Lim Kopi Fridays Videos

Ep. 8 - The Science of Spending: How Psychology Affects Your Financial Choices



Have you ever walked into a store planning
to buy just one item and you ended up leaving the store with a bag full of
things that you didn’t know that you needed? What if I told you that there are
invisible forces at play seemingly guiding you every time you reach for a
purchase decision? Now let’s dive right into this.


Hello everyone, My name is Adrian and
welcome to another episode of Lim Kopi Fridays with Adrian. In this episode, we
are going to dive deeper into what are some of the psychological factors that
are persuading us to buy the next thing that we didn’t know we needed. Have you
ever found yourself into a situation where you feel that you are overly happy
or you are very stressed at work and that actually triggers you to spend
impulsively? For example, if you’re stressed at work and you just take out your
handphone, you just happen to open a shopping app. You are just randomly
scrolling through them and before you know it, after a while you have already
put into your cart and you have already checked out of the cart as well and you
just close the phone and you continue to work. And after a few days the
doorbell rang and some of the items were being delivered to you and at that
time you didn’t know that


hey! why do I need this? When did I
purchase this? Have you encountered such a situation before? Well, I certainly
did and that was why I was able to understand what are some of my emotional
triggers. Or it could be that you have a promotion and you are very happy about
it, and once again when you’re happy about it and you take out your phone and
you just seemingly scroll through something on the shopping app or if you
scroll through social media and it happened that there is an advertisements
that came out that led you to purchase something. Have you encountered this
before? If you have, the good news is you are not alone.


And because of the fact that a lot of us
are triggered by what we call instant gratification. What do I mean by this is
that we crave for instant rewards. When we purchase something and we get
something that could benefit us within the next few days or even a few weeks,
it’s definitely better than something that can benefit us over the next few
years or even more than 10 years. Our brains are wired for instant
gratification, and we’re always seeking out for things that can trigger us to
make us happy when we are feeling down, or to make us even happier when we are


The second thing that could tilt us into
impulse buying would be social proof. Have you ever encountered a situation
where you look at someone’s social media and you felt that, hey! that isn’t
something that you needed, but it looks interesting and it looks like it’s
useful. And over time, if you realise that there are many people around you, or
many people that is in your social media feeds that are using this, it actually
psychologically influenced you to think that it is something that you needed
because it is good. A lot of people are using it and you have a use for it.


That is the second trap that we may have to
be mindful of when we are looking at impulsive buying behavior. Last but not
the least, the scarcity principle where you have like limited time offers,
closing down sale, 50% sale. So these are some of the additional triggers that
can help to push you to reach a purchase decision that you didn’t know that you
needed or if you are thinking about it as well. How do we rectify this
situation or make it better for us? You have to understand what is your
emotional trigger.


Do you impulse buy when you are feeling sad
or do you do it when you are feeling happy or feeling stressed? By
understanding where the source of stress or where the source of emotions come
from, you are in a better position to arrest it and to stop it in time. The
second thing is you may have to set clear budget goals.


Like for example, if you are getting a
house within next few years or you want to upgrade your home within the next
few years. By getting a budget in place every time you started to have the
tendency to impulse buy then you will fall back to why you actually needed the
money to be saved in a different place for a different matter in the future,
and that can hopefully help to stop you from getting into impulsive spending


Last but not the least, being a minimalist
can definitely help in reducing some of these impulsive spending behavior,
because, by default, you don’t need a lot of things. So even when
advertisements come out, or even when you are scrolling the shopping apps, a
lot of things you’ll find hey! I don’t need this, because the default is I
don’t need this. So when you revert to that default, chances are you may not
allow your emotions to influence you to spend impulsively. And in fact, this
can have emotional rewards on us because when we are saving more than we spend
or we are spending less intensively as what we used to, it actually creates a
confidence in us that we are in control of our finances.


And because of that, we’re empowered to do
more. And for some people, saving can become an addiction over time. The other
emotional rewards will be that we can have reduced financial stress. Because if
let’s say, you are constantly in a state of spending and not saving, then you
might be living from paycheck to paycheck. If you are in that current
situation, Having some form of relief that you have more savings and you have
more control over your spending can actually help to relieve some of the stress
that can arrive. Last but not least, do not underestimate the potential for
relief of financial freedom.


Financial freedom doesn’t really means that
you don’t have to work anymore, but to be free and to be in control of your
finances. That’s financial freedom for me. So I hope this helps. And the next
time that you wanted to buy impulsively, do understand your own emotions and
try to arrest it before you make a purchase decisions. Hopefully by the time
that you realize that you didn’t really spend too much, this can helps you give
more confidence and to empower you to manage your finances in a more
appropriate manner according to your current lifestyle.

07:28 :

I hope this helps and I’ll see you in the next episode.