You can be your own worst enemy when it comes to managing your finances. You resolve to do better one week, and the next week you’ve sabotaged your finances and fallen off-track.
That’s where money hacks come in. They help you work with your psychology, rather than against it, to make better financial choices.
There are some simple, science-backed strategies that you can use to reframe your finances and make better money choices. Here are four life hacks to save money and help your decision making.
1. Follow the money advice you’d give a friend
When it comes to making tough financial decisions, it’s hard to be impartial. Our money choices are tied up in our own wants, emotions, and judgments. It can be tricky to get past all the personal stuff to make an objective, smart money decision.
That’s where money-saving life hacks can help. If you’re struggling with an area of your finances, for instance, one study from researchers at the University of Michigan found a solution. Distance yourself from your situation.
Based on three experiments, the study found that participants had wiser reasoning when it came to another person’s problems compared with their own.
This money hack means instead of obsessing about your financial issues, take a step back. Ask yourself what advice you would give to a friend, or even a stranger, in the same situation.
Maybe you’ll see the hangups holding you back are really just excuses. Or you might realize that you don’t feel you’d know enough about a financial topic to give friend advice and take that as a sign that you need to learn more.
2. Take a moment before making money choices
Money hacks can be very simple: Even just hitting the pause button before making money choices can be effective.
“Studies have shown that response accuracy can be improved by prolonging the decision process, to allow the brain time to collect more information,” according to a study from Columbia University Medical Center. That’s because the brain needs distraction-free time for the information-processing centers to work.
When you’re making a financial decision, your brain first collects information to base it on.
What’s the price?
What’s your budget?
Is it affordable?
What value are you getting in return?
Pausing and giving yourself a moment free of distractions or new information can give you greater clarity. This allows your brain to fully integrate and process the information. Then you can make a decision based on the most accurate information and analysis your brain has to offer.
3. Visualize your future self
Smart money decisions often comes down to making sacrifices today to benefit yourself tomorrow. But this delayed gratification is hard to pull off because your future self often feels abstract and distant.
Studies show that people tend to view their future selves similarly to how they view strangers or other people. However, people who connect to their future selves make more responsible choices, according to research from the New York University’s Stern School of Business.
In the study, some participants looked at images of themselves that were aged, while others looked at current images of themselves. Then they were asked to decide how to allocate $1,000.
“Subjects exposed to aged avatars put nearly twice as much money into the retirement fund as the other people,” said Hal Hershfield, an NYU professor who worked on the study.
You can imagine yourself five, 10, or more years in the future. Doing so will prime you to make wiser decisions that are will benefit your future self.
4. Switch to cash over cards
How you pay can also affect your financial decisions.
A study from MIT’s Sloan School of Management tested the hypothesis that credit cards increase spending. It found that “willingness-to-pay can be increased when customers are instructed to use a credit card rather than cash.” The effect was pretty dramatic, with people willing to pay up to 100 percent more.
This is because credit cards make money feel less real and tangible than cash, making it easier and more painless to spend. Credit cards remove the natural limits on spending — like how much cash is in your wallet. These limits are replaced by an artificial credit limit.
Plus, credit cards are backed by marketing messages designed to get you to spend. Even a glimpse of a credit card logo can trigger a conditioned response to spend more, according to The New York Times.
That’s why many money-saving life hacks revolve around putting away the plastic and replacing it with paper. Leave your credit cards at home and remove saved credit cards from online shopping accounts. You can even go as far as to freeze your credit cards in a block of ice.
Switch to doing your shopping in-person and with cold, hard cash. It might require a bit of effort and planning, but it can go a long way in resetting spending habits. When limited to cash only, you’ll naturally be more frugal.
So the next time you find yourself financially stuck, try one of these money hacks instead. They can help you get out of a rut and do more with your money.
Interested in a personal loan?Here are the top personal loan lenders of 2020!
|Lender||APR Range||Loan Amount|
|1 Includes AutoPay discount. Important Disclosures for SoFi.
2 Includes AutoPay discount. Important Disclosures for Opploans.
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Opploans currently operates in these states: . *Approval may take longer if additional verification documents are requested. Not all loan requests are approved. Approval and loan terms vary based on credit determination and state law. Applications processed and approved before 7:30 p.m. ET Monday-Friday are typically funded the next business day.
