12 strategies to reduce overspending

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We all have long-term financial goals that we want to achieve, such as saving for retirement. However, you often have to resist everyday temptations, such as having a fancy dinner at a restaurant, buying a new gadget, or having a nice vacation, to achieve these goals.

Unfortunately, our brain’s reward system is designed in a way that often prefers short-term rewards that are immediately accessible to long-term goals without any immediate pleasure. Thus, self-control is necessary to resist the urges to spend in everyday life.

What psychological strategies for financial self-control are really effective?

In a new study, which has just been published in the journal PLOS ONE, Davydenko and colleagues (2021) conducted a meta-analysis of financial self-control strategies in the academic literature to find out which psychological financial control strategies are effective.

A meta-analysis is a statistical analysis that integrates the results of many different scientific studies. It has the advantage of having a larger sample size, increasing statistical power, and making the analysis less likely to be affected by the characteristics of individual studies. The scientists included 15 different articles with a total of 29 studies that tested 12 different financial self-control strategies in their meta-analysis. In all 29 studies, data from 12,316 volunteers were included.

The 12 financial control strategies identified in the analysis were as follows:

  1. Use a retirement savings projection plan
  2. Planning purchases with a shopping list
  3. Consider why you are pursuing the goal
  4. Pay with cash instead of card
  5. Monitoring of weekly savings deposits
  6. Using a savings account without early withdrawal
  7. Keep budgets for races
  8. Anticipate future regrets on purchases
  9. Set specific savings goals
  10. Keep cash in general bills
  11. Store cash specifically in high value banknotes
  12. Make money difficult to access

The good news is this: In all of the studies, financial control strategies have significantly helped volunteers reduce their expenses or increase their savings. So, psychological financial control strategies generally work well!

The scientists further analyzed the data to determine whether proactive financial control strategies (strategies focused on what people can do to control spending before encountering a tempting situation) or reactive financial control strategies (strategies focused on this that people can do during a tempting situation) have been more successful. However, the analysis revealed that the two types of strategies were equally effective. Overall, the financial self-control strategies one uses to reduce overspending do not matter much, as long as they are used on an ongoing basis.

What financial self-control strategies are promoted online?

In a second analysis, they investigated which self-financial control strategies are promoted online by analyzing the content of websites focused on self-financial control. Scientists were able to identify 104 websites that included 1,950 suggestions on how to cut expenses or increase savings.

Here are the top 10 financial self-control strategies that have been promoted online:

  1. Wise purchases, such as buying only sale items or avoiding branded items
  2. Avoid tempting places, people and activities, such as restaurants, cigarettes, shopping malls, or online browsing
  3. Avoid passing temptations by doing it yourself, such as making your own lunch instead of going to a restaurant
  4. Make a plan, like a grocery shopping list
  5. Automated Deductions Used on a Paycheque
  6. Create a budget
  7. Track spending or savings accounts and behavior
  8. Make money difficult to access, for example by freezing credit cards
  9. Set or think about your financial goals such as your retirement or college fund
  10. Think about whether you need it or want it

Interestingly, the overlap between the strategies promoted online and those that were found to be effective by the first analysis of this study was 55.4%. So, there are some useful tips on websites promoting a self-financial control strategy, but they only partially overlap with what the academic literature has proven to be effective.

What financial self-control strategies do people use in real life?

In the third and final part of the study, the scientists asked 1,000 Canadian and American volunteers about their financial self-control strategies to determine to what extent the strategies tested in the academic literature or presented on websites overlap with what people actually do in reality. life. Eight hundred and thirty of the 1,000 volunteers described at least one strategy they were using. In total, 20 different strategies have been identified.

Essential Self-Control Readings

Here are the top 10 financial self-control strategies used by volunteers:

  1. Create a budget
  2. Think about whether you need it or want it
  3. Make money difficult to access, for example by freezing credit cards
  4. Avoid passing temptations by doing it yourself, such as making your own lunch instead of going to a restaurant
  5. Wise purchases, such as buying only sale items or avoiding branded items
  6. Save before you spend, for example, save 50% of a salary
  7. Set or think about your financial goals such as your retirement or college fund
  8. Track spending or savings accounts and behavior
  9. Think or imagine your future self
  10. Wait before making the purchase

Overall, the strategies used by real people in day-to-day life overlapped about 50% with those that were found to be effective by the first analysis in this study. The overlap with the strategies promoted online was 95%. This may suggest (unsurprisingly) that people are basing their decisions on the financial self-control strategy to be used more on online advice than academic literature. Better communication of scientific results to websites that promote financial self-control could help people optimize their strategies.

Take away message

Failures in financial self-control can have serious consequences, making these strategies an important tool for long-term happiness and success in life. Fortunately, psychological strategies to cut overspending and start saving are effective. Interestingly, the specific strategy doesn’t really matter. This suggests that a generally mindful approach to day-to-day financial decisions that included one or more of the strategies outlined above is a great way to limit overspending.


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