Why We Spend More than We Earn?

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Professor Dan Ariely of Duke University is a world authority on behavioral economics and spoke in Bogota on the irrationality of spending on people.

Simple examples and anecdotes of daily life help to better understand why individuals get a bonus instantly in spending and care little about save or invest. Professor Ariely, researcher and author of several books on the behavior of individuals with regard to its economy, has found that consumers have a way of thinking something illogical or impulsive facing their money problems.

In his presentation “Predictably Irrational: psychology behind the money, ” he explained some variables to explain why we spend, why save, what are the causes that lead us to take a decision X or Y when thinking about money.

If say, a person offers another 10 chocolates now or if you prefer 20 chocolates within a week and that chocolate is a provocative presentation, with a striking photo in an envelope that begs to be eaten once and, the result is that most people prefer the middle box, rather than wait for the package of 20 chocolates. Same thing happens with money.

It is a medium of exchange, allowing us to buy all sorts of things. And if something is expert today’s society is to offer products, goods or too attractive services in exchange for money. Even at the cost of passing credit card to get them.

More examples

Otherwise, suppose you are in a store and see a pen USD $ 15. Examine and decide to buy it. Then the counselor tells you: “You know, you look like a great person. I’ll tell you that this same pen USD $ 8 worth only three blocks from here, if you want to buy it there better. Perhaps you will decide that it’s worth walking 10 minutes which will save USD $ 7.

But if you are looking for is an Armani suit USD $ 2,000 and the seller says “I tell you in a warehouse three blocks from here they sell the same Armani suit for $ 1,903” what would you do in that case? Probably end passing the card to buy the suit USD $ 2,000, and to walk 10 minutes to save only USD $ 7 you do not have the same incentive bonus as in the previous example, despite knowing that would save them USD $ 7.

“It is essential that we learn about our behaviors when consuming, there exists a lot of information about the use of money and how can we tap better. Also, knowing this information for businesses will enable the development of services and products that meet the needs of people, without implying to go against established habits, “said Ariely.

Why we are irrational?

There is no absolute explanation, but there are some trends, the reason why people do not save, it is because that action is more difficult to spend. For many, it is easier to spend a little more, to develop a plan to achieve a goal. For most human beings, the future will be better than now and why we dream goals, without worrying too much about how to achieve them.

That is why people do not save, start a remodeling and end up spending a little more. You can take a break on the road when going to buy something and ask yourself what I want or need? That simple question can avoid some unnecessary expenses.

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