When it comes to handling money, most of us aren’t as rational and logical as we think. As with losing weight, we know what we need to do — eat less (spend less) and exercise more (save more), but somehow we can’t bring ourselves to do it. Or we buy a hot stock that really doesn’t fit our investing needs and later wonder, “What the heck was I thinking?”

You needn’t beat yourself up about your seemingly irrational money choices, though — it turns out there’s a lot of psychology and evolutionary history involved in why and how we do dumb things with money.

In fact, there are now entire fields — neuroeconomics and behavioral economics — dedicated to how and why we behave certain ways with money. The good news is that researchers in these fields have pinpointed ways we can actually outsmart our brains when it comes to money. We simply need to understand the most typical financial/psychological traps, then shift the way we make certain investing and purchasing decisions.

1. The lure of free

No matter how smart you are, that one little word can lure you to make purchases you wouldn’t have otherwise. In fact, it happened to Dan Ariely, the Alfred P. Sloan Professor of Behavioral Economics at MIT and subsequently the author of “Predictably Irrational: The Hidden Forces That Shape Our Decisions.” Ariely confesses that he uses his own mistakes to inspire his research.

Not long ago, Ariely says, he passed up buying a much-needed minivan in favor of a sporty Audi. Why? There were a few other factors, but a big influence was that the Audi came with free oil changes for the next three years. “In fact, those services were only worth about $200, but the promise of ‘free’ anything was very appealing,” he says. “They could have offered me a $2,000 discount on the minivan and I still would have bought the wrong car (the Audi) because the free oil-change offer was so tempting in the heat of the moment.”

According to Ariely, that simple word “free” also explains why consumers will choose a “free” credit card (no annual fee) with an annual interest rate of 15 percent over a card with a $100 annual charge but a lower interest rate of 12 percent.

How to outsmart your brain: “Whenever you see the term ‘free,’ consider it a warning to slow down and consider your choice very carefully,” advises Ariely. Do the math and always consider what you are giving up when you choose the item attached to something “free.” Usually — but not always — there is a real cost to something touted as “free.”

2. The ‘anchor-price’ persuasion

Have you ever lusted after an expensive piece of jewelry, only to discover later a comparable item that was much cheaper? You were probably thrilled by your “bargain” find — even if the cheaper jewelry still cost several thousand bucks, and possibly out of your price range.

Or how about when a real estate agent shows you two expensive homes first, then introduces you to two cheaper ones? Again, the less expensive ones now seem like bargains, comparatively.

Thank a mental trick called “anchoring” for this habit, says Ariely. In short, he explains, our brains naturally latch on to the first price we see in a new-to-us purchase category — thus creating an “anchor” against which we compare all other prices. “This natural process helps us bypass the difficult decision of deciding what something new to us is worth,” he says.

When you shop for a new TV, the price of the first one you seriously consider will be the price by which you compare all new TVs. Similarly, Ariely explains in his book, when people move to new cities, they tend to compare home prices to what they paid for a house in their previous city — and spend the same amount.

Example: If a family previously spent $500,000 in an expensive housing market, they’ll tend to pay that same price for a house (a much nicer one, most likely) if they move to a cheaper rural area. They don’t pay less for a home, even though they could.

How to outsmart your brain: In the case of a house, rent in a new city for a year, until your brain adjusts to home prices in your new city. In the case of jewelry or other new-to-you items, don’t buy in the heat of the moment, just after you find “bargain” items. Wait and consider your purchase for a while. Give your brain time to decide whether the “cheaper” bracelet is really something you want to afford.

3. The instant-gratification attraction

We all know we should save for future goals like vacations, college and retirement, but many of us still don’t. Why? Because, “You feel that you need a cup of coffee and, by the way, that pair of shoes is to die for. So you spend the four bucks at Starbucks or you buy the new shoes, because both kinds of spending give you the intense pleasure of an immediate reward — especially if you pay with a credit card,” says Jason Zweig, personal finance columnist for the Wall Street Journal and author of “Your Money & Your Brain.”

What about that longer-term goal? “It carries no emotional kick whatsoever. What’s rewarding about setting money aside today for a goal two or three decades away?” he says.

How to outsmart your brain: Infuse your future goal with emotion. Visualize that next vacation in Europe or that retirement cottage in Mexico in as much detail as you can.

“If your financial life is not yet computerized, take a manila folder and paste color illustrations to it: Pictures of palm trees and surf on the Hawaiian coast, Tuscan hillsides covered in grapes and sunflowers, or sand and sun in the Gulf of Mexico,” suggests Zweig. “If you are online, set up a file on your desktop and download a bunch of images to it.”

Zweig also encourages you to add dates and colorful names to financial goals, such as “The Jan. 23, 2034, Tuscany Villa Fund.” Now could you forgo that caramel latte and put a little money in that savings account? This practice is also used effectively in weight-loss programs: Dieters learn that it’s easier to give up a piece of chocolate cake today if you clearly visualize the trade-off, such as yourself in that elegant dress three months from now at your daughter’s graduation.

