How Can You Stop Buying Shit You Don’t Need?
Have you ever gone out for a meal only to head home with a gazillion paper bags hanging off your arm? Oh No!! That feeling is terrible. But How Can You Stop Buying Shit You Don’t Need?
(This article is written by a recent graduate from NTU, Karissa Sim who is recording down her financial journey)
Being a recent rat in the rat race, I have just started getting my new “monthly allowance”. And like every other person who suddenly “come into money”, all I want to do when I’m out is to spend it all on things I didn’t bear to before (Consider Reading How To Track Your Expenses? ). From classy restaurants to Lush and boutiques, and spending hours on online shopping just adding things to my cart, the only thing left at the end of the day is an ever decreasing balance in my bank account and me wondering whatever happened.
WHY AM I SUCH A SPENDTHRIFT?
Our subconscious has an incredible way of leading us by the nose to make the most redundant of purchases. Affectionately nicknamed System 1 by Professor Daniel Kahneman in his bestseller, “Thinking, Fast and Slow”, it refers to the fast, automatic and emotional thinking processes that often results in relying on illogical impressions, feelings and inclination for decisions. On the other hand, each individual also has a System 2, referring to the slow, deliberate and systematic thinking processes that evaluates our options rationally and logically.
“System 1 continuously generates suggestions for System 2: impressions, intuitions, intentions, and feelings. If endorsed by System 2, impressions and intuitions turn into beliefs, and impulses turn into voluntary actions. When all goes smoothly, which is most of the time, System 2 adopts the suggestions of System 1 with little or no modification.”
― Daniel Kahneman, Thinking, Fast and Slow
Confusing examples, I know. System 1 is the part of you that looks at that 50% off everything in store sign and desperately want to run in and throw everything remotely appealing to you into the basket and swipe that card. System 2 is the part of you that asks yourself if you are even interested in what that shop to offer, and if yes, whether the items you’re picking up is something nice, needed, and worth its price tag. Our system 1 is always sending alarm bells to us and made worse because of influencers.
WHAT ARE INFLUENCERS DOING TO US?
In today’s world, we are not only exposed to TV or online commercials, but we also place ourselves in range of being influenced by a group of people we call “Influencers”. These people are experts at appealing to our System 1 by targeting our mental rule of thumb (i.e. heuristics) or our cognitive biases.
Why do we trust what these influencers say? Because they are also people. We trust other people more than trusting brands and marketers. Furthermore, since many others are also following them, they should also be that much better at adulting than we are, aren’t they? This is the halo effect, especially since we view them positively as a person, we trust that their decisions would also be good. Forbes magazine also once reported that “data from influencer marketing platform MuseFind shows that 92% of consumers trust an influencer more than an advertisement or traditional celebrity endorsement.”
“Indeed, there is evidence that people are more likely to be influenced by empty persuasive messages, such as commercials, when they are tired and depleted.”
― Daniel Kahneman, Thinking, Fast and Slow
As the cherry on top, influencers leverage on the framing effect, as different wordings, settings and situations would affect our decision making differently – from emotional appeals to social pressure and more. An interesting example would be the fat loss gummies that rocked social media world in 2017, shortly after 28-day detox teas was given the same treatment by not just influencers, but celebrities worldwide. These teas did not work as well as advertised for majority of the users, but many still bought it at an inflated price because they trusted the influencers and their opinions. Interestingly, people forgot that these influencers looked as great before and after they “consumed” the tea.
SO WHY DO WE BUY SO MUCH NONSENSE?
Let’s contrast our thinking processes of System 1 with our System 2. In our great grandparents’ age, it was commonly believed that consumers are rational with their purchasing decisions – a feat only possible if they have all the information available in the marketplace. Today, the marketplace is so saturated with choices – the sheer number of choices with varying qualities and prices – that it is impossible for one to make the best economic decisions.
Unfortunately, there is no hard and fast rule to making the best economic decisions, not just when making consumerist purchases, but also when deciding what exactly to do with your money. How much should you spend in a month? What proportion of your monthly income should you invest? What about insurance? Savings? (Consider Reading this: Sandwich Generation: Is it still possible to be rich? and Insurance for investors and Money Maximization: REV©)
The answers to these questions and more can be answered in our monthly seminars. Why stop at spending less? Start working on meeting your future goals of owning that condo or that beautiful Mercedes. (Consider Reading This: How can we be rich and succeed in the financial world?).
It is time to start understanding.
We hope this website will be one to let you be rich and succeed in the financial world. If you would like to start your financial journey today. Subscribe to us (yourwealthdojo) to learn how you can move through your financial journey together.
Thank you Karissa for sharing your own personal journey.