You're Being Cheated
Have you ever thought about why you end up buying more than you need?
OR
Why your shopping carts are stuffed with things you didn’t plan on buying?
If so, you’re not alone.
And trust me, it’s not even your fault.
Let me share my experience.
I walked into my local department store and saw a pair of shoes that I had to have. They were comfy sneakers.
Plus, they were tagged yellow!
I was so excited to buy them that I didn’t even bother to check their original price online.
When I got home, I realized I had been duped — the shoes were priced exactly as before.
But with a yellow tag.
That experience taught me an important lesson about marketing: “always be aware of the psychology behind prices.”
Retailers know that you're more likely to overspend if they can get you to feel emotional about a purchase. They use all sorts of techniques to make you feel like you’re getting a good deal when in reality, you’re just spending more than you wanted to.
But thankfully, knowledge is power!
Books, videos, and documentaries made me aware of the sneaky psychological tricks companies use to make you buy more.
Once I understood how these psychological tricks worked, I could resist the urge to spend unnecessarily.
So the next time you go shopping, keep these tips in mind, and you’ll be able to stick to your budget without any trouble!
#1. Be Aware of Anchoring
Anchoring is a psychological phenomenon that occurs when you’re presented with a reference point, or “anchor,” before making a decision.
This anchor can influence your thoughts and feelings about what you’re trying to decide on, even if it’s completely unrelated!
For example, let’s say you’re trying to decide whether or not to buy a new car. The salesman shows you a base model priced at $15,000, and then he offers you the fully loaded model priced at $35,000.
The base model might seem too plain for your taste, but the fully loaded model is way out of your budget.
However, because you’ve been “anchored” by the high price of the fully loaded model, the $15,000 base model looks like a bargain!
Apple does it consistently to sell its iPhones. They release a “normal” priced phone and then a premium one.
The new iPhone 13 is $699, while the iPhone 13 Pro Max is $1,099.
You might not think you need all the bells and whistles of the Pro Max, but after seeing that price tag, the normal priced iPhone 13 starts to look like a steal!
No wonder iPhone 13 beat its higher-end flagship model in sales!
#2. The Sunk Cost Fallacy
The sunk cost fallacy is another cognitive bias that can lead you to spend more money than you should.
It occurs when you mistakenly believe that you have already invested so much in something — in terms of time, money, or effort — that you have to see it through to the end, even if it’s not worth it.
This fallacy often affects your decision-making when it comes to large purchases, like houses or cars.
For example, let’s say you buy a new car for $30,000. A few months later, the car starts having mechanical problems, and it ends up costing you an extra $3,000 in repairs.
You might start to regret your decision to buy the car, but because you’ve already invested so much money in it, you convince yourself that you have to keep it.
Sometimes, companies dangle the idea of “free” products or services in front of you, knowing that you’re more likely to take the bait if you’ve already invested something into it.
#3. The Confirmation Bias Is a Trap
Confirmation bias is a cognitive bias that causes you to seek out information that confirms your existing beliefs.
This can be dangerous when it comes to spending money because you’re more likely to believe something if it confirms what you want to be true!
For example, let’s take the same example of buying a new car.
You might start to believe that you made the wrong decision after reading a few negative reviews about the car online.
But instead of looking for more information that could disapprove your beliefs, you only seek out information that confirms what you already think!
You read more negative reviews and watch videos of people having problems with the same car — and before you know it, you’re convinced that you made a huge mistake.
This confirmation bias can also work in reverse.
You might be tempted to buy a product because all your friends are using it, and you see them posting about how great it is on social media.
But instead of doing your research, you only look for information that will confirm your belief that the product is good!
#4. The Social Proof
Social proof is a psychological phenomenon that occurs when you copy the actions of others around you.
Marketers often use it to get you to spend more money because you’re more likely to make a purchase if you see other people doing it.
For example, let’s say you’re at a clothing store and see a shirt you like. But you’re not sure if you want to buy it, so you look around to see if anyone else is buying it.
If you see that the shirt is popular and lots of other people are buying it, you’re more likely to make the purchase yourself.
But if you don’t see anyone else buying it, you might decide to pass on the shirt.
#5. Be Aware of Loss Aversion
Loss aversion is a cognitive bias that causes you to feel pain more intensely than pleasure.
In other words, you’re more likely to avoid losses than you are to seek out gains.
And this can have a big impact on your spending habits.
For example, let’s say you’re trying to save money by giving up your daily Starbucks habit.
You might feel like you’re missing out on your daily $5 latte, but in reality, you’re saving $1,500 a year by making this small change.
Loss aversion can also work in reverse: you might be more likely to take a risk if you stand to lose something significant.
For example, let’s say you’ve been offered a job that pays $50,000 a year but requires you to move to a new city.
You might be hesitant to take the job because of the cost of moving, but if you don’t take it, you’ll lose out on the $50,000 salary!
Loss aversion can be a powerful motivator, and it’s important to be aware of it when making financial decisions.
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Thanks once again!
See ya next time!
Lots of love,
Darshak
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Let’s break all the barriers!
At the end of the day, we all want to be validated I guess! haha. "Confirmation bias is a cognitive bias that causes you to seek out information that confirms your existing beliefs"