Incorrect use of the money
As the information portal Arbeits-Abc notes, people are less inclined to suffer financial bottlenecks if they were brought up to be responsible for themselves with money from an early age. According to the portal, however, only a few people can handle money. Above all, people for whom financial wealth is a high priority in life tend to be wasteful of 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 aforementioned lottery winners. According to the 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 working people who are not allowed to enjoy a one-off payment worth millions. Here, too, the needs are often adapted to the growing budget. In the student life it was still the cheap private labels and the daily cooking at home, in the full-time employment it is the expensive brands, restaurant visits or a large number of online purchases. Expenses that previously had to be avoided because they were outside the budget.
This is the assumption that if more money is available, more money can be spent. In this regard, work Abc speaks of the wasteful error. The inhibition threshold sinks and the money is spent more wastefully. According to Safe-More-Money, this is closely linked to the belief that more consumption leads to a better quality of life.
The obvious conclusion would therefore not be to aim for more money through a higher income, but rather to leave more money in the account. This can be done through the income, but much more likely through avoided expenses.
The mental component
The human brain considers current happiness to be more important than that of the future. Short-term rewards designed for the here and now are always more desirable for the brain than, for example, putting the money aside for the future. The phenomenon known as time inconsistency often leads to the fact that long-term savings plans for asset accumulation or for old-age provision are neglected, according to Secure-More-Money. 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 get their products to consumers. One 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 warehouse situation. Accordingly, it is very likely that there are plenty more items in stock than the indicated three items.
In addition, many companies trick with relative discounts. A product is much more likely to be bought if it had previously cost more but is discounted. The rewards system in the brain is activated by the discount and the supposedly saved money. Therefore, people are more likely to be happy about the amount saved than to be annoyed about the amount spent.
Philipp Beißwanger / editors Forex-news.com.net
Image Sources: Marian Weyo / Shutterstock.com