5 *Interesting* Ways Psychology Influences The Way We Save Money

Start using your brain power in ~powerful~ ways.

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Saving money is one of those things that is often easier said than done, especially when you consider the fact that a recent study found only 39% of Americans have enough money saved to cover a $1,000 emergency.

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The average person doesn't just wake up one day to a lofty savings account balance — even when they earn a "high" salary. In reality, it takes years of diligently tucking away and investing cash, but sometimes human nature makes saving feel harder than it should be.

Understanding your mind's motivators can help you get one step closer to reaching your savings goals. Here are five psychological factors that could be keeping you from saving as much as you want to — plus tips that could help you start to retrain your brain:

1. It's easier to do nothing than it is to make a change.

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What are some changes you might be able to make in order to save more money? Maybe you can switch to a more affordable cable or internet provider. Perhaps you can earn more money by starting a side hustle or taking on freelance projects. Or maybe you can cancel all your unused subscriptions and memberships. But often, when we say we'll do something differently, we don't — because it's easier to simply keep everything the way it is. There's a special name for this: the status quo bias.

"It can be daunting to say, 'What do I need to do to save for retirement? Do I need to change the way I'm saving for retirement?'" said Dr. Vicki Bogan, associate professor at Cornell University and the director of the Institute for Behavioral and Household Finance. "Because of status quo bias, people often just don't do anything about retirement."

Tip: If you feel a little intimidated by how you're going to save money, it can help to think about the repetitive little steps you can take — aka the small things you can do every week or every month to get to your goal. Depending on your situation, this could mean putting $5 into a rainy day jar every week, or just reading through your credit card statement every month so you know what you spent money on (which can eventually help you see where you can cut back spending).

2. We make too many decisions with the present in mind and without thinking about the future.

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It can be easy to say that you don't have enough money to save for retirement and get the things you want — like new clothes, a weekend getaway, and dinners with friends. And because retirement just feels so far away and you can really use a vacation now, it seems like it makes more sense to pay for what can satisfy you now. This tendency is what's known as hyperbolic discounting — and we pretty much do this all the time!

According to Dr. Bogan, if you are trying to save money, you may have to deny yourself something you want now so that you can put away money for the future — and it can sometimes be a tough trade-off to make. But when you put too much weight on what you're consuming now, you end up in a situation where you aren't saving as much as you need to.

Tip: Budgeting can help you balance some of your current needs with your future ones. It can even help you get some clarity on things you actually *don't* need to spend as much money on, so you can redirect those funds to areas where you can ~grow~ your savings. Also, setting up automatic savings for retirement or an emergency fund can completely take the guesswork out of the process — this way, you don't even get the option of choosing between your savings and the new TV you saw at the store.

3. We forget (or refuse) to track our spending and balances, so we wind up spending more.

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If you checked your credit card balance and saw that it increased by $300 in expenses this month, you'd probably think twice about throwing down more money on an online shopping spree. That's exactly what happened in research conducted by the Federal Reserve in 2016. In their survey, they found that 62% of mobile banking users checked their account balance before making a large purchase — and after seeing their balance, half of them decided not to make that purchase after all. The big takeaway here is that increasing our awareness can influence our behavior when it comes to money.

Tip: When you have to remember multiple passwords and sign into several accounts to check all your balances, you might be less likely to actually do it — which means you'll be less likely to be aware of where your money stands. Make it easy to keep tabs on your account balances! If keeping track of logins slows you down, you might try using an app like Mint, which lets you connect all your accounts so you just have to sign into one app to get an overview of all your balances.

4. We think the end goal is more important than the progress we make along the way.

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We all have financial goals. Some people want to pay off their credit card debt, others want to save $1,000,000. And while keeping our eyes on the prize can be motivating by itself, seeing that we've made progress can also get our blood pumping and get us excited to continue toward our goals. This is called the progress principle, and a study from the Harvard Business Review shows it in action: Basically, they found that when research participants reported having "good" work days, 76% of the time it was due to progress their team made that day.

So, it's important to actually *see* your progress toward a goal when dealing with your finances. In fact, this is why the snowball method for paying down debt works so well — it requires you to pay off the smallest debt balance first, then move on to the next smallest balance, and then the next. Seeing that debt completely ~disappear~ more quickly motivates you to keep working toward wiping out the others.

Tip: Start by setting *realistic* goals for your situation. Then think of a visual way to represent your progress. This could be as simple as drawing a progress meter in a notebook and coloring it in every time you save some extra money toward your goal.

5. And, when we don't celebrate our small wins, we don't reinforce our positive actions when it comes to money.

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It's important to set financial goals (like saving $500 every year, or paying off $500 in debt every year). But it can be equally important to celebrate a little when we reach those goals. Humans have a self-reinforcing nature. Our brains are programmed to respond well to rewards — accomplishing something and treating ourselves releases dopamine (one of the neurotransmitters that affects happiness in the brain). That spark of happiness can motivate us to keep on going — then, when we hit the next milestone, we can celebrate and increase our motivation all over again.

So while the big picture is still looming over you, it's important to take the time to appreciate yourself for the little details (the little wins) along the way. Maybe celebrating means buying yourself one nice thing you really want. Or it could mean taking yourself to a nice dinner.

Tip: if you have a savings goal you want to reach by the end of the year, set a goal for your midway point so you can celebrate your progress along the way!

Do you have any money saving tricks that *really* work? Share 'em in the comments below!

And if this sounds like music to your ears (and bank account), check out more of our personal finance posts.