Understanding and Overcoming Cognitive Biases Undermining Financial Goals in The Psychology of Spending

By Business Content Creator Nitin Joshi
Imagine yourself browsing through social media, inundated with images of luxurious getaways and exquisite apparel.

That long-forgotten need for a new phone reappears out of nowhere. This situation, which is all too common in India these days, brings to light an important topic: the psychology of our purchasing patterns, especially in light of the country’s rising economy and social media’s pervasive impact.
Mixing the Macro and Micro: India’s economic expansion has pros and cons.

It may lead to growing discretionary earnings, but it can also accelerate the inflation of lifestyles. According to 2020 RBI research, credit card debt is becoming a bigger problem, particularly for younger people. The distinction between necessities and desires is muddled by easy access to credit, which encourages hasty spending that jeopardizes long-term financial objectives.
The Spend-to-Click Trap: Online shopping, although convenient, is not without its drawbacks. One-click purchases are so simple that they get over the natural “do I really need this?” screening. In addition, social media algorithms generate a universe of idealized lives that are often supported by influencers. Fear of missing out (FOMO) and comparison bias thrive as a result of this. People who display their “success” to us make us feel compelled to follow suit, even if it means sacrificing our financial security.

From Keeping Up with the Sharmas to Saving Grace: There is a change in culture. As India rises out of poverty, the need to save for the future is being overshadowed by the desire to show off one’s goods as a sign of success. This puts a burden on our resources and takes our attention away from creating a safe future. We are not purchasing security, but status symbols.
The Formula for Financial Fitness: How then can we go across this complicated terrain? The following advice will help you become a financially astute Indian:
Budgeting is your best friend. Establish a reasonable spending plan. Set aside money for needs and give saving for future objectives top priority. Make use of budgeting applications created especially for the Indian market.
2. The key is conscious consumption. Consider this question before clicking “buy”: “Need or want?” Use the 24-hour rule to prevent impulsive purchases by waiting a day before making one.
3. Manage Your Wallet and Curate Your Feed: Delete accounts that make you feel inadequate. Rather, pay attention to financial influencers who advocate for frugal spending and saving practices.
4. Your Superpower is Delaying Gratification: The short-lived happiness of immediate pleasure is nothing compared to the long-term fulfillment of reaching a financial objective.
Recall that having money secure equals being free. We may make wise financial judgments if we comprehend the psychology behind our purchasing patterns and make use of the resources and market trends available in India. Let’s rethink how we interact with money, giving long-term financial security precedence over fads and peer pressure.