3 ways to control your spending in 2014

Science has thrown up some fascinating facts about how the brain operates when we're in consumer mode, and the processes at work when people over-spend. 

Apply some science to control your spending

There are three main factors at work - and to watch out for - if you want to keep spending under control in 2014:

1. Biological Factors: Don’t go shopping if you’re hungry, pre-menstrual or have just emptied your bladder.

You may not realise that your physiology is affecting your behaviour. But when you're hungry you will buy more food and make higher calorific choices at the supermarket. When in an anxious state you will be more likely to impulse-buy. That's because the physical state of high arousal leads to a depletion of the resources that govern self-control. And fluctuations in activity in the brain’s orbitofrontal cortex during the menstrual cycle will make you more likely to go on a spending spree when premenstrual. And more rational and controlled post-ovulation. Even an empty bladder affects your brain’s control mechanisms. Science has shown you’ll be more likely to (sorry) splash out if you’ve just spent a penny. So pay attention to your body before hitting the shops, it may be telling you to hold fire.

Try timing shopping trips with your menstrual cycle and avoid the pre-menstrual phase

2. Emotional factors: Don’t shop if you’ve just had a row, a stressful day or been dumped by your boyfriend.

People experience a range of emotions (anger, fear, sadness) in their daily lives and engage in all sorts of behavioural responses to keep them in check.  Some women find shopping gives them an emotional outlet, the way that alcohol or drugs can do for others. It distracts them from negative feelings and provides comfort in the form of a treat or reward. In fact studies of compulsive buying have shown that its prime function is to repair mood. So spot when emotions are running high and find an alternative way of releasing them. Find  distraction through exercise or relaxation, or seek social support by spending time with friends. Concentration, whether on gardening, painting or rock-climbing, is also a good way to absorb negative emotions. And the Do Something Different approach to behavioural change could help see you through the tough times because it's all about about breaking habits and increasing behavioural flexibility.

Buyer's remorse is like a shopping hangover

3. Cognitive factors: Don’t go shopping with low self-esteem and an “I deserve it attitude”.

Impulse purchases can trigger a lot of self-justification in the consumer, to assuage the guilt of over-spending. Their thoughts echo with the messages that have been implanted by constant brain-washing and bombarding marketing campaigns. Thoughts such as “Why shouldn’t I have it?” “I work hard I deserve it” “My friends will love me for it” and so on. Self-talk can also shift the focus onto the wrong things, “I’m saving £100 by buying this in the sale” (instead of, “I’m spending £200 I don’t have") or even "I'll show him!" Some cognitive reframing can help here. Relabel your credit card your debt card. Silently answer the ad-men back. Recall when you last had buyer’s remorse and tell yourself how you’ll feel tomorrow. And find ways to boost your self-esteem so that you can resist the constant bombardment of persuasive messages. 
Few people greet a large credit card bill with the words, “Because I’m worth it”.

20 money milestones for kids

As school exams get underway there’s a lot of stuff being digested in teenage bedrooms all over the country. I don’t just mean chocolate hob-nobs, but maybe some geography, german and algebra too.

Are modern kids prepared for the money world?

However,  one subject that’s notably absent from the modern curriculum is financial literacy. 

In a couple of years hoards of these youngsters will be managing their own finances, perhaps while saddled with student loans. And research shows that a big chunk of them won’t understand the money basics, like the difference between AER and APR or how compound interest works, by the time they reach adulthood.

That’s why I welcomed the launch this week of a website aimed at helping kids understand money. Moneyasyougrow.org is a site that features 20 essential money milestones that kids go through from the age of three to eighteen.

OK, it’s a US site but loads of the common sense stuff applies here too.

As do the key activities that help kids to learn at each age stage. I’ve selected just one for each age group here:

3 – 5 year olds need to understand that you may have to wait before you can have something that you want (see my earlier blog on one thing to teach your kids)

6-10 years olds need to know that it’s good to shop around and compare prices before you buy

11- 13 year olds are advised to save a dime for every dollar they get (for kids in the UK that would be 10p in the pound, although I suggest a third is better)

15 – 18 year olds are advised to use cash rather than credit cards for purchases and the over 18s are told they should only use a credit card if they can pay off the whole balance in full every month.

Many of the money problems we see in adults have their roots in childhood. 
So many of us had little or no financial education as kids and grew up into financial illiterate adults. Others had parents who handed down such strict money rules that money strikes fear in them years later and they avoid responsibility. 
One way to stop this pattern repeating itself if you have kids is to start a simple money education as soon as they are old enough to reach up and hand their pennies over the sweetie counter. The moneyasyougrow site is a good place to start; there are also lots of tips in Sheconomics.

THE BEST THINGS COME TO THOSE WHO ANTICIPATE

Here's a quote I came across recently by the managing director of Harrods, Michael Ward, who apparently said:

“What luxury is about is having the most beautiful experience,

 that’s what people love.”

Is luxury just a beautiful experience - or more than that?

