Dubai: Oftentimes, most financial psychologists don’t exactly know why you end up with a propensity to splurge or save, but it’s consistently been a topic that researchers continue to study.
“Interestingly, the amount of money you make doesn’t impact whether you’re a spender or a saver,” said Abu Dhabi-based financial planner Andrea Barber, who is licensed to coach people on money-related matters and issues with spending.
“However, it’s long been evident that your propensity to spend or save does impact the amount of debt and savings you have. So knowing how you take a decision when it comes to your spending is integral to your financial health in the long run.”
Interestingly, the amount of money you make doesn’t impact whether you’re a spender or a saver
Are you a ‘maximiser’ when spending money?
‘Maximisers’ are those who want to make the best possible decision like when it comes to spending money – or avoid making a bad decision – but in doing so they will most likely spend too much time and energy in the process.
For example, say you're picking out a new television. If you're a ‘maximiser’, you might take a very long time assessing five different models, trying to decide which one will maximise your benefit. Not only that, they’d most likely be unsatisfied with any choice they make.
“Going back and forth in your head over which call is the ‘correct’ one can lead to decision paralysis, leaving the person feeling like they still don't have enough information to make the best financial choice, and maybe never will,” explained Matthew Griffin, a UK-based behavioural economist.
“Once you finally decide, however, the maximiser mentality can also trigger decision regret. The process of deliberating and choosing one option after seriously considering others is not only very time-consuming, but also associated with post-decision regret and counterfactual thinking.”
Or are you a ‘satisficer’ when spending money?
At the other end of the spectrum, you have ‘satisficers’: people who would rather make decisions quickly. Instead of the ‘best’ choice, they're fine with what's acceptable. The term combines the words 'satisfy' and 'suffice' and was first coined back in the 1950s by US psychologist Herbert Simon.
For instance, let’s say Jacob is looking for a car to purchase, and being a ‘satisficer’, he will consider the use of the vehicle (for his long commute to work) and come to a decision that he would like his next car be fuel efficient.
While Jacob will undoubtedly discount any car that’s not fuel efficient, if given a choice between an older car that doesn’t consumer fuel as much and a pricier new car which is efficient, he might reject the latter car as being unnecessary additional expense, and instead opt to buy the second car.
“Unlike ‘maximisers’, ‘satisficers’ don't need a lot of information. They also rely less on outside sources, meaning they’re less likely to scour external feedback when making decisions. They make decisions faster, weigh fewer choices and go with their gut,” added Griffin.
“On the other hand, ‘maximisers’, like ‘satisficers’, refine their options to those that will fulfil their essential needs when making a decision, but they will subsequently pursue the option that will provide them with the maximum benefit or highest utility.”
‘Maximisers’, like ‘satisficers’, refine their options to those that will fulfil their essential needs when making a decision
Know if you’re a ‘maximiser’ or ‘satisficer’
In other words, ‘maximisers’ tend to obsess over every choice they make, while ‘satisficers’ are usually content with whatever decision they make. So if you are curious about your control-seeking levels, these two scales that will help you answer this question.
Shani Thomas, a Dubai resident working as a corporate lawyer, noted that she often finds herself to be an efficient decision-maker when it comes to everyday spending. Here’s an example she shared when asked whether she considers herself to be a ‘satisficer’ or ‘maximise’.
"At restaurants, for example, I almost never look at the full menu," said Tom. "I look around and see what others have ordered and then I choose among those that are within my budget. I end up having a good meal, which I now realise is what it means to be a ‘satisficer’ [a term I just learnt]."
However, for Jaison Wilson, another resident who works as a financial analyst in Dubai, learnt that he is a “maximiser to the core”, especially when it comes to money-related matters.
“I am consumed by the belief that if I do one more revision, or spend one more hour, I’ll finally reach the perfection for which I strive. I admit that it’s exhausting, and as research has now proven, I may be less satisfied with my decision because of the exhaustive energy I spend on it,” he said.
While ‘satisficers’ may reach a decision quickly, it may not necessarily be the ‘best’ outcome that gives them the maximum return. Meanwhile, ‘maximisers’ can be so dazed by the difficulty of making decisions that they get bogged down completely at some point in their exhaustive process.
One such global study, for example, showed that recent university graduates with high maximising tendencies found jobs that paid starting salaries that were 20 per cent higher than those of their satisficing peers. (That being said, ‘maximisers’ reported being less satisfied with those jobs.)
“Research has found nothing to suggest that either ‘maximisers’ or ‘satisficers’ make bad decisions more often. While satisficers have high standards, they are happier than ‘maximisers’ as the latter tend to report a lower satisfaction rate with their financial decisions,” added Barber.
“If you tend to obsessively research even small purchases, buy a Dh10 or Dh20 item without researching it at all, she suggests. Notice how that feels, and then do it again a few times. This is what is known as ‘exposure therapy’.”
If a sense of regret after having made a purchase sets in once you’ve committed, Barber recommends reality-testing your thinking: Would your life really be vastly better if you’d chosen something else? Then she suggests resolutely turning your mind to positive aspects of your choice.