Scarcity: Why having too little means so much by Sendhil Mullainathan and Eldar Shafir is a very interesting read for anyone interested in personal debt advice and policy in Britain. Scarcity doesn't just mean lack of money Having less than you need - scarcity - warps your decision making in similar ways whatever you are short of, whether that is money, or time, or if you are on a strict diet or … [Read more...]
The psychology of debt
Advertisers spend a lot of time and money working out how to persuade you to spend lots of money - that may well be how you got into debt in the first place! If you find out a bit about how your mind works, it may help you spot the mental traps that stop you from getting out of debt.
Sales bargains, and how to avoid the bad buys!
The number of people setting off for the shops in post-Christmas sales in 2021 was down by more than a third compared with 2019. Lots of us are still bargain hunting though, we have just switched to online. But in-store or online, how do you spot the real bargains? It's great to take advantage of a Sale - but can you be sure you are not the one being taken advantage of? There is a whole … [Read more...]
Overdrafts are often hard to clear – 5 ways to do it
Do you worry you will always be stuck in your overdraft? You aren't alone. Overdrafts can be the hardest sort of debt to pay off. Even authorised overdrafts aren't cheap, once you stop being a student. So what can you do that will work? Very hard to escape from The hamster on this wheel is enjoying going round and round and never getting anywhere. For many people, their overdraft feels … [Read more...]
Three mind tricks to help clear debt
Loyalty cards encourage you to come back for your next coffee, pizza or supermarket shop. If you are trying to get rid of problem debt, then you need to beware of the temptation to overspend your budget, well that's obvious! But let's look at why companies use reward programs. Exploring the psychology involved reveals three factors which could also help you to get out of debt. 1) Simple … [Read more...]
COVID-19, financial decisions & those tricky exponential numbers
This is a guest post by David Steele, Policy and Research Manager at The Money Charity (currently furloughed). He was previously Policy Manager Financial Services for Age UK and Head of the Research and Statistics Unit at the UK Film Council. This blog is written in David’s personal capacity and does not necessarily represent the views of his current employer. With the Sunday … [Read more...]
Optimism bias, the planning fallacy & debt advice
Research shows that most people underestimate the chance of a negative event and overestimate the chance of a positive event happening to them. This is called Optimism bias as it results in us having an unrealistically optimistic view of the future. For example: although about half of Western marriages end in divorce, few people getting married think it may happen to them; and we … [Read more...]
Catalogues offering Buy Now Pay Later – it often goes badly wrong
Buy Now Pay Later (BNPL) and other deals promising no interest sound so appealing. And so sensible if you are short of money. But very often you end up being charged large amounts of interest. The catalogue retailers offering these "bargains" know this happens and that they will make a lot of money from them So what goes wrong? Here are three things to look out for if you see one of these … [Read more...]
Have you told people about your debts?
Talking about your debts can be hard. You might feel it’s nobody’s business but your own and you just want to sort it out yourself, rather than reaching out to other people. Or you may not want to explain how your debts got so large in the first place - perhaps feeling embarrassed about it. But that’s not the case for everyone. Perhaps talking it through, perhaps with just one person, has … [Read more...]
How can an experiment help with your debts?
I'm interested in the psychology of debt - what makes it harder or easier to tackle a debt problem. I think you may be able to make use of the Hawthorne Effect to help you clear your debts. Never heard of it? Read on! The Hawthorne Effect is the tendency for humans to change their behaviour simply because they are being studied. It was named after the factory where it was first noticed 90 … [Read more...]
Are you being tricked into debt by your own mind?
Have you heard of "present bias"? It's not wanting a jumper for your birthday rather than a bottle of wine, it's a behavioural economics term for a self-delusion that everyone suffers from to some extent. It affects many areas of life and one of the most important is making poor decisions about money - present bias makes it easy to get into debt and much harder to climb out. All too often we … [Read more...]