What makes you buy something? That's the question that lies at the heart of our consumer economy, and your money personality is going to steer you towards different things at different times. You might buy something to celebrate, or to make yourself feel better, because you're bored, because everyone else has got one, or even to save time. And what about when you've got a choice between brands? What do you do then? Do you buy the expensive one or do you go for the no-frills option? Which do you choose? This episode is all about spending. It's something close to the heart of Power Spenders,... Amazing sale. I saved $500! ...but we're all influenced by our money personalities when it comes to spending. So we're gonna show you how you're influenced and some ideas to help you avoid spending too much on the wrong things. Copyright Able 2018 We've used scientific studies and our own research and discovered four key money personalities ` the Power Spender, who reacts to money in an emotional way and gets a dopamine hit from buying stuff. For the Security Saver, money can make them feel safe. They're more likely to have put something away for a rainy day. The Sociable Sharer uses money to have a good time with people. They're the kind of person you want as your best mate. And the Freedom Seeker sees money as a way to independence. For them, it's all about having new experiences. All of our money personalities have different levels of self-control. Some want instant gratification, and others are happy to delay it. Perhaps the way you eat your fish and chips will tell us something about your money personality. There are two ways of doing this ` eat now or eat later. There's this guy ` he gets into the car and rips the packet open. They're hot and fresh, and no time is better than right now. He could be a Freedom Seeker or a Power Spender wanting that instant hit. And there's this guy who takes the approach that the value of the fish and chips will be improved if you wait till you get home. He could be a Security Saver or a Sociable Sharer waiting to get back to his family. Personally, I think this guy scoffing his chips is wrong. Yeah, you. Exercise a little bit of self-control, eh? The people who wait are less impulsive, but some money personalities are all impulse and can't resist a red button. This red button has magical powers. Some people are instantly drawn to pushing it because they think something exciting might happen, which will give their brain a shot of dopamine ` the chemical that makes you feel good. Other people are more cautious. (INTRIGUING MUSIC) Some resist the button, but others can't help pushing it, and their reward is an annoying bloke who sounds like Kermit the Frog asking them why they pushed the button. Why'd you push the button? It looked fun. I was just, yeah` I was walking by and it just caught my eye. Just there. It's a weird place for a button, so... Yeah. This is true. Do you ever do things just on impulse? BOTH: Yeah. Yeah, I do make impulse purchases often. Oh, yeah. If I'm scrolling online and all of a sudden I see something, I'm like, 'I just have to have that.' But you don't need it. You don't need it, no. When I walked past there initially, the impulse was the touch it, but I stopped myself and thought about it, and that does mirror how I purchase gifts. I'm often tempted to impulse-buy, but the sensible part of me says, 'Let's see if you want it next week and we'll purchase it.' It's more likely to be super-powered spenders who are tempted to push the button, and research has clearly shown that the more self-control you have, the better off you are financially. Rosie is definitely short on self-control and money. Rosie's a Power Spender extraordinaire, and she's got all kinds of bad money habits. The problem is that her partner doesn't know about many of them, which makes it really hard to talk about it on TV. So we got an actor to play the role of Rosie, but all the words are true. So you literally feel an actual rush from buying things? Yeah, definitely. I know it's gonna make me feel better, but it doesn't last. I already know that 12 hours later, it won't feel like anything. I know all this, but I still do it. So, does your partner, Noah... Does he know about your spending? I think he knows about 50%. I'll rip these off and stuff them and the receipts in the glovebox. And this goes in here. Sometimes I'll take a different approach and I'll be blatant ` get a bag, go in with the thing and go... Amazing sale. I saved $500! Half price! (SIGHS) We don't have to talk about the spa, do we? Yeah, we really do. So tell me about buyer's remorse. So we went to the spa expo and we saw the spa, and it was slashed, like, half price. That's saving money. We would be stupid not to get it. Put it on the credit card. Were you feeling stressed at the time? I knew I was on thin ice with buyer's remorse. You know, when you kind of know when it's gonna be a bit stressful; you know you shouldn't really buy the thing; you don't have the money for the thing; you don't need the thing. So what happened when you got home? I rang them and I begged them to take it back. 