The psychology behind our money decision making. 

The psychology of money is an interesting topic. Having an understanding of the way our minds can work when it comes to money decisions can help us make better choices. When we are able to make better choices, we can avoid paying too much for things, and snag better deals that save us money. 

So, let’s take a look at some of the psychological theories around our financial decision making, so you can improve your decision making skills. 

Confirmation Bias

Confirmation bias refers to the tendency people have to seek information that confirms something they already believe to be true. Essentially, they prefer to see information that supports their current beliefs, rather than information that might oppose their views. This can mean that people dismiss or ignore information that doesn’t align with their beliefs, and may influence a decision that is based on the wrong facts. 

For example, if your friend tells you about a bad experience they had with a credit card company, it may deter you from using that company, even when they might offer the best deal for your unique needs. 

You can avoid this by being sure you look at all the information available to you. For example, if you want to get out a personal loan, be sure to jump on Money Compare to compare all the loans and lenders available to you, so you can make the best experience for your unique needs. With Money Compare, you can compare over 30 lenders with no impact on your credit score, backed by the power of AI. Simply answer a few questions about your personal loan needs, and we will show you all the lenders available to you, so you can compare, and make a fully informed choice, and therefore, choose the best deal for you. 

Compare Personal Loans

Emotional Influence

Our emotions are powerful, and they can influence our choices. When it comes to finances, we can often be swayed with the use of fear, particularly fear of missing out. Companies and brands will take advantage of this fear when they advertise their deals and discounts. You may see limited time only or 3 items left in stock when shopping online. These can pressure you to click buy out of fear you’ll miss out on the deal or the product. 

You can avoid emotional influence by shopping with more intention. Create a budget that limits how much you can spend per month, and be sure to also write down the items you would like. Sit with those wants, and consider how that product will fit in your life and home. Do you need it now? How long will it last?

Compare prices on PriceMe to avoid paying for more, and to be sure you are getting the best deal out there. 

Anchoring Bias

Did you know that people have a tendency to hold onto the first piece of information they come across? This is a psychological concept. For example, if you come across a broadband and power bundle deal you may choose to purchase the plan without considering other options. This could cause you to miss out on even better deals that could save you more money. 

Loss Aversion

Our brains are wired to feel pain more than joy. This can make us more likely to feel the weight of loss rather than gain. When it comes to finances, this can make us more likely to avoid opportunities out of fear for possible loss. While this may keep us ‘safe,’ we can miss out on things that may improve our situation. 

For example, you might think it isn’t worth switching to a new broadband or power provider. However, if you stay at the same company, you could fall victim to loyalty tax, which means you may end up missing out on better deals and end up paying more as prices go up. 

At NZ Compare, we make it as easy as possible for Kiwis to switch providers. Compare options for broadband, power, mobile, and other finances all in the same place, side-by-side so you can see all your options in just a few clicks. There are so many benefits to switching, particularly saving money. It is worth it! It’s important to have a healthy balance of risk and gain. 

Influences of Others

The people in our lives, and around us can influence the things we do. For example, if your friend really likes a particular insurance provider, we may feel compelled to take out a policy with the same provider. However, everyone has different needs when it comes to insurances, and other household bills. Therefore, we should assess all the options available, and make sure we are choosing the one that best suits our unique needs and budget to avoid paying for something that doesn’t quite match our circumstances, or costs more than necessary. 

Compare to Make a Fully Informed Choice

Make a fully informed choice by comparing. When you compare your bills, and see all the options available to you, you are more likely to choose the best option for you and your budget. Make smarter, better choices, and jump on our user-friendly comparison platforms to avoid spending too much money, and find the deal that offers the best value for your unique needs. 

With Money Compare, you can compare a range of financial services including KiwiSaver funds, personal loans, insurances, and mortgages. Within minutes, you can find the right deal, save money, and avoid making a decision that will bite you down the track. 

Compare Mortgages

Compare Insurances

Compare Personal Loans

Visit Money Compare