Save Money With These Behavioral Financial Gimmicks
We all know that automating savings and enforcing spending rules can help us save money. But a new report from the Common Cents Lab at Duke University’s Center for Advanced Retrospective Analysis offers new insights into how to hack behavioral finance to put more money in our pockets (or rather, in bank accounts).
The report has a lot to read, detailing all of the Center’s 2017 experiments and focusing on seniors, low-income and hourly workers, but here are some key takeaways you can apply in your life.
Use age milestones to achieve your goals
Older adults can be encouraged to change their habits by being reminded of upcoming age limits, according to the report. The center has partnered with Silvernest , a service that matches senior homeowners with potential tenants, to try to increase the number of homeowners using the site. They found that by targeting ads to people with age-specific information (“You’re 64 turning 65. Are you ready for retirement? Sharing at home can help”) rather than more general language, they were able to increase number of clicks – through rates from 2.46 percent to 5.49 percent.
This is consistent with past research, which has shown that people are more likely to make big changes in their behavior / life as they approach the new decade (for example, when they are 29, 39, etc.). You can apply this in your life by making a list of what you want and need to achieve financially in the months leading up to your own big birthdays. Stick to actually completing tasks by setting reminders on your calendar and telling people about your goals.
Limit how often you do something instead of focusing on the budget.
In an experiment in which they analyzed over 30,000 transactions using the personal finance app Qapital, Common Cents found that consumers regret spending more on restaurants, coffee and fast food than other categories. To curb this, they tested various ways to restrict those purchases.
Their takeaway: People who limited the number of times they could eat out (in this case, two excursions a week), rather than the amount of money they had to spend, were more successful. So in your life, consider setting a spending frequency rather than X dollars.
Reduce the number of invoices by setting them up for auto payment
In another partnership with Qapital, Common Cents found that millennials were less likely to regret recurring transactions as they are used to seeing transactions in their monthly statements. In fact, they were “10 percent more satisfied with recurring transactions versus one-time transactions.”
“One of the reasons for this is that humans are great adaptations,” the report says. “Our first experience of something unusual and interesting, but after several similar experiences, the novelty and our attention diminish until we get the same answer. Tear off the patch once and it will hurt. Tear it off a few times and we will begin to underestimate the pain. “
Automatic payments can make sequential transactions like rentals, car payments, etc., less financially painful. “On the other hand, they make payments that we might regret (another round of drinks or fast food) more obvious and innovative because the latter are more likely to be paid in cash.” So automating recurring payments is kind of a win-win: the rent gets a little lower every month, and when you spend too much, you become more aware of your costs (and how it makes you feel).
Pick up the phone and get ready to wait
By watching 20 people discuss credit card interest rates and polling 5,000 people about negotiating bills, Common Cents found that the biggest obstacle to a lower annual interest rate was simply to pick up the phone and wait. Once consumers did that, their bargaining skills didn’t really affect whether or not they got a lower rate – all they had to do was ask.
“The most important step is to call the credit card company,” the report says. “After the participants made a phone call, their likelihood of continuing on with the assignment was very high.”
So yes, you’re probably busy, but be warned: you get a lower rate just by asking, no negotiation required. Considering the average credit card debt among households with a balance is $ 15,654 , this can save you a lot of money in the long run.