Why do we strain to find a deal for cheap socks, but don't see the difference between a $1500 and $2000 suit? Some of the psychology of willpower and spending money.
When we shop, we calculate prices in our heads, and this takes energy.
We are “cognitive misers”
- This is a term in social psychology to describe all the mental heuristics that humans use to save brain energy.
- We stereotype, round numbers, form opinions and impressions on people, etc. using lazy mental shortcuts. For instance, it's easier to stereotype every member of a certain race based on meeting one person, than it is to learn the spectrum of characteristics and personalities of each person we meet. Thus, humans have prejudices.
- That's why “first impressions matter.” This is worthy of a full article of its own!
- However, some psychologists have updated the term. Instead of “cognitive misers” they suggest that perhaps we're “motivated tacticians.” What does this mean?
- It means our brains are capable of thinking deeply and intelligently, if we are motivated to do so. In other words, if we “give a damn” (to use Antonio's rule), we can overcome our lazy thinking and think tactically.
We're biased toward calculations that are easy, and we tend to “round down”
Smaller numbers are easier to calculate
- Choosing between $8 and $20 socks is easier because the numbers are smaller – and easily manageable in our minds. We might even have a visual “picture” of twenty dollars.
- Most of the day-to-day decisions we make tend to happen in the single- and double-digits (buying lunch, gifts, small grocery shopping, buying small items and clothing, etc.).
- We can't really “grasp” thousands of dollars in our minds. That would take a TON of mental energy.
- Only savants and geniuses can really picture very large prime numbers and multiply large numbers in their heads. We can multiply 8×5 in our heads but multiplying, say, 85×55 requires more energy (only a fraction of adults can do this easily), and multiplying 855×555 in our heads is out of the question for most adults.
- $1500 and $2000 are both just really huge numbers. We just can't “visualize” that many dollars.
- That's why everything is priced with .99 cents at the end. We see $1.99 in the one-dollar range even though it's basically $2.
- This means that if something is priced at $1299 we tend to think of it as “around $1200” or worse – “around $1000” even though that last $299 is a big deal! Mental rounding can cheat us out of a lot of money. Retailers know this, and price things to manipulate the way we think.
- We also tend to “round down”
- That's why there is cheap sugar at the checkout line (candy that is priced higher than the stuff in the candy aisle). By the end of a shopping trip, we've depleted our mental energy and our brains crave sugar! Plus, with less mental energy available, we make worse decisions.
- This is measured in an interesting way – grip strength and duration. People with more brain energy have more willpower. Experimental subjects are asked to come in to the lab and grip and handle with a quarter in it. When their grip loosens, the quarter slips out of the apparatus and falls to the floor. People with more mental energy are able to grip the handle stronger, and longer.
- Just making people exercise their willpower causes their “gas tank” to be depleted. In one study, chocolates were placed in front of some experimental subjects and they were asked not to eat them. The experimenters found that those who had resisted the urge to eat the chocolates were less able to persist on a subsequent frustrating puzzle. Battling their willpower reduced their ability to focus on a task afterward.
- In some research, subjects who drink a sugary beverage show better self-control (and less aggressive behavior) than those who don't.
- Have you ever heard of a bar fight at 10 am? No – aggression and stupid decisions generally tend to happen at the end of the day. Once our mental glucose is depleted, we tend to run on “autopilot” and react to things without thinking. Add a little alcohol into the equation and you have bar fights (and all the other stupidity that can happen in bars at night).
- This means that developing habits for self-control will strengthen our capacity for self-control!
- It also means that improving your discipline in one area will actually improve other areas.
- So it's possible that starting an exercise regimen (or any regular activity that sharpens your willpower) will help you in your shopping habits!
- This means that when we're in a bad mood, we make worse decisions
- This is why “retail therapy” is almost always a bad idea. You can't “cure” depression by buying things – looking at your bank statement at the end of the month will likely cause the depression to return!
- Don't shop when in a bad mood!
General summary of Ego Depletion, from one of the founding psychologists of this area: https://psych.ut.ee/~nek/isiksus/Baumeister%202002.pdf
Research has shown that we have a “mental gas tank” of glucose (sugar – or energy)
Making calculations/decisions in our heads takes work
When we're in the grocery store, each decision to buy or not buy takes energy – and depletes our “gas tank”
We can “recharge” our mental energy tanks by sleeping, or eating something with energy
This means that when we are tired (especially at the end of the day) we make worse decisions
However, ego depletion research has shown that our willpower is like a muscle: using willpower often results in a “strengthening” of our capacity for self control.
Another important note: a good mood buffers the effects of ego depletion.
The moral of the story:
- Know your brain energy. Don't make big decisions (like the decision to buy a suit) at the end of the day, near closing time, or when tired.
- Know your moods. Don't make big decisions when sad, angry, or depressed.
- This may seem crazy, but if you have to shop at a time when your brain or mood is working against you, drinking a sugary drink can actually boost your willpower.
- Mental heuristics – Don't rely on mental calculations and rounding to decide whether you can afford something! Take a pencil and paper shopping if you have to, and have your budget written down. Here's a trick to help your thinking. If you're trying to decide between a $1500 and a $2000 suit, think of what you could buy with that extra $500. Break it down into lunches, shirts, car payments, or whatever you need to help you visualize the amount. Even the difference between a $900 suit and a $980 suit is maybe 8 lunches.
- Calculate whether you have the money for something in your budget. If it helps, take out the money to spend in cash (even if it's a lot). Picturing the money visually could help.
- Don't be afraid to walk away and/or sleep on your decision. Sleeping recharges our mental energy – the old adage to “sleep on it” has a lot of wisdom behind it. The item you want will probably still be there in the morning. If you think that the item might not be there in the morning, you're probably being manipulated by the sales agent.