Thank goodness psychologists keep researching human behavior – thanks to their studies, we can know how and why we spend money on stuff we don’t need. Here are some tips (adapted from the book Predictably Irrational) for avoiding classic marketing and behavior traps that may lead to bad financial decisions.

Admit It: You Procrastinate

We all put off chores if at all possible (this is why fast food exists). Rather than assuming your behavior will change anytime soon, plan for procrastination.

• Avoid free trials. Most free trials automatically enroll you in a service you have to pay for when the trial ends. You could, of course, cancel the free service at some point – but that takes planning and effort. Either avoid such services or set up a system to remind yourself to cut them off.
• Watch out for convenience store prices. Convenience stores are so called because they’re just that – convenient. While it may be tempting to grab a gallon of milk or a few bars of soap while you’re picking up a prescription, resist the urge. You’ll save money by shopping in regular grocery outlets, even if it’s a little more out of the way.

Keep an Open Mind

• Rely on your own judgment. If you’ve heard good (or bad) things about a brand or an object, you may be more likely to interpret your experience in that framework. But try to keep an open mind – you may find a less-expensive version of something that suits your needs just fine.
• Sift through the lingo. Products touted as premium or professional grade often tempt us because they sound like they’re high quality. But remember that these words have no quantifiable meaning – the way they work is what matters.

Remember: Cost Does Not Equal Quality

There’s a joke that goes, A man will pay two dollars for a one-dollar item he needs. A woman will pay one dollar for a two-dollar item she doesn’t need. While arguably sexist, this illustrates an important point.

• Don’t equate price with value: An item is not a bargain if you don’t need it. Similarly, if you must have something, it’s worthwhile to spend money on it.
• Know when you’ve erred: Sometimes, we don’t want to admit we spent too much for something. But doing so allows us to see our mistakes and hopefully improve our behavior in the future – and maybe even get a refund.

Make Your Money Work for You

Whether you're saving up money for a vacation, creating an emergency fund, or learning to stick with a budget after filing bankruptcy, it's important to make every dollar work for you. By avoid these common pitfalls, you may be able to reach your goals with your budget – and your sanity – intact.

Tags: budget, financial planning, marketers, saving money