*This is a guest post by Jeff Kreisler, Editor-in-Chief of Behavior Science website, PeopleScience.com
One of the best things about money is that it can be used to purchase just anything any time. That’s great, but it also makes it extremely hard to think and plan out your spending decisions. It’s overwhelming to try and consider the opportunity costs of every purchase – could that money be spent on something else, now or in the future? As humans, we usually don’t weigh out all our options, we just react.
Instead, we fall victim to the “cues” or “traps” that prey upon our cognitive biases which is the way we make an easy/quick judgment about something. In this case, it may be the decision buy loose leaf binders because-inevitably analyzing the decision is too hard.
Setting “traps” for back to school sales is one of the most easily recognizable tactic. It’s not just typical sales promotions, but additional emotional un-clarity because we want our children to succeed and will do anything to make that happen.
Here are 7 tips to avoid overspending and save money during back to school season:
1. Beware the Sale price
When you buy something that used to be $100 but is 35% off, you’re not “saving $35” you’re “spending $65.” Compare the price you’re paying to zero. Compare it to the price of not buying it at all, not to the “original” or “suggested” price.
2. Beware the decoy price
Sales prices are designed to make you think you’re making wise choices, so are decoy prices. What’s a decoy price? It’s a price the seller doesn’t really expect anyone to pay. How do you spot it? Any time there’s an item with three options – the simple one, a middle one and high-priced luxury version – chances are the highest price is a decoy price. Unless you’re an expert in that particular product, chances are you’ll think “Oh, we don’t need the deluxe model and I don’t want to be cheap and buy the lowest one, so I’ll just make the ‘safe’ choice and pick the middle on.” Decoy prices are designed to make us choose the middle one.
3. Don’t allow yourself to be herded
Just because all your kids’ friends are buying the “hottest” item: a phone, a hoverboard, a 3-hole punch– doesn’t mean you have to buy one also! Did you buy Bitcoin just because everyone else did? Then you shouldn’t buy three-hole punches either.
4. Don’t overdo it
There will be pencils, erases and notepads available for purchase in October and February. In fact, since they won’t be in as high demand, they’ll probably be cheaper. Don’t buy it all now. No one is hoarding staples, pens, or printers.
5. Beware percentages
You might be able to save 50% on a packet of printer paper (approximately $7.00) but pay an extra 10% for the printer ($35.00). Don’t get caught up in the percent your spending, think about the absolutes. How many dollars are leaving your wallet for an item?
6. Pay attention to payment methods
When we use credit cards or e-payments or shop online, we pay much less attention to the amount we’re paying and make quicker, less-thoughtful purchases. These methods are unavoidable, but keep in mind, paying all cash will always save you money, but it’s not realistic. Try to be mindful and treat your payment as if it were cash by stopping and thinking about the amount and if it’s the best choice. Don’t be lulled into one-click and express-pay because it’s code for no-think and over-pay.
7. Don’t sweat everything, just the big stuff
Don’t worry about spending an extra 10 cents on erasers. Worry about spending an extra $300 on a tablet or $400.00 on clothes or $25.00 every month on subscriptions. Remember your kid won’t “lose” at school if he or she has the most stuff. Children succeed with love and lots of emotional support.
We can’t change our nature to make quick purchasing decisions based upon these value cues, but we can be aware of them so that we’re less susceptible to their power. Let’s remember to factor in priorities and what really matters: our kids and their future happiness.