'Look, don't deliver it. I don't want it. Please, don't. I can't pay it off.' It came in the morning. I was just so panicked, and I didn't even want a spa! Looking back now, do you think buying a spa was a good thing or a bad thing? It was a stupid decision, and it wasn't thought through. It's not a necessity. The novelty's actually worn off, so we don't actually use it that much. If you didn't buy things, how do you think that would change your life? It would be amazing, because we could go on holiday. But, I mean, my EFTPOS card declines all the time, so I just pull out another one, and another one, and another one. It's just, in the moment, it feels so good to buy that thing, so I buy it and I'll deal with the consequences later. It feels good to buy things even if you know, eventually, it's gonna feel bad once the buzz wears off. Rosie is just like the rest of us. She does stuff that she hopes will make her life better, even if sometimes that stuff actually makes your life worse. All money personalities, when they're in spending mode, may need help with ways of reducing their spending. What happens if we put barriers in the way of our impulsive behaviours? Will that slow down or change the behaviours that we don't want to continue? In this experiment, we're gonna see how many people eat these chocolaty treats using our hidden camera. (WHIMSICAL MUSIC) Day one in our Mind Over Money studio waiting room, people had easy access to the sweets. In fact, it was too easy access for the kids. Parents understand very well the importance of barriers when it comes to stopping kids from doing something. The lid stemmed the flow of sweets being eaten. On day two, we kept the lid on, and there were definitely fewer takers. You could liken this to moving your money out of your cheque account each week into a savings account, which you can still access. Day three, we tried a seal bag off to the side. This is like an automatic payment that puts your money in a savings account you can't touch before you've even seen it. The friction stops anyone from eating the sweets. But no plan's foolproof. Someone overcomes the friction, and it's open season on the sweets. Well, perhaps not surprisingly, the more barriers you put in front of people, the less lollies they eat. And maybe there are some lessons here too when it comes to our spending. Just put some barriers in place. So instead of maybe saving your credit card details into the app or the web browser, click 'no'. Or maybe keep your credit card somewhere that's really inconvenient, like in the garage behind a spider web, where you know is a great, big frightening spider that will randomly run out. And maybe that'll help. After the break ` a way to get $96,000 richer... sort of. And we have a very odd experiment with a fascinating result. * (UPLIFTING MUSIC) What's the thing you've bought that's made you the happiest? I recently bought myself a brand-new laptop, and it made me happy because I saved up for it. Probably when I remember I bought my first house in 1972. The thing that I bought that made me the happiest was my Audi TT. (UPBEAT MUSIC) Hi, Jillana. Hi. So, what I'd like you to do ` little strange ` is just to begin by counting the pieces of paper. This is an experiment on the power of money and, admittedly, it's a little bit odd. OK, and now come over to our... slightly less pleasant part of the experiment. So, now what I would like you to do is just place your hang in the icy cold water until it becomes really unpleasant and you wanna stop. OK. We want to see how long Jillana ` a Security Saver ` can leave her hand in a freezing bowl of water after counting paper. This is based on an overseas study that came up with a very surprising result. How's that ` pretty terrible? Oh, you know, I've had better. So, that was two minutes and six seconds. OK. And now I'll let you go and warm up,... Thank you. ...and we'll come back to it. This is Annette, another Security Saver. Let's see how long she'll last after counting paper. (CHUCKLES) Sorry, Annette, that was just one minute and 30. Now for the interesting bit. What happens if our people now count money instead of paper? Annette lasted 20 seconds longer after counting money. Is that 25% increase purely because handling money makes us feel a little braver ` slightly more bulletproof? And Jillana, our other Security Saver, did better after counting money too. In fact, Freedom Seekers, Power Spenders and Security Savers all lasted longer after counting the money. This backed up what the research showed ` money is powerful and sneaky. It can affect us in subtle ways. The only person that lasted less time was our Sociable Sharer. Perhaps money didn't cast such a strong spell over her. Money definitely doesn't have a strong hold