Whether your friends and family are on a high salary or minimum wage, chances are you’ve heard them say ‘I don’t even know where my money goes each month!’. I’d be willing to bet you ask yourself the same question too. You pay your bills, maybe save a little, and then can’t quite understand why you don’t have more left over.
- 1 Simply HAVING Money Can Turn You Into A Bad Person
- 2 Monopoly makes us all a little crazy
- 3 If You’re Homeless, At Least Wear A Suit
- 4 You’re Even Irrational When You’re Spending Money
- 5 Don’t worry, none of this will be happening to you
Don’t mind me, just searching for all the money I spent on things I didn’t need last month
I’ll tell you why you can’t figure out how you’re spending so much each month and why you can’t save more. It’s because money makes you irrational. Maybe even a little bit crazy.
In this post I’m going to tell you:
- How money makes good people bad (even you!).
- Why you’re so bad with money (the psychology of spending).
- What you can do about it.
Simply HAVING Money Can Turn You Into A Bad Person
If we had this much money, we’d probably dance around in it too.
It’s a pretty common stereotype thanks to arrogant bankers and less-than-lawful millionaires that money can turn you into a horrible human being.
You’ve probably had that whole ‘what would we do if we won the lottery?’ chat with friends, and agreed that you wouldn’t be like other rich people. You’d give some to charity, help out your friends and family, and stay the exact same well-rounded, ethical person you are now.
You’re wrong. Okay, so some wealthy individuals would be piss-poor examples of human beings even without their money, but for those who WERE nice to begin with, it’s the psychology of money that drags them downhill. And if you knew the psychology of money, you’d know that it would probably do the same to you too.
One psychology study found that just the thought of money made participants offer less help to a person in need. Another found that wealthier participants offered sweets that were meant to be for children took twice as much than the poor participants.
Won’t somebody PLEASE think of the children?
It’s official; money makes you mean to children.
Monopoly makes us all a little crazy
If I asked you who’d be more likely to lie to win a $50 prize; someone who earned $150,000 – $200,000 a year, or someone who earned under $15,000, who would you pick? Maybe the person who earned under $15,000, because they need the money right?
Wrong. In a study of chance where a dice score could win you $50, people who earned the higher wage were FOUR TIMES as likely to cheat and lie about their score than the lower earning participants.
‘Ah’, I hear you say, ‘but maybe this cheating attitude is what’s made these people rich in the first place? So of course they’d be more likely to lie in an experiment, that’s just the kind of people they are!’
Maybe you’re right. Maybe these rich people just aren’t nice people. But psychologists have tested that too, in the form of a rigged Monopoly game.
Two people toss a coin – heads and you start as the Monopoly Moneybags, tails and you’re the Low Dog. Being the Monopoly Moneybags comes with perks; starting with 2x as much money as the Low Dog, usingthe Rolls Royce figure and having the right to roll with 2 dice instead of 1.
Whoever invented this game just wanted to see families hate each other.
Basically Monopoly Moneybags can’t lose. And not because they’re good at the game, but because they won the coin toss by chance and got given a bunch of perks. But when they were asked after the game how much they felt like they deserved to win, they felt entitled to.
They attributed the success to themselves, even though it was all down to the coin. The rich players even began to act like they were entitled to things outside of the game. They spoke in a more demanding manner, were a little bit ruder in their behaviour, and often ate with their mouths full when they hadn’t done any of those things previously.
Not only that, but when people who were rich in real life were assigned the Low Dog role, they became more generous, compassionate and more likely to offer other people help. See? Not all bad people.
If You’re Homeless, At Least Wear A Suit
Having money can make you irrational. Knowing someone else has (or hasn’t) got money can also make you irrational.
A social experiment by YouTuber NorniTube showed how strangers reacted to a man collapsing either in a suit, or dressed as a homeless person.
Unsurprisingly (and sadly) strangers rushed to help the suited man, completely ignoring the homeless man. There’s been a ton of speculation about the real reason this happens, but doesn’t it all boil down to the fact that the guy in the suit obviously has money and the homeless guy doesn’t?
You can jump to your own conclusions, but all I learnt was if I ever find myself out on the streets, I’m at least taking a suit with me.
You’re Even Irrational When You’re Spending Money
So we’ve established that thinking about money, having money, and knowing someone else has money can make you act a little bit strangely. But how about spending your money? Surely we’re all well in control of that, right?
Nope. You must be getting the idea by now, we’re all irrational in how and why we spend whatever money we have. From buying something because it ‘feels right’, to buying because we’re bored, we’re hardly ever logical in our purchasing.
What do you think of the student who’s been living off baked beans on toast for the past month, but buys herself a £70 dress the day she’s finished her exams? Pretty silly when she doesn’t have the money for it, but you’d probably do the same in her position.
What about a guy who buys a new car and pays £250 more just to have a different shade of blue? You’re probably tutting in disgust right now.
Don’t worry, you do this kind of stuff all the time too.
The student’s rewarding herself for struggling through all of those exams. She feels like she deserves that dress, whether she can afford it or not. The guy’s either been affected by advertising or just the psychology of colour. Neither of them planned on these changes to their spending, they just happened.
Don’t worry, none of this will be happening to you
In this new series, I’m going to teach you why, psychologically, your friends (and you!) are so bad with money. I’m going to tell you what to do about these psychological downfalls, and if you take my advice I guarantee you’ll save some money.
You probably already know about some of the things I’ll tell you, but just like knowing how to get a six-pack, unless you have a good personal trainer to motivate you you’re probably not going to get it.
Awww yes, I can help you be as happy as this (minus the muscles, I’m really not a personal trainer)
Keep an eye out on this post for a list of all the future psychology of spending advice. We’re going to be covering big psychology topics, like the different types of Cognitive Bias (don’t worry, not half as complicated as they sound), and also some smart things to do with your money, like planning for (un)expected expenses.