How We Value Money When We Purchase Things

Elaine King

To avoid impulsive purchases that surpass your budget and cause catastrophic experiences, take a look at these 3 tips related to Dan Ariely's scientific discoveries. He is a scientist and MIT psychology professor who says, “It's possible to manipulate what we're willing to spend.”

  1. Arbitrary coherence, prices are flexible.

You purchase a few chocolates with your family that cost $5 and the price increases to $8 the following week. Do you buy them?  It all depends on the previous experience with this product in terms of value. If the price increases too much, will you be able to find an alternative or will you get driven blindly by this?

  1. Gregariousness, we like to do what our friends do.

You go to a restaurant with a 50% off coupon but your friends want to go to the one on the corner that's fashionable, where perhaps the food isn't as good as in the first one. In the end, you decide to go to the second restaurant because your friends are going to this place. Is there any another way to accomplish the same thing without having to risk your budget?

  1. The word “Free” diminishes the fear of losing.

You need to buy an organic juice for your diet, but if you buy a non-organic juice, you get another one free. What do you do? The word "free "confuses our initial purpose and makes us value the product offered free of charge a lot more.

It’s been proven that we make 80% of our decisions at an emotional level. That's why the next time you open your wallet and decide to buy something, make sure that it's in your budget, that the amount makes sense and that the product or service meets your goal. Keeping this in mind will allow you to focus on the experiences you value the most and this will have large implications in your financial health as well.

To receive monthly tips from our Institute, sign up here and follow us on Facebook or on Twitter @elainekingfp.

4531 Ponce de León STE #200
Coral Gables. FL 33146, USA.
Elaine King - Family and Money Matters™ 2021