3 Includes AutoPay discount. Important Disclosures for Payoff.
4 Important Disclosures for FreedomPlus.
5 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
6 Important Disclosures for LendingPoint.
7 Important Disclosures for LendingClub.
All loans made by WebBank, Member FDIC. Your actual rate depends upon credit score, loan amount, loan term, and credit usage & history. The APR ranges from 6.95% to 35.89%*. The origination fee ranges from 1% to 6% of the original principal balance and is deducted from your loan proceeds. For example, you could receive a loan of $6,000 with an interest rate of 7.99% and a 5.00% origination fee of $300 for an APR of 11.51%. In this example, you will receive $5,700 and will make 36 monthly payments of $187.99. The total amount repayable will be $6,767.64. Your APR will be determined based on your credit at the time of application. The average origination fee is 5.49% as of Q1 2017. In Georgia, the minimum loan amount is $3,025. In Massachusetts, the minimum loan amount is $6,025 if your APR is greater than 12%. There is no down payment and there is never a prepayment penalty. Closing of your loan is contingent upon your agreement of all the required agreements and disclosures on the www.lendingclub.com website. All loans via LendingClub have a minimum repayment term of 36 months. Borrower must be a U.S. citizen, permanent resident or be in the United States on a valid long term visa and at least 18 years old. Valid bank account and Social Security number are required. Equal Housing Lender. All loans are subject to credit approval. LendingClub’s physical address is: LendingClub, 71 Stevenson Street, Suite 1000, San Francisco, CA 94105.
†Per reviews collected and authenticated by Bazaarvoice in compliance with the Bazaarvoice Authentication Requirements, supported by anti-fraud technology and human analysis. All reviews can be reviewed at reviews.lendingclub.com
**Based on approximately 60% of borrowers who received offers through LendingClub’s marketing partners between January 1, 2018 to July 20,2018. The time it will take to fund your loan may vary.
8 Important Disclosures for Earnest.
9 Important Disclosures for Avant.
*If approved, the actual loan terms that a customer qualifies for may vary based on credit determination, state law, and other factors. Minimum loan amounts vary by state.
**Example: A $5,900 loan with an administration fee of 4.75% and an amount financed of $5,619.75, repayable in 36 monthly installments, with an APR of 29.95% would have monthly payments of $250.30.
Based on the responses from 11,574 customers in a survey of 210,584 newly funded customers, conducted from 1 Feb 2018 – 1 Aug 2019 95.05% of customers stated that they were either extremely satisfied or satisfied with Avant. 4/5 Customers would recommend us. Avant branded credit products are issued by WebBank, member FDIC.
* Important Disclosures for Upgrade Bank.
Upgrade Bank Disclosures
* Personal loans made through Upgrade feature APRs of 6.98%-35.89%. All personal loans have a 1.5% to 6% origination fee, which is deducted from the loan proceeds. Lowest rates require Autopay and paying off a portion of existing debt directly. For example, if you receive a $10,000 loan with a 36-month term and a 17.98% APR (which includes a 14.32% yearly interest rate and a 5% one-time origination fee), you would receive $9,500 in your account and would have a required monthly payment of $343.33. Over the life of the loan, your payments would total $12,359.97. The APR on your loan may be higher or lower and your loan offers may not have multiple term lengths available. Actual rate depends on credit score, credit usage history, loan term, and other factors. Late payments or subsequent charges and fees may increase the cost of your fixed rate loan. There is no fee or penalty for repaying a loan early. Personal loans issued by WebBank, Member FDIC.
** Accept your loan offer and your funds will be sent to your bank via ACH within one (1) business day of clearing necessary verifications. Availability of the funds is dependent on how quickly your bank processes this transaction. From the time of approval, funds should be available within four (4) business days.
|5.99% – 20.01%1||$5,000 - $100,000|
|6.14% – 35.99%||$1,000 - $50,000|
|6.98% – 35.89%*||$1,000 - $50,000|
|99.00% – 199.00%2||$500 - $4,000|
|5.99% – 24.99%3||$5,000 - $35,000|
|5.99% – 29.99%4||$7,500 - $40,000|
|6.79% – 20.89%5||$5,000 - $50,000|
|9.99% – 35.99%6||$2,000 - $25,000|
|6.95% – 35.89%7||$1,000 - $40,000|
|5.99% – 17.24%8||$5,000 - $75,000|
|9.95% – 35.99%9||$2,000 - $35,000|