Saving money according to science: 5 proven tips
Do you find it familiar that despite being aware of the need to save money, it doesn’t seem to work out in practice? If so, let science come to your aid. Studies and experiments have revealed specific strategies that genuinely help you increase your savings.
Saving money can be challenging, but by implementing these scientifically validated techniques, you significantly enhance your ability to save.
Sign a contract with yourself
Saving is like losing weight. It’s not that complicated in itself. Simply spend less than what you earn to witness your savings account flourish. However, where many stumble is in maintaining consistency.
To address this challenge, Dean Karlan, an economics professor at Yale, devised a commitment contract. This contract serves two purposes: firstly, it establishes a feasible and optimistic savings objective, and secondly, it outlines the consequences if the goal is not achieved—a form of self-imposed punishment.
For instance, one may decide to watch a horror movie, even if they dislike that genre. To bolster accountability, the contract is shared with a friend or partner.
Use the ‘fresh start effect’ to your advantage
The phenomenon of starting anew and feeling motivated is commonly associated with January. However, researchers at the Common Cents Lab, a financial research lab located at Duke University in North Carolina, have discovered that you can harness this effect more frequently to your advantage. For instance, you can leverage the start of spring or your birthday as additional opportunities to tap into this increased motivation.
Treat yourself
Absolutely! While it may seem counterintuitive, indulging in occasional treats can actually enhance your ability to save. Research indicates that when you occasionally reward yourself with something that genuinely brings you joy, you tend to exhibit better perseverance in your savings journey.
For instance, if you decide to purchase that long-awaited game you’ve been anticipating, the act of saving money no longer feels like a form of punishment.
Make saving money as easy as possible
The greater the mental effort and number of steps involved in the money saving process, the higher you set the bar for yourself. Behavioral economists have conducted research that supports this notion. The solution, however, is refreshingly straightforward: automate your savings.
Determine the amount you can comfortably set aside each month and arrange for an automatic transfer from your salary to your savings account through direct debit. By doing so, you eliminate the need for constant deliberation and action, streamlining the saving process.
Think of yourself as a retiree
The inherent challenge in saving for humans lies in our tendency to prioritize short-term desires over long-term goals. While we may aspire to enjoy a pleasant trip in the future, we also derive immediate enjoyment from socializing with friends over a beer at the pub.
According to research conducted in the United States, it is advisable to shift our focus towards our future selves. This can be easily achieved through practical means like using the AgingBooth app, which utilizes your photo to simulate the process of aging, providing a transformative experience that allows you to envision yourself in the future.
Or simply closing your eyes and envisioning the type of house you desire to live in as you grow older. Engaging in this exercise on a daily basis increases the likelihood of saving for that dream home.
Conclusion of saving money according to science: 5 proven tips
We all know that the fundamental principle of saving money can simply be summed up in the golden rule: ‘Save before you spend’. Unfortunately, setting these goals are easy to apply, but it is equally easy to neglect or overlook them over time.
Lastly, it is crucial to bear in mind that as the balance in your savings account grows, your financial journey becomes increasingly effortless. No scientific validation is required to substantiate this truth. Simply allow it to pave the way for the realization of your financial aspirations!
