To be financially healthy, saving is necessary. Keep track of income and expenses and try to save month by month to achieve financial security. Savings is the part of our income that we do not spend. The more income we have, the more savings capacity we have.
But in order to save, even if it is obvious, you must first decide to do so. In the process of making the decision to save money, this determination goes through different phases:
- It should be desirable
- It should be feasible
- There must be a commitment
- Planning
- Implementation
It happens that in some of these steps we stop and it usually happens because of the relationship we have with money. So, among the many reasons that may exist for why we find it so hard to save, one of them centers on the bad decisions we make regarding finances because of our behavior. By making some changes, behavior can be modified, but to do so, it is first necessary to know them and identify ourselves.
REASONS WHY WE FIND IT DIFFICULT TO SAVE MONEY
There are Behavioral economics theories that indicate that part of the reasons why it is difficult for us to save is due to a series of biases that are completely natural to human beings, which make us believe that the ideal time to save is in the future, but never in the present. These unconscious biases create a gap between intention and action.
Some of these cognitive biases that influence our savings goals are described below. Knowing them is a great help to make better decisions. You will find that even the most disciplined saver will at some point identify with one of the following biases.
Bias to the present
Everyone knows that the most reasonable thing to do is to save in order to achieve well-being and peace of mind in the future. But we have a predisposition to stay in the “here and now”, with a strong emotional detachment with our future-self and we tend to postpone setting in motion our purpose of saving for a long-term goal. Something typical of this bias is to be driven by impulse, seeking immediate satisfaction with compulsive buying that ends up spending money that could be used for savings.
Procrastination bias
Sometimes a pending task can become, under a person’s perception, an arduous task, something heavy and difficult to accomplish. It ends up being left for another day, lacking the energy and interest to carry it out. When it comes to saving, all actions that have to do with this objective, no matter how simple, end up being put off until a better time. However, that moment never comes and they end up being missed opportunities to start taking steps towards the savings goal.
Optimism bias
Another very common bias is to be very optimistic about the future and think that there will always be a better time to save in the future because later on we will be better off, we will be successful or that we will not need to save because there will be no difficulties at all. But the future cannot be predicted and, although optimism is necessary, combined with a pinch of realism is optimal, as it is always important to have money saved in case things do not go as expected.
Better-than-average bias
In many aspects of life, when we want to know if things are going well, we compare ourselves with the rest of the people around us and people not so close to us. The same applies to saving money. If there is someone close to us who does not save, then we will not be the only people and, therefore, we will not be doing so badly. If there are people who let us know that they are unable to save, we again embrace the fact that we are not the only ones in that situation. Many of our behaviors are social and the people around us determine our patterns.