Episode 50: Cognitive Biases & How they affect our money and spending Part 1 of 6

In part 1 of a  6-part series, Kelsa discusses Cognitive Biases and how they impact us and our money each and every day! It’s important to know what these are because they are impacting the way you make decisions and the way you think about your finances every single day. And advertisers and retailers are fully aware of what these tendencies are and they’re using them to influence you.

Notes from episode/ summary of major points/ etc:

• What is a cognitive bias?
• The Anchoring Bias - what it is and how it’s being used to affect my decision making
• Kelsa’s example of how this bias impacted a choice she made recently
• How we can overcome the anchoring bias

 

Additional tips/ strategies/ other things to consider/ etc:

• In order to combat the effect of anchoring, it’s important to put your own anchor to the amount of money you would otherwise spend = called self-anchoring. Use something like “# of hours if I spend $x” or “# of days my goal is delayed for $Y.”
• Note that we can fall victim to anchoring when we’re faced with a decision we know very little about - so the first time buying an electronic, etc. That’s why research and price-comparison shopping comes into play b/c you are challenging the anchor.
• A good strategy for determining if a sale price is a good deal is to mentally block out the regular list price. Does it still represent a good deal for the item, for you, and for your budget? This can be hard to do if you’ve already seen the list price but try it anyway. This approach can help you view the price of “great deal” purchases more realistically.

 

Resources/ links related to topic/ mentioned in podcast:

• The Anchoring Effect: What is This Jacket Really Worth?
• www.Fiscalfitnessphx.com
• www.financialcoachacademy.com
• www.financialcoachingsymposium.com
• www.cpfcoach.com