How to trick your brain into spending less (and other good habits)

Ruth Davies 29 May 2014

We all have bad habits we’d like to change, from smoking to biting our nails. The effects of these habits can range from the irritating to the life-threatening, and when it comes to our finances, they can cost us a fortune. Luckily, understanding how your brain works can help you to re-wire it, replacing unwanted habits with new ones.

Impulse spending is a costly habit; a survey from NEST in 2013 found that in Britain, we spend more than £1 billion a year on impulse buys, with 5% of overspenders saying they wasted more than £500 a year. If you want to cut back on impulse spending or other bad financial habits, these tips and tricks from the world of psychology could help you to beat it once and for all - leaving you free to live a better financial life.

Nature or nurture?

It’s a question that has plagued the field of behavioural psychology for decades - and the answer almost always seems to be “a bit of both”. A 2013 study by Hersh Shefrin of Santa Clara University found that financial decisions, like others, involve a combination of two different ways of thinking:

  • Our habitual instincts or “fast thinking”
  • Our strategic thought processes or “slow thinking”

The fast thinking part of our brain is hard-wired to resist the acceptance of immediate pain, as well as the delay of gratification - this is what makes giving up smoking so difficult. Shefrin’s study found that, although our decision making is partly influenced by genetics, it is possible to re-train our brains to work differently.

How it’s done

All you need to do to get rid of a bad habit is bring your fast thinking processes into line with your slow thinking; in other words, make sure your brain puts the theory it has learned into practice. This can be done thanks to the fact that our brains are constantly changing - a concept known as neuroplasticity.

Every time you repeat an action, your brain creates a neural pathway. If you want to change a habit, you need to create a new neural pathway for your brain to follow. The basic process can be broken down into these three steps:

  1. Identify the behaviour you want to change and why - it can be helpful to write it down
  2. Work out what your triggers are - which situations usually lead to this behaviour?
  3. Think of a replacement behaviour and focus on doing that whenever your triggers occur

For example, if I wanted to stop impulse buying, my trigger might be seeing something I want online or walking past a shop window. I could come up with a replacement habit such as mentally reminding myself what I’m saving for, or even logging into my online banking and putting a small amount into my savings. Eventually, if a behaviour is repeated enough it becomes an automatic response, and resisting those unnecessary purchases should become effortless.

Tips for staying on track

Kicking a habit isn’t easy, and it won’t happen overnight - try these tips to make sure you don’t slip back into your old ways:

  • Try to focus on one habit at a time - changing habitual behaviour takes time and a lot of mental effort, so don’t bite off more than you can chew
  • Stay positive - if you’re trying to reduce your spending, concentrate on the other great stuff you’ll be able to do with that money, rather than feeling like you’re depriving yourself of things you want
  • Be realistic - if you aim to completely eradicate a bad habit in a week, you’re setting yourself up to fail. Accept that it will take time, and don’t give up if you have the odd slip!

Motivate yourself - being able to clearly see the consequences of your bad habits can give you the motivation to beat them. Why not login to MoneyHub and see how much you’ve spent on impulse purchases this month?

Armed with a little understanding of how the brain works, we can train it to help us achieve our goals - whether you want to cut out a particular spending habit, or change the way you make bigger financial decisions, knowing how to rebuild neural pathways can make good habits become second nature.