4. The dollars-to-donuts decoy

Consider this classic economics puzzle. You go to a store to buy a $100 lamp. You then learn that the same lamp is on sale for $50 at another store a mile away. Would you drive one mile to save $50?

Now imagine you’re considering a dining room set for $5,000. You learn that the identical set is selling for $4,950 at a store one mile away. Do you make the drive?

“Hopefully you said yes in each situation. However, many people say no, they would not make the effort in the second example,” says Mike Romzy, an investment analyst at Hapanowicz & Associates Financial Services in Pittsburgh. Why? Because 50 percent of $100 ($50) instinctively seems more valuable than 1 percent of $5,000 (also $50).

How to outsmart your brain: Don’t confuse dollars and donuts. Constantly remind yourself that a dollar is a dollar — just because it’s a small percentage doesn’t mean it’s not still real money. If you’re willing to clip coupons to save $10, you should also be willing to find ways to cut $10 off the price of a refrigerator or increase your retirement portfolio’s earnings by $10. Or ask yourself: Would I be willing to go to a different store to buy this item if they were handing out $50 bills (or whatever the savings would be)? Picturing your savings in cash makes it seem more worthwhile.

5. The separate-buckets blunder

For the sake of simplicity, most of us tend to separate our money into different mental “buckets.” Sometimes this works well: This savings account is for our Italian vacation, but this account is for this month’s groceries, for instance.

However, this practice can also get you into trouble if you always separate your money into discrete buckets, says Tom Nowak, Certified Financial Planner of Quantum Financial Planning in Grayslake, Ill. For example, “Maintaining a credit card balance (Bucket No. 1) over a period of time even though you have more than enough liquid assets (Bucket No. 2: non-retirement money market funds, savings accounts) to pay off the balances,” says Nowak. “Even auto loans or home equity loans with relatively high interest rates can sometimes be paid off with surplus cash reserves.”

How to outsmart your brain: Remind yourself that “money is money” — no matter where it comes from or what category you’ve placed it in. Don’t spend your tax refund on something you wouldn’t buy with your monthly salary just because you think of it as “free” money. If you get a $25 gift card from your grocery store for switching your prescription to their pharmacy, don’t automatically use the card for something frivolous. Buy the same items you would have purchased if the $25 had been cash from your own wallet.

6. The ‘sacred-fund’ slip-up

This one also falls into the category of “mental accounting.” Say you receive $3,000 from your beloved grandmother, who scrimped and saved a few dollars at a time to accumulate that money. It’s your money now, and generally you’re a fairly aggressive investor.

Are you willing to invest “Grandma’s money” in the stock market along with your other retirement funds, knowing you could lose some of it during a down year? Studies show that many folks would be uncomfortable risking Grandma’s hard-earned money so they treat inheritances much more conservatively than their other cash. The same is often true of our workplace retirement money. We mentally consider it “precious retirement money” that we’re afraid to lose, so we put it in more conservative accounts than we really should.

How to outsmart your brain: Deposit gift money into the same account as your other savings and let it sit, commingled with your other funds, until it no longer feels separate from your other money. Over time, you’ll begin to treat it as you would your own earned money. As for retirement accounts, Romzy likes to encourage cautious clients to consider putting just a portion of their retirement funds into investments just a little riskier than usual. This should be true, he says, especially in cases in which you get a match from your employer, in which case you’ve already earned a 100 percent return on your money just with the match.

“I might suggest they buy a bond fund, a U.S. stock fund, a commodity fund, a real estate fund and an international stock fund. They’ll eventually see that their ‘riskier’ investments begin to outperform their safe conservative ones, he says. That’s often enough to break the “sacred money” hold.

7. The lost-money fallacy

Once we own something — a house, an investment stock, a car — we often irrationally keep it or even put more money into it, even when it’s time to walk away.

That’s exactly why folks are often hesitant to sell losing stocks, says Cheryl Krueger, president of Growing Fortunes Financial Partners in Schaumburg, Ill. “Although everyone knows stocks aren’t guaranteed, some people irrationally want to hold on to loser stocks ‘until they earn their money back,'” she explains. “This can be especially dangerous for people with very few stocks in their portfolio, since they don’t have much diversification to begin with.” However, while they wait for the stock’s price to go up, they could actually lose money on more appropriate investments.

Other examples: You continue making expensive repairs to your older car because you don’t want to “lose” the repair money you invested in the car last month, three months earlier and six months before that. In today’s market, you might also feel antsy about selling your house for 15 percent less than you bought it, even though you know the sale price is reasonable today.

How to outsmart your brain: Remind yourself that spent money no longer figures into your financial decisions. It’s gone. Would you buy that losing stock today, given its performance, if you didn’t already own it? If not, it’s time to sell. Next time, establish a stop-loss limit (the price at which you will sell a stock) as soon as you buy it, before you get attached to it. Finally, would you put $1,000 into repairing that beater car if a relative had given it to you for free last week? If not, leave the mechanic’s shop — now. You’re trying to financially prop up a sinking ship.

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