Money Crashers: How Stores Trick You Into Buying & Spending More

Some of my favorite articles I've written for Money Crashers are the ones that deal with the psychology of money. For instance, I really enjoyed writing my piece on happiness economics, and I was very pleased with the way it turned out. I feel like I did a good job of exploring a subject that a lot of people don't know about and showing why it's so interesting. Likewise, I felt like my article on cognitive biases was both entertaining and informative, even if it hasn't attracted a lot of views or shares.

So I'm quite happy with my latest Money Crashers article, which explores the psychological tricks retailers use to push your spending triggers and get you to spend more money than you planned. Just to whet your appetite, here's a preview of the questions you'll find answers to in this piece:

• Why are most stores set up in a way that encourages you to turn right when you walk in?
• Why are shopping carts are so much bigger today than they used to be?
• Why do supermarkets put staple foods, such as bread and milk, way at the back of the store?
• Why does it seem like just when you've figured out where to find everything at your favorite store, they reorganize the aisles?
• Why does Victoria's Secret offer a $1 million bra every year that they know nobody is going to buy?
• How can it possibly be a good deal for stores to offer free samples or free gifts with a purchase?
• Why do prices at some stores end in $.99, while other stores have round dollar amounts?
• Why are the salespeople in high-end boutiques so rude?

If you've ever wondered about any of these perplexing questions, now's your chance to learn the answer. Just check out the article here: How Stores Trick You Into Buying & Spending More.

Money Crashers: How Feeling Poor Hurts You – and How to Stop It

One of the keys to living a frugal life is to avoid feeling deprived. Many people seem to think that living frugally is all about "doing without," but to me, the whole point of frugality is to avoid wasting money on the things you don't really care about, so you can have more to spend on—or save up for—the things you do. A frugal life, lived right, should make you feel rich, not poor.

Now I've learned just how important this attitude really is. Apparently, there's a wealth of research out there to show that feeling poor makes you less satisfied with your life, damages your mental and physical health, and leads to risky financial decisions that can make you actually poor if you weren't before.

My latest Money Crashers article is all about the risks of feeling poor and how to counteract them. I discuss what can make you feel poor—regardless of your actual income—and the ways feeling poor can hurt you financially, emotionally, and physically. Then I discuss ways to break out of this trap by: 

1. changing your perspective to focus on how well-off you are already;
2. taking steps to strengthen your finances so you'll know you'll have more in the future; and
3. making yourself feel rich by indulging yourself with cheap luxuries and giving money to charity.

Learn more about these techniques here: How Feeling Poor Hurts You – and How to Stop It

Money Crashers: Avoid Frugal Fatigue with Cheap Luxuries

I've always made a point of stressing, on this site and off it, that frugality isn't the same thing as deprivation. Ideally, in fact, living a frugal life means you have more money and time to spend on the things that really matter to you. As I put it in this 2010 entry, "we really can have our cake and eat it too, as long as we're willing to bake it ourselves."

The problem is that a lot of people don't really know how to cut back without going to extremes. They'll try to trim their budgets down to the absolute bare bones, and then after a few weeks of feeling deprived, they snap and go on a spending binge. Then follows self-recrimination, a vow to turn over a new leaf, another period of self-denial...and the cycle repeats itself.

The best way to avoid this problem—sometimes known as "frugal fatigue"—is to make sure you allow yourself to indulge a little while you're saving money. There are plenty of treats that you can enjoy for very little money or even no money at all, such as fluffy TV shows, hand-picked flowers, homemade coffee treats, cozy bedding, library books, online puzzles, and other forms of cheap entertainment. Little luxuries like these make a frugal lifestyle a joyful and abundant one.

This is the theme of my latest Money Crashers article. I outline the causes and symptoms of frugal fatigue and then offer a list of cheap luxuries that can alleviate it, such as fresh flowers, fancy toiletries, home-cooked gourmet meals, and even the extra-plushy toilet paper. I give prices for each item on the list and discuss ways of lowering the cost still more, so you can stretch your "mad money" as far as possible.

Read all about these luxuries that won't break the bank here:

How to Avoid Frugal Fatigue by Indulging in These 12 Cheap Luxuries

Money Crashers: “Free” Stuff

In this 2013 post, I talked a bit about the psychology of the word "free," and how it can lure us into making decisions that aren't necessarily in our interest. In my latest Money Crashers post, I explore this idea in more detail. I talk about how the use of the word "free" affects consumer behavior and give several examples of "free" offers—free shipping, free trials, free gifts with purchase—that end up costing you money in different ways. Then I wrap it up with a few pointers on how to avoid falling into the "free" trap.

