Everyone knows that money plays a key role in just about every facet of our lives. It influences our quality of life, our mental and physical wellbeing, and our sense of security. In this cost of living crisis, it matters so much more.
As such, our decisions around money and finances can have rolling consequences, positive and negative. There is a lot of research about the psychology of our money decision-making, helping us to understand how and why we make certain choices. You can improve your financial decision making skills by taking the time to read and digest this psychological research.
So, what are some of the theories behind our money decisions?
Confirmation Bias
Confirmation bias is a concept in psychology. It refers to the tendency that people have to seek out information that confirms what they already know or believe. Or information that supports their current beliefs. As a result, people can inadvertently dismiss or ignore any information that does not align with their beliefs. In the world of finance, this can lead to us making decisions that are based on inaccurate information. For example, if we hear about a friend who had a bad experience with a credit card company, we may decide to not go with that credit card company ourselves, even if their offerings may actually suit us best. That is why it’s important to equip ourselves with all the information by comparing. Jump on Money Compare to compare insurances, mortgages, personal loans, credit cards and more to make sure you are making a fully informed choice!
Emotional Influence
Our emotions, such as fear and anxiety, can influence our decisions. A common fear is the fear of missing out. We may fear missing out on the latest trend and as a result, make an impulse spend. Or we may buy something that’s on sale for fear of missing out on the discounted product. We may buy these things even when we likely don’t need them. You can always find a better price for items you do need by jumping on PriceMe and comparing.
Anchoring Bias
This psychological concept refers to the tendency that people have to rely on the first piece of information they come across. For example, if you come across a broadband provider that has a sale, you may likely choose to go with them, without scoping out your other options. Therefore, it really is important to compare prices to make sure you are finding the best deal, and the right deal for your unique needs. NZ Compare’s array of comparison tools makes it easy to compare a range of utilities so you can be sure to find the right option for you.
Loss Aversion
As people, we tend to feel the weight of loss more than gain. Our brains are wired to feel sadness more than pleasure! This fear can make us too cautious to take some opportunities due to the fear of potential loss. It’s important to be aware of this fear so we can find a healthy balance between risk and gain. There are times when it’s worth the risk to switch to a new provider! For example, you may be a victim of loyalty tax and you don’t even know it. This is when you stay with a certain provider or plan out of convenience, and because you may believe that comparing and switching is a time consuming process. But you can be paying a premium for staying with the same company as they increase prices. It’s important to compare regularly to avoid paying more than you need to, especially when another provider may likely offer a better deal. Luckily, NZ Compare makes it easy to compare the information, all in one place. Our user-friendly comparison platforms allow you to compare broadband, power, mobile, and finances within just minutes!
Influence of Others
The people around us can influence the things we do, and the decisions we make about our money. If your friend chooses a certain company because it works for them, it can influence us into thinking that we should sign up with them too. However, there are so many different utility plans and finance options available. The insurance policy your friend chooses may not be right for your unique needs. It’s important to compare the options you have, without the influence of bias, so you can be sure you are finding the right fit. Compare to unlock the best choice for you.
Make a Fully Informed Choice
The best decisions are the fully informed decisions. Here at NZ Compare, we are on a mission to help Kiwis make better choices by providing them with all the information, all in one place. Our user-friendly comparison platforms allow you to compare broadband, power, mobile, and finances within minutes, without bias, and without hassle. And it’s all free to use. Be sure you are making the right decisions so you can avoid paying more than necessary and so that you can unlock savings.
Jump on Money Compare to compare finances such as insurances, mortgages, personal loans, and credit cards. You can find the right deal, make savings, and avoid long-term headaches by putting in that little bit of extra effort into your important financial decisions.
Further Reading:
7 Tips to Save Money and Reach your Financial Goals