Do you agree? I think he’s only partly right. Because experiences, however beautiful, are also often fleeting, transient, gone in an instant.

Real luxury, I would argue, is about anticipating the most beautiful experience.

That’s because brain research now tells us that pleasure isn’t just experiential. It’s anticipatory. We know our brains have pleasure detectors. When we acquire an object of desire, or see a lover’s smile or taste a wonderful champagne, a rush of happy chemicals go sloshing through the brain.

But those happy chemicals also get released when we anticipate something we love. In fact we get a bigger rush from anticipating than we do from experiencing.

Scientists from the University Medical Centre in Hamburg recently conducted tests that measure brain activity and found that our brains experience more pleasure when we are working towards something than when we actually achieve it.
(So that's why makers of designer handbags create waiting lists)

That’s why luxury in the form of real quality brings lasting satisfaction, it’s why craftsmanship persists and why bling will only ever bring transient satisfaction, to the producer and to the consumer.

Science has proved that it’s anticipation that makes us happy, that long-termism always trumps short-termism and that a delayed reward brings more pleasure than an instant reward.

Interestingly the scientists found also discovered that regular hints about the upcoming reward can boost our feelings of pleasure, when people in the lab were reminded of something that was worth waiting for the pleasure centres in their brains lit up.

So if you have a special bottle of GH Mumm champagne tucked away for a special occasion, having a quick peek at it on regular occasions will be sure to boost your happiness levels.

Dreaming about future pleasures can bring more happiness than experiencing them. 

Think about holidays too. We’re all supposed to love holidays.  Do you like planning a holiday, looking at images of tropical beaches, beautiful sunsets, sumptuous hotels, imagining a place where the sun always shines and you’ve left all your worries behind in Heathrow’s departure lounge? 

Well researchers in the Netherlands recently showed that we get a larger boost in happiness from planning a holiday than we do from the holiday itself. They studied the happiness levels of over 1000 Dutch adults and found that happiness levels were highest when people were planning their holiday.

In fact they argue that if you really want holidays to make you happier you shouldn’t just have one long one, you should have lots of shorter ones so you maximise the time spent in anticipation.

Intuitively we all know this and evolutionary psychology accounts for why we’re drawn to products that embody this waiting process, that stand for timelessless and are characterised by tradition and craftsmanship.

Ironically though nowadays we are rarely encouraged to wait. We live in an immediate gratification society, instant messaging, fast food, ready credit and computer games where you can kill your enemies at the touch of a button.

Are we all going to lose the ability to delay our pleasures? During boom times that is always a risk but during a recession different types of processes operate. That’s when delayed gratification comes to the fore.

  

Because psychological research shows being able to delay gratification is a sign of higher cognitive ability, one that’s more recently evolved. A sign of maturity that’s even linked to quality of life.

Resisting temptation is hard if you like immediate gratification. 

You may have heard of the famous marshmallow test that an American psychologist called Walter Mischel carried out on children in the 1960’s. Mischel offered young children, around 3 and 4 years of age, a marshmallow. He put it in front of them and said they could eat it now OR if they could wait while he stepped out for a few minutes when he came back they could have two marshmallows.

Most children couldn’t wait. They either ate it as soon as he was out of the room or sat and squirmed for a while and then caved in and ate it. Some covered their eyes with their hands or turned their back on the marshmallow so that they can’t see it.

One girl stroked the marshmallow lovingly; another boy looked carefully around the room to make sure that nobody could see him then picked it up sucked it and put it back!

Some children managed to wait 15 minutes.

But about 30% of the children wrestled with temptation but stuck it out for a full fifteen minutes. They were ones who could delay gratification in return for a second marshmallow. Years later the experimenters followed up the children to adulthood.

The ones who could wait did better at school, were more successful in their careers and in their relationships.

The instant gratifiers, the ones who couldn’t wait, on the other hand were more likely to have behavioural problems at school, or problems at home.

The moral of this story is that waiting is a higher-cognitive skill, a sign of maturity and those who can delay gratification have a better quality of life.

Delayed and immediate gratification originate in different parts of the human brain.

More recently brain researchers have found the key to the link between delayed gratification and intelligence. Different parts of the brain get activated by immediate and delayed rewards.

The need for immediate reward is driven by the more primitive part of the brain – the part that might impel the purchaser towards quick fixes, impulse buys, bling and disposable luxury.

But when people choose longer term options they use the frontal-parietal part of the brain, that is situated in the more recently evolved pre-frontal cortex - the part that differentiates us from animals and from our ancestors – it gives us the ability to reason, to plan ahead and exercise self-control.

So delayed gratification and the ethic of the craftsman overlap and reinforce each other in that both require a certain construction of the future, a certain ideal of stability and longevity.

That’s why brands that are associated with longevity, with craftsmanship and tradition, will continue to have lasting appeal whatever the economic climate but especially when people want every penny they spend to have value.

So Michael Ward was only partly right when he said that luxury is having a beautiful experience, it’s more than that.

The best things come to those who anticipate….

 This is the talk I gave to the G.H. Mumm Perrier-Jouet Champagne Assembly on 27th January.

PS When researching this article I discovered there's even a magazine called Delayed Gratification. I thought it might be found right on the top shelf of the newsagents, or only published every other year, but it seems it's out quarterly and rather sensibly measures news in months not minutes. Like all good things in life it says it is beautiful, collectable and designed to be treasured.http://www.dgquarterly.com/

10 design tricks to turn us all into shopping zombies

This morning, after apparently being quoted in the Daily Mail talking about women's love of shopping, I popped out to the local shop where I'm staying in Dunvegan on the Isle of Skye.
It looks like this (below).

Skye's answer to Westfield? Not a digital waterfall in sight.

I know, they couldn't make it less appealing if they tried.  But there's a certain authenticity to this type of shop;  a corrugated-tin reminder that shopping is just about getting the stuff we need, not a leisure activity.

 Shopping is just something we do in order to live better lives, it shouldn't be the way we live our life.

I wasn’t the first to compare shoppers to zombies (see earlier post and a dazzling analysis by Mimi Spencer in Saturday’s Times) and I’m sure I won’t be the last, but recent news about a million shoppers invading Westfield in its first week of opening got me thinking again about the draw of the mall. And all the psychological tricks that are pulled to make sure the mindless keep searching those seven miles of shop fronts, perhaps in the vain hope they’ll find their lost soul.

Are you being served? Or manipulated?

Westfield’s marketing team are on a mission to make sure the shopper stays for at least two hours. Because the average person won't be able to go for more than two hours without parting with a hefty proportion of their paypacket, and feeling the need to top it off with a cappuchino and a visit to one of its 50 cafes.

Here's how the designers-cum-brainwashers plan the mall to persuade you to suspend your critical faculties and surrender to the goddess of eternal consumption:

·     No clocks for fear you might notice the time (and your life) slipping away and feel compelled to rush empty-handed towards the exit.

·       The soul-less exterior of the mall, anonymous and blank enhances the contrast effect as you enter the sparkling glassy jingly interior.

·       Deliberately disorientating layouts so you get lost and retrace your steps or go off on an aimless purse-splurge.

·       Reflective echoing floors that make the carpeted interior of the shops more alluring.

·       Ditto the harsh lighting in the malls contrasting with the seductive and glitzy lighting of the shops’ interiors.

·       Mirrors on the walls between shops. People slow down when they pass mirrors (vanity) and how can they sell to you if youre rushing around?

·       Slowing your pace down slows your heart rate and even your blink rate, rendering you more mesmerised and gullible. Piped birdsong and a digital waterfall help the coma-induction process.

·       Shopping stretches of a maximum length of 300 metres, about the distance for which buying interest can be held at a peak before waning.

·       Expanses of stores above and around that are visible through glass balustrades and open plan escalators, giving uninterrupted views of tempting targets,

·       Scrupulously clean floors so your attention is exclusively fixed on shop fronts and not distracted by having to step over or around street detritus.

So next time you realise you spent more time in the shopping centre than you'd intended and more cash than you could afford, you'll know how it happened.

The one thing you need to teach your kids

As a child psychologist, I meet mums who tell me their kids have all the latest toys and gadgets yet never seem satisfied.

I also see worn-down teachers in despair at the rising number of pupils with attention problems.

And when I look at the psychology of money, impulsivity and short-termism seem to underpin most financial disasters.

So here’s the one thing you need to teach your kids.

Teach them to wait. To delay gratification. To resist impulse.

Mimic the marshmallow-waving psychologist Mischel - tell them they can have one sweet now, or two if they wait five minutes. Or the whole packet if they wait a week.

Buy now, pay later. Click to purchase. Surf 120 channels. Express delivery. Free upgrade. Loans by phone.

The wholesale commercialization of our society has seduced us into gratifying our impulses immediately. With easy credit, being skint needn’t stop us having what we want now.

And the 24/7 internet means we don’t even have to wait for the shops to open to feed our greed.

Research shows that adults who can transcend impulsive urges are more likely to be high achievers. They’re the ones who’ll ride the ups and downs of the stock market instead of over-reacting to every blip. They’ll be the slow-burners, the savers with long-term plans and flourishing investments, quietly gloating over the live-it-up splurgers. And with kids, as Mischel found, those who can sit it out for the two sweets turn out to have higher IQs.

So I’m convinced that if you nurture children’s ability to delay gratification, they’ll do better in all walks of life.

What's stopping you?

I have written a report on the psychological barriers to financial management for AXA, based on a yougov survey.

The three main 'blockers' that people have come under the headings:

• inertia (doing nothing because of fear, indecision or the status quo bias
• ignorance (thinking things are better than they are or being baffled by jargon)
• immediate gratification (wanting rewards now instead of being able to postpone them)

If you want to read the report, with some fascinating stats too (one in ten men would rather have a minor operation than see a financial advisor) it's downloadable from our Sheconomics site.