According to a New Scientist article this month money carries an ‘eerie psychological force’.
Here's an example of the eeriness at work. Most people would rather find £100 cash than have their heating bill cut from £950 to £835. Yet the latter gains them more in real terms.
The article suggests these solutions to the psychological biases that trip us up:
1. Freeze your credit card. Literally. Drop it into a tub of water and stick it in the back of the freezer. By the time it’s thawed out the overwhelming urge to splurge will have worn off (or frostbite might have set in).
2. If saving is hard you may find creating a ‘loose change’ category less painful. So if something costs £22 tell yourself it was £30 and save the difference. Do this every time you buy something and it mounts up.
3. MIT researcher Daniel Ariely suggests adding categories to our credit card with specific limits. Maybe a maximum of £50 on a meal out or only £300 a year on shoes. Over the limit and your card gets refused.
Not surprisingly he hasn’t persuaded any credit card company to take this up yet.