4 mental hacks that can help you save money during the pandemic

Cognitive biases can influence your money decisions, but these mental hacks can act as antidotes to help you keep your financial wits about you during the coronavirus pandemic.


Your mind can play a lot of tricks on you, especially when you are under stress. Behavioral economists call some of these tricks "cognitive biases," or patterns that disrupt how people judge and process information. It's very helpful to understand how they work and how they can influence your money decisions, especially when dealing with anxiety brought on by Covid-19. 

It can feel hard to save for tomorrow when tomorrow is so uncertain. But it's critical to keep your financial wits about you and make good choices so you and your bank account are ready for whatever might happen in the future. 

Here are four common cognitive biases and the mental hacks that can help you overcome them.

1. Scarcity bias

There's a natural urge to overvalue things that are or seem scarce. In a classic behavioral science experiment from 1975, researcher Stephen Worchel put jars of identical cookies in front of two sets of students. One set picked from a jar of 10, the other from a jar of two. The students were willing to pay 11% more for the "more rare" cookie and gave those treats a higher rating. 

Scarcity triggers an urge to hoard, which can trigger panic buying. We've seen a lot of that lately. Throughout Covid, even everyday items like toilet paper, hand sanitizer, hair dye, and bicycle tires have been hard to come by. So that "only two left" label on the ultrawarm blanket you saw on a website really does work, particularly because of another scarcity that many Americans are currently encountering — mental scarcity.  

Every day seems to bring an exhausting set of high-stakes choices about how to navigate Covid-19. Is it safe to go in that store, to touch the mail, to hug that family member, to send the kids to school? So when it comes time to make a risk assessment about our savings account or a big purchase, it's difficult to summon the mental energy to do so.

"We don't have a lot of ability to think things through carefully. We are frying all our circuits," said Jeff Kreisler, editor-in-chief of People Science and co-author of the book "Dollars and Sense." "Our normal decisions are piling up. It's a psychological morass."

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The mental hack: Build in pauses

To negate the irrational pressure brought on by scarcity bias, hit the pause button to give your brain some much needed space and rest. Make it a habit to reflect before making a financial decision and add friction to the process to make spending just a bit more difficult. Leave items in your shopping cart until the morning and don't let online shopping sites save your credit card information, for example.

Of course, this advice doesn't apply if the scarcity you're facing is real. But try to take a moment and decide when you are facing real scarcity versus the manufactured kind. Remember: Most people didn't really need all that toilet paper.  

2. Hyperbolic discounting

Many people have a hard time comparing the value of something today vs. the value of something tomorrow.  We have a "present bias" that leads us to accept $10 today versus $200 at retirement, or to value that box of ice cream today more than the clean bill of health from our doctor in six months. We "discount" the value of future rewards too much. 

Life is a constant mental calculus comparing rewards today vs. rewards in the future, and that's a very tricky math problem. During the pandemic, when the future seems so uncertain, it's even harder to delay gratification for a greater reward later.

"We focus even more on what we need right now for our safety, well-being, or health," Kreisler said. "People are overpaying for things, not making normal decisions, because the future is more uncertain, and it's harder to connect to."

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The mental hack: Talk to future you 

Behavioral economists have long advocated this trick to get around hyperbolic discounting: Imagine a conversation with "future you" and discuss choices you make today with that person. The technique might sound artificial, but there is evidence that connecting with your future self helps you make better choices today. Hal Hershfield, a professor at NYU's Stern School of Business, showed study subjects images of themselves altered to look as they would appear during retirement age. They made better financial choices. 

It's not easy right now, Kreisler concedes.

"Is Jeff in 10 years still going to be wearing a mask? Will he be going to events? I don't know what the next week holds, let alone 10 years from now," Kreisler says. Still, it's important to try. And if 10 years is a bit too far to fathom, make a mental  jump ahead a year, or even six months from now, when making decisions about saving or bigger purchases.

3. Snake bite effect

When you've been burned by someone or something, the effect on the mind can be powerful. For example, young adults who entