority in life tend to wasteful consumption. Likewise, people overestimate their profit or high income if they are not used to financial prosperity. A phenomenon that can be observed especially with lottery winners.
Higher income often leads to a higher standard of living
A classic example of this is the lottery winners mentioned above. According to Arbeits-Abc, many lottery winners are bankrupt or even in debt shortly after winning. A fast car, the big house, travel, expensive restaurants, expensive clothes and jewelry – and the money is gone. The same applies to professionals who are not allowed to enjoy a one-off payment worth millions. Here, too, the needs are often adapted to the growing budget. If it was still the cheap own brands and the daily cooking at home when you were a student, it is the expensive brands, visits to restaurants or a large number of online purchases when you work full-time. Expenditures that previously had to be avoided because they were outside of the budget.
This is the assumption that when more money is available, more money can be spent. Arbeits-ABC speaks in this regard of the wasteful error. The inhibition threshold drops and the money is spent more lavishly. According to Sicher-More-Money, this is closely linked to the belief that more consumption leads to a better quality of life.
So the obvious conclusion would not be to aim for more money through higher income, but rather to leave more money in the account. This can be done through income, but much more likely through avoided expenses.
The mental component
The human brain considers current happiness more important than future happiness. Short-term rewards designed for the here and now are always more desirable for the brain than, say, putting money aside for the future. According to Sicher-More-Money, the phenomenon known as time inconsistency often means that long-term savings plans for asset accumulation or for old-age provision are neglected. Another indication why money is spent very quickly and current consumption is increasingly in the foreground.
Why we fall for corporate tricks
Companies often dig deep into their bag of tricks to bring their products to consumers. An example is an artificially created scarcity. It is not uncommon to find comments such as “almost sold out” or “only 3 left in stock” under various goods in online shops. Ultimately, according to the work ABC, this leads to an accelerated purchase decision. And since the item is only reserved in the shopping cart for a limited time, the purchase must be completed quickly. According to the information portal, however, this is more likely to be a trick than reliable information about the camp situation. It is therefore very likely that there are many more items in stock than the three items shown.
In addition, many companies trick with relative discounts. A product is much more likely to be purchased if it previously cost more but is on sale. The reward system in the brain is activated by the discount and the supposedly saved money. Therefore, people are more happy about the amount saved than annoyed about the amount spent.
Philipp Beißwanger / Editor finanzen.net
Image sources: Marian Weyo / Shutterstock.com