Pause before you make that splurge

The new year flurry has started fading. With that our resolutions too have started vanishing into thin air. A diet goes crashing seeing a big box of sweets, a saving resolution nosedives in unnecessary spending of alluring discounts and so on.

A Harvard research says that 33% of people walk away from resolutions out of habit but an astonishing number of 65% people grow out of own decisions with a little of greed and a lot of cheating own selves. The new science of judgement and decision making is now called behavioral economics that deals with human psychology and economics both.

Researchers across the globe have agreed upon a few common factors influencing our daily behaviour. The most prominent one is relativity.

What does that mean?

It states that most people buy materialistic stuff, acquire expensive gadgets, or decide about life’s crucial decisions based on other’s achievements. The parameters are set by looking at someone else.

Coventry University of UK has a fundamental observation stating that 78% humans are unaware of what they want unless they see it with someone else. For instance, we do not know what car we want until we see someone zooming away with one. Our academic degrees are governed by who has them before we walked on earth and even more, how much money is been made already by others. Everything is relative here.

The habit of comparison is based on no logics but on similarity, as per Amos Tversky, author of “Features of Similarity”. We compare a car to another car, a salary hike to another’s or even a spouse with of someone else’s. Tversky’s findings state that in those statements, 67% people make one look better than another, like, “This is not much. You should see that one. It’s better.” Here comes the relativity.

You want to go to Ladakh or Shimla this summer. Travel agent gives you comparatives of both places. Flights, airport transfers, hotels and sightseeings including, the tour package costs same for either place. But Shimla’s hotel does not have free breakfast. You need to pay one-time airport transfer too. Which destination are you more likely to consider? Destination Ladakh was chosen by a whopping 78% people in this experiment run by incubator LEAF.

Why?

The sense of comfort infused by Ladakh package was the deciding factor. Shimla’s hotel was walking distance from the main road, so food was not an issue. But logic sure was.

Relativity decides how your saving pattern or binge eating or dating patterns are. The enticing effect of comparing an old car to a new one, an ex-date to the recent and biggest one, spending more on unnecessary things are because of enticement.

How to overcome it?

Before making any decision, pause for a while. Think before taking that credit card out to buy that shirt on 70% off. Numbers are very attractive when they are flashed against comfort. Make a financially sound decision which would be based on logic and straight thinking.

You are in control when you think logically avoiding short-term lures.

Preferences do shift over a period, get influenced by relativity and similarity. Stick to logical  decision making. At times, little discomforting but sure better for long term.

The writer is a strategic advisor and premium educator with Harvard business publishing.