As a side note, you may find the title of this piece—How to Avoid Bait & Switch Advertising Scams Offering “Free” Stuff—a little confusing, since the article isn't really about "scams" and is only loosely related to "bait and switch." My original proposed title was "When 'Free' is Too Expensive," but my editor explained that "there really wasn't any search traffic opportunities" for this topic. So instead, he decided to give it a title about "how to avoid bait and switch scams," a topic that attracted "plenty" of search traffic. Ironically, this means the article itself now is a bait and switch scam, because it's trying to lure in people looking for articles on a completely different topic. But at least I managed to talk him into tacking on a reference to the word "free" in the title, so readers won't be completely baffled.

[UPDATE, October 2021: This piece was recently revised, and it got a new title that's less misleading and a new URL to go with it. You can find the updated piece here: The Psychology of Free – How “Free Stuff” Causes You to Spend.]

Money Crashers: 10 Cognitive Biases in Your Brain That Are Costing You Money

A few months ago, I made a rare impulse buy at the Barnes & Noble in New Brunswick: a book called How Not to Be Wrong: The Power of Mathematical Thinking, by Jordan Ellenberg. This turned out to be a fascinating read, examining the many ways in which your instincts can lead you into wrong thinking and how understanding some basic mathematical concepts—not higher math, but stuff like probability, which applies to all kinds of real-world problems—can stop you from being wrong. What makes it so interesting is not the mathematical concepts themselves, but the stories Ellenberg uses to illustrate them, such as the one about how Abraham Wald figured out where to put armor on WWII planes (which I'd first heard as a puzzler on "Car Talk"), or the one about how a bunch of MIT students figured out how to beat the Massachusetts state lottery. And he also discusses ways to apply the same mathematical concepts to your own everyday life, such as figuring out the optimal time to leave for the airport before your plane is scheduled to take off.

This book and its ideas were still in the back of my mind when I happened across this video on YouTube, which discusses 12 common cognitive biases—the same sort of mental traps Ellenberg discusses in his book—and how to beat them. Many of the examples in the video involve mistakes people make with money. Putting this together in my head with the book, I decided the topic of cognitive biases and how they affect our finances would actually make a great article for Money Crashers.

I sifted through the cognitive biases covered in the video, along with a couple of others I'd seen discussed in Ellenberg's book and other sources, and narrowed it down to a list of ten that I thought were most likely to affect you financially. Even with just ten biases, it's a rather long article, but I think it's an interesting one—particularly since it's a topic that applies to everyone, not just folks who happen to be (for example) shopping for a mortgage or looking to save on auto insurance.

If you're at all interested in math, psychology, behavioral economics, or any similarly nerdy subject, you'll probably find this article interesting on an intellectual level. And if you aren't, but you handle money on a regular basis, you'll probably find it relevant enough to your life to be interesting on a purely practical level.

10 Cognitive Biases in Your Brain That Are Costing You Money

Money Crashers: Can Money Buy Happiness?

My latest post for Money Crashers is one that I'm rather proud of. It's on the fascinating (at least to me) topic of happiness economics, which I've so far covered only briefly on this blog. I wrote a post three years ago in response to a Washington Post article on the subject, in which I summed up some of the major discoveries made by happiness economists, such as:

• Higher income only improves day-to-day happiness up to a limit of about $75,000. Beyond that point, day-to-day happiness doesn't increase, but "life satisfaction" does.
• Buying more stuff doesn't tend to make us happier, because we quickly get used to what we have.
• Spending on experiences does make us happier, because it ties in with our social needs.

In the new article, I go into all these findings in much more detail, along with a lot of others. And I talk about how happiness economists are applying their findings to the health of whole nations, not just individuals, much like David Cameron did four years ago in seeking to create a National Happiness Index for Great Britain.

Here's the full article: "Can Money Buy Happiness? - Understanding the Economics of Happiness"

Also, let me reassure everyone that I will post a real blog entry soon. I've been posting these links to my Money Crashers pieces to fill in the blog during the week, because my work for Money Crashers is keeping me busy Monday through Friday and I usually only have time to update my own blog on the weekends...but I promise not to neglect it entirely.