Let’s face it, if you’re automatically deducting $100 a month from your chequing account and sending it into your savings pool, but also adding $100 to the balance on your credit card, you aren’t saving anything.
Behavioural psychologists have long believed that most of the decisions we make are rational ones. So it came as a bit of a shock when they discovered that people aren’t rational. In fact, we can be downright dopey sometimes.
In a Stanford University study published in the journal Neuron, people’s brains were scanned as they looked at desirable goods and their prices, and the most active brain areas were recorded. The result: while distinct parts of the brain anticipate having the item, others register the impact of having to part with money.
It seems our nucleus accumbens, which is full of dopamine receptors and so is a pleasure centre, lights up when we want something. So the nucleus accumbens lights the fire of want. Our insula (associated with pain) is activated by prices that seem too high. So it’s like the sprinkler system putting out the fire. Yes, there is an actual physicality to the trade-off between really wanting something and having to pay for it.
Now we come to the bump in the road. If you shop with a credit card you won’t feel the pain of actually having to part with cash. Since you’re not triggering your insula to douse the great feeling you get from your nucleus accumbens when you think about acquiring that new dress or those new tools, cachunk-cachunk, you buy.
If they came up with a credit card that reminded you of your outstanding balance every time you pulled it out of your wallet, that’d be the ticket. Think anybody’s working on that sucker?
In the mean time, if you’re taking your savings goals seriously, leave the plastic at home except on those purpose-shopping days. And only buy the thing you set out to buy. If you can’t do that, stick with cash.