on Brock, another Sociable Sharer, but he still gets a dopamine hit from spending money on other people. Dad's been looking for a car battery. He's run his truck on a flat battery for the last few weeks, and I know he's budgeting to get one, but I also know that $200, $300 on a battery is gonna put him out for another few months. I do think that now and then, people deserve the opportunity just to have something that they've been wanting to have. And if I'm able to give it to them, then I don't wanna be the one sitting there with my independence and then them not have their independence too. Being a Sociable Sharer means Brock doesn't just give to his family. I've given money to homeless people, I've given money to strangers at bars, I've bought rounds of drinks for people that I didn't even know. I never wanted anything in return. It was` Hopefully, it just cheers them up. But there have been some people that would take advantage of it. But when I'm out and in the moment, I don't like money to be a barrier for anyone else. I think that's the thing. Does your generosity cause you problems? I ended up in quite a lot of debt. I think, I mean, even at this stage, I'm probably still in 90K or 100K debt, even though I've got a good income. And that escalated over time, really. So even as I was paying it off, I was still making these big spends on other people. How much stress does the debt cause you, though? Endless stress, really. The spending on others allows me a little bit of reprieve from the stress, cos it's quite nice to be able to buy stuff for others, especially when it's something that they need and you can brighten up their day a little bit. But that doesn't necessarily detract from the fact that I'm in a huge amount of debt because of it. (ENGINE REVS) Beautiful. Awesome, man. Spending on others gives Brock pleasure, but it's also gotten him into a lot of debt. He's trying to change the way he gives. I'm really working on making sure that I'm financially secure before I'm able to offer that to anybody else. In terms of giving, I'd give the world to anybody if I could, but I don't necessarily think that needs to be in the form of money. You know, I've noticed, even after years of spending on people, that it's actually energy. It's good nature that they need; it's a pair of ears, you know, to listen when they're in trouble. And it's that real emotional connection that will sustain people and cheer them up as much as any money could. Perhaps another way of reducing your money worries is simply to have more money to spend. One of the important things in any relationship is who pays the bills. Apparently, if you're good with numbers, that really helps. Now, that's not terribly surprising, but what might surprise you is how much difference it makes. How many of you guys pay the bills? OK, so I'm gonna ask you three simple questions. And one study showed that for each of these three questions that you get right, your household will be $32,000 better off, but only if you're the one paying the bills. So, here we go. First question ` If you get this right, the net worth of your household, according to the study, will be $32,000 more than someone who gets it wrong. Next question ` (INTRIGUING MUSIC) And last question ` If you have $200 in an account and the account earns 10% compounding interest per year, how much money will be in the account after two years? (INTRIGUING MUSIC) The research, that suggested that household wealth is connected to your ability to answer these questions, can't be definitive, but nevertheless, experts all agree the more financially literate you are, the better off your household will be. OK, so we'll come back in a little bit and see how they did and you did as well. * I asked you three questions from a study that found for each question you get right, your household could have $32,000 more in total wealth by the time you've reached retirement. So let's see how you did. If the rate of catching a disease is 10% and there are 1000 people, then you would expect 100 people to have the disease. If five people win a Lotto prize worth $2,000,000, then each person gets $400,000. And if you have $200 sitting in an account earning 10% compound interest over two years, the amount that you would have in that account after two years is $242. Let's see... how you did. How'd you do? I got two right. That's good. That means your net worth will be $64,000 greater than if you'd got them all wrong. You pay the bills in your house? Nope. Maybe you should. (CHUCKLES) How many did you get right? Zero out of three. OK, so you got none. So that's not great. And do you pay the bills at your house? I do. OK, maybe use a calculator. That might help. If you got all three questions right, then I hope you're the one doing your household accounts. Another way to have more money is to understand a very important principle of buying. If we're feeling a bit down, we might think that everything would be