Train your brain to save

You may notice that by the end of the week, some of your friends just don’t have any money left. Meanwhile, others always seem flush. And here’s the weird thing… the people who manage to hang on to their cash often aren’t any better at saving money. What they are better at is not spending it. Saving is a strategy, and strategy is all about choices.

Studies of the psychology of saving show that there’s a simple reason why it’s so hard. Observing the brain with magnetic resonance imaging (MRI), scientists can actually see the brain’s pleasure centre lighting up as it gets a rush of a feel-good chemical called dopamine when you buy things.

So stop doing battle with your brain. Instead, use this understanding of the way it works to make your savings grow.

Rewire your brain

Sooner or later, we all learn that staying up late with too much wine is not worth the price the next day, especially if you have an early-morning meeting with perky colleagues. When you find yourself about to buy something that’s not an absolute necessity, remind yourself of how little ongoing pleasure you got the last time around, and how guilty you felt. I call this the “hangover effect,” because it’s such a great deterrent.

Make it real. Say you’re planning for retirement someday (as I know I am!). The word itself probably doesn’t conjure up anything specific. The solution? Make it concrete. Pick a specific age for your retirement and make the target date your birthday. Then picture the party you’ll throw, and the speech you’ll make. Making a future goal, such as your retirement, tangible will make it easier to put money into your RSP, instead of a pricey restaurant meal.

Think small. You probably find that a big goal — whether it’s saving for retirement, or something shorter-term, like a car, a down payment on a condo, or a vacation — simply can be overwhelming. It’s hard to convince yourself it’s worth missing a fun night out (say, $50?) in order to save for your vacation next spring, if your goal has a price tag in the thousands. A good trick is to break down big goals into smaller and more immediate goals, like tucking away $50 this week! Keep it up, and in a year’s time you’ll have saved $2,600. Then it’s time to make that call to the travel agent.