Eight Principles to improve your Buying Decisions

An oriental basar is a good place to train your buying skills. (seen in Safranbolu, Black Sea, Turkey)

Found an interesting article on the art of spending money the right way. (link to PDF)

I think it’s good to remember that money can be a great tool on the way to happiness, provided you use it in the right way (which most people don’t).

Here are their findings, principles you should stick to when spending your money:
(All findings are underpinned by experiments and studies,  details see article, my comments in italics)

Principle 1: Buy experiences instead of things

The adaptation to new possessions is so quick that the happiness boost wear of quickly. Memories of nice events or holidays stay longer.

I can wholeheartedly confirm this. Our Italy trip e.g. produced way more happiness than the car we bought last year and the later was 3 times as expensive.

Principle 2: Help others instead of yourself

Anything that connects you closer to other humans improves your happiness – obviously including money spent on charity. The effect seems to be bigger in most cases than if you spend the same amount of money for yourselves.

Surprising result, I should definitely explore this further.

Principle 3: Buy many small pleasures instead of few big ones

Better spend your money on a couple of small things than on the big car.

A no brainer for any downshifter. Follows directly from the law of adaptation, because this law works independent of the price of a new possession.

Principle 4: Buy less insurance

People overestimate the influence of negative events on their long-term happiness, as adaptation works also for negative events. Thus they buy more insurance than actually needed.

Absolutely d’accord. See here.

Principle 5: Pay now and consume later

Looking forward to get something is actually a big part of the pleasure. And looking forward to get a bill later is a big dis-pleasure. When you buy on credit you lose the former and you gain the latter. Bad idea.

Credit cards are not good for you! Here comes the scientific proof.

Principle 6: Think about what you’re not thinking about

People tend to focus on the positive effects a new possession would bring with it, and they ignore the negative implications. E.g. a big house on a lake in the countryside: People want it because they think of space, quietness, nice view. They forget to think about hours of annoying commuting, bore-out with no friends around, all the cleaning, and tons of mosquitos invading their home.
You must force yourself to include this negative aspects before making a buying decision.

Certainly true. Sure a major step forward if you learn to stop fooling yourself.

Principle 7: Beware of comparison shopping

Comparing too much tends to make people focus on price and on attributes others might prefer and forget about other features of the product that are important to their happiness. Thus, sometimes shopping around makes you forget about your original preferences.

Interesting finding, I recommend reading the respective paragraph in the article. Can however confirm this – when I looked around for a car last year all the test-drives were a bad idea as they increased my desire for features I did not miss before.

Principle 8. Follow the herd instead of your head

It is argued that you should not bother to come to an own opinion about the qualities of a product, but just take the user ratings as a proxy, their prediction would be superior. A funny example, where this effect was proven in a speed-dating experiment is included.

Interesting finding, sounds bit counter-intuitive at first but quite worth finding out more about.

Cheers,

Woodpecker

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One comment on “Eight Principles to improve your Buying Decisions

  1. zanzanaglob says:

    Thank you for always reminding us about your trip to Italy as a source of happiness, we are hnoured to welcome people like you 🙂 Iwanted to tell you something about the point 2: it is really true for charity but also for volunteering, when you give time and some woirk for people who did not ask you for anything, and from whom you don’t expect anything at all. It is a kind of experience where you learn a lot, and that can become a big part of your happiness. If I post something about that, I will tell you! 🙂

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