much better if we only had a nicer car. And for a little while, it does feel amazing, but then a thing called hedonic adaption kicks in. What that means for your lovely new modern car, is that novelty of that wears off as well, and so eventually that starts to feel exactly like... this car. So, our brain's always looking for things that are novel and new and exciting. Maybe something amazing like this. It's a house that looks like a castle. A 'hastle', in fact. It's amazing. And the new house does make us happy for a little bit, because you get a lot of cool new things, like a brass lion head. But this quickly becomes the new normal and you have to aspire to a new high. If you can recognise that certain things are going to give you a quick dopamine hit and then disappear, maybe you'll make better money decisions and think twice before that big purchase. And perhaps there's another way to reduce that super-powered spending. These days, if you buy stuff, the people serving you automatically assume that you're going to pay with a card, so they hand you the EFTPOS terminal. But if you pass over cash, it's almost a bit strange. Now, that may not seem very important, but are there unintended consequences of paying for everything with your card? We have our twins Natasha and Melissa. Melissa has $40 cash to spend, but she can go back to the ATM if she wants to spend more. Melissa spends just under $20 in cash to buy a couple of small things. Now it's time for her twin, Natasha, to buy something, but instead of carrying cash, she's armed with a credit card. Natasha uses her credit card to spend $54.90 on a basket and a candle. So, Natasha, you had a card. Was it easier to buy stuff with a card? Very easy. Do you think it was easier to spend money with a card? Um, yeah, I do. I do. I think you forget how much you've got, and you just` you get involved in the purchase. One study showed that you'll spend twice as much if you're using your credit card, which is what happened here with the twins. So if you're a Power Spender, or any of the money personalities, and you wanna cut back on your spending, then it's a good idea to take cash and leave the cards behind, because you can't spend what you don't have. Meet Susie. She's a Power Spender like Rosie, who we met at the beginning of the programme. It's just, in the moment, it feels so good to buy that thing, so I buy it and I'll deal with the consequences later. It is mood-altering for me. It's like a high and then a crash. There's the high, there's the person in the shop and they're being lovely, and there's the friends. They're saying, 'Oh, go on and try that on,' and then, 'Oh, yes, OK.' And then walking out of the shop and thinking, 'I can't afford that.' My EFTPOS card declines all the time, so I just pull out another one, and another one, and another one. I would be standing at the supermarket with my EFTPOS card, say, in the queue, and feeling really, really anxious. I think, 'What if I haven't got enough money in my account to cover this?' You know, all those kind of anxieties I lived with all the time. But there's a difference between the two. While Rosie is trapped by her money personality,... I shouldn't be in this kind of debt, and I don't know why` Well, I do know why, but I don't know how to fix it. ...Susie has found a way out. It was $15,000 that I had on credit card debt before I started addressing it, before I thought, 'I've gotta do something about this. I can't live like this. 'I don't wanna be that person that lives like this.' The only thing I can change is me. That other stuff's not going away ` you know, the consumer 'Buy, buy, buy, get this and you will feel complete.' How did you solve the problem of spending money that you didn't have? I got a little notebook. Just write down everything that goes out, everything that comes in, just reflecting on my day, the previous day, and checking myself in for this day. I use a debit card. I've been able to save up and go on holidays and things like that now. How does that planned-purchase high compare to the impulse-buying high? Buying in that way feels really easy and fun, and there's no high and there's no crash. I can use that energy to spend time with friends and family and do the things I enjoy doing that don't take me to that same place. It was like learning how to live well now in a way where I'm taking care of the debt; I'm not incurring any more debt; and it's about care and about love, really. No matter what your money personality, taking time to consider what you're buying is never going to hurt. Understanding how your money personality influences your spending means you're more likely to end up with a duck that you really need, rather than the duck you thought you wanted but later come to regret. No one wants to have duck regret. (QUACKS) Captions by Starsha Samarasinghe. Edited by Glenna Casalme. www.able.co.nz Captions were made with the support of NZ On Air. Copyright Able 2018