Tuesday, October 18, 2016

Why Do People Spend Money More Than They Make?

I wonder if I could spend less than I earn, probably I may have lots of property than anyone else. But the problem is I'm spending more than I'm earning. For the previous few months I noticed my spending is increasing day by day in a alarming rate. The this question comes up in my mind "Why do people spend more than they make?"

Why Do People Spend Money More Than They Make?
I was finding reasons for spending money, because when I was checking my bank account balance, I just had able to make a sound like Ahh.. Where the hell my money has gone? What I did? I really don't have any clue to find the reason behind my spending. Now lets come to the point and check it out why do people spend more than they earn.

Simple examples and anecdotes of daily life help to better understand why individuals get instant gratification in spending and we care little we can save or invest. Professor Ariely, a researcher and author of several books on the behavior of individuals with regard to its economy, has found that consumers have a way of thinking something illogical or impulsive facing their money problems.

In his presentation "Predictably Irrational: psychology behind the money," he explained some variables to explain why we spend, why save, what are the causes that lead us to take a decision X or Y when thinking about money.

If say, a person offers another 10 chocolates now or if you prefer 20 chocolates within a week and that chocolate is a provocative presentation, with a striking photo in an envelope that begs to be eaten once and, the result is that most people prefer the middle box, rather than wait for the package of 20 chocolates. Same thing happens with money.

It is a medium of exchange, allowing us to buy all sorts of things. And if something is expert today's society is to offer products, goods or too attractive services in exchange for money. Even at the cost of passing credit card to get them.

More examples

Otherwise, suppose you are in a store and sees a pen USD $15. Examines and decides to buy it. Then the counselor tells you: "You know, you look like a great person. I'll tell you that this same pen USD $ 8 worth only three blocks from here, if you want to buy it." Perhaps you decide that it's worth walking 10 minutes will have saved USD $ 7.

But if you are looking for is an Armani suit USD $ 2,000 and the seller says "I tell you in a warehouse three blocks from here they sell the same Armani suit for $ 1,903" what would you do in that case? Probably end up passing the card to buy the suit USD $ 2,000, and to walk 10 minutes to save only USD $ 7 does not have the same incentive bonus as in the previous example, despite knowing that would save them USD $ 7.

It is essential that we learn about our behaviors when consuming, there exists a lot of information about the use of money and how can we tap the better. Also, knowing this information for businesses will enable the development of services and products that meet the needs of people, without implying go against established habits.

Why we are irrational?

There is no absolute explanation, but there are some trends, which is why people do not save, is because that action is more difficult to spend. For many, it is easier to spend a little more, to develop a plan to achieve a goal. For most human beings, the future will be better than now and why we dream goals, without worrying too much about how to achieve them.

That is why people don't save, start a remodeling and end up spending a little more, or give a "Test' instead of taking a break on the road and ask yourself what I want or need? That simple question can avoid some unnecessary expenses.

In the US, the automotive industry is an expert in bomb customers go for a vehicle and equipping end, as if trying to 'personalize' a car, according to the 'need' for a client. And that person who goes by the car, just buy tires and wheels more luxurious, more powerful radio, some more flashy lights, without the money to respond. No one bothered to ask how long my current salary have to spend is taken to pay that I want to buy?


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