Think you’ve tried everything to save more money but are still coming up short of your goals? Here are five tips to boost your bottom line, based in the increasingly popular field of behavioral economics.
SET YOUR CELL PHONE OR COMPUTER TO REMIND YOU TO SAVE. A 2010 study by economists from Harvard and Yale and co-authored by Jonathan Zinman of Dartmouth found that bank customers who were reminded of their savings goals with monthly text messages stashed away six percent more money than those who didn’t receive reminders. So set your calendar on your Blackberry or an alarm on your cell phone to remind you of your goals. Use post-its, refrigerator magnets, screensavers, mobile alerts—whatever works for you. More simply, contact your bank and ask them to automatically withdraw a set amount—say $50 or $100 a month—out of your checking account after each pay period and have it transferred to savings.
DON’T LET YOUR COMPUTER MAKE IT TOO EASY TO SPEND. With popular websites like Gilt Groupe, Groupon, and RueLaLa offering deep discounts to your favorite retailers, you don’t even have to leave your desk in order to blow money on shopping sprees. Erase your credit card information from tempting sites, don’t allow them to save your passwords, and delete bookmarks to places where you’re likely to spend. But do use sites like bankrate.com to get the lowest rate on credit cards and billshrink.com to see if there’s a better cell phone or wireless plan for you.
USE CASH NOT PLASTIC. A classic 2001 study from MIT found that people were willing to pay twice as much for the same items when they paid with credit cards compared to when they paid with cash. So stick to an all-cash diet. Another 2008 study by Priya Personal Raghubir of NYU and Joydeep Srivastava of the University of Maryland, found that people tend to treat credit cards and gift cards like “monopoly money”—meaning that plastic feels less real and people are less careful about overspending with it. Take out a fixed amount of cold, hard, cash from the ATM each week and hold yourself to that sum of money to get you through the week.
CHECK YOUR EMOTIONS. Research from British psychologists done in 2009 and other studies by American psychologists has found that we’re willing to spend more money when emotions run rampant. In fact, in one famous study from Carnegie Mellon, participants who’d been shown a tearjerker about a dying parent were willing to fork over almost four times more for a bottle of water, compared to people who’d been shown a documentary about the Great Barrier Reef. Save your shopping for your mellow moods.
SHOP WITH FRUGAL FRIENDS. Studies show that friends (and even friends-of-friends) influence everything from how much you weigh to how much you smoke. And at least some unpublished preliminary research seems to show that friends can influence how you can spend as well. Next time you’re planning a big-ticket purchase, bring a frugal pal shopping with you. Take your spendthrift friends on a run instead.