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Mind over Money
The Psychology of Money and How to Use It Better
It is not considered polite to talk about money, but Claudia Hammond, the presenter of BBC Radio 4's All in the Mind, is happy to break the taboo in her detailed new book. People's attitudes to their finances, she suggests, are often extremely illogical and, in Mind over Money, she marshals a battery of psychological experiments to explore why, and show us how to spend (and save) more wisely.
Take the cash versus card question. Are you the sort of person who mostly uses cash, or the type who pays for everything using a contactless debit card, even your morning cup of coffee? Well, the card user might like to think again.
In America, researchers monitored the food-shopping habits of 1,000 families for six months. When people paid by credit or debit card, they tended to make more impulsive purchases of cakes, chocolate and other unhealthy food. 'It seems our propensity to indulge in guilty pleasures increases when we don’t have to hand over 'real' money,' writes Hammond. 'So going 'contactless' might expand our waistlines as well as slimming down our bank accounts.'
What about the feel of money? Do you, for instance, spend your old notes first, or the lovely, shiny new ones? Again, our behaviour is irrational. Despite a tatty fiver being worth exactly the same as a new one, it turns out that as notes get older and dirtier we actually spend them more quickly. The 'dwell time' (how long a particular note spends in your wallet) is longer for the newer, cleaner notes than the old grubby ones.
Hammond shows how we can sometimes use this irrational behaviour to our financial advantage. To stop yourself dipping into your savings, for instance, open a savings account 'at the other end of the country'. The money will feel 'further away', even if it is instantly accessible online and could be withdrawn easily. So, those living in Norfolk might consider opening an account with the splendidly named Tipton & Coseley building society, based in the West Midlands.
In her final chapter, Hammond adds up the number of experiments that she has mentioned throughout. The answer is 263. Cumulatively, this is just too many, and at times Mind over Money feels like a first-year undergraduate textbook. A lot of the experiments she quotes are fascinating, but many others are less than gripping.
The last chapter is also the most interesting and insightful in the book. In just four pages, she pulls together 32 money tips derived from the research on which Mind over Money is based. 'Don't choose the same lottery numbers every week, or you will never be able to stop playing.' 'If your headache is really bad, buy the more expensive branded pain relief, even though you know it contains the same ingredients as the cheap stuff. It really might reduce the pain more quickly.' 'When you go to a restaurant with a group of friends, don’t agree to sharing the bill equally until everyone has ordered.' [You know how annoying it is when one friend orders a steak and a bottle of red when you’re having salad and water, and then gaily splits the bill 50:50.] And never, ever go on a wine course. 'If you learn too much about expensive wines, you will start caring about what you're drinking. If you don't, cheap wine will carry on tasting good, especially if your friends lie to you about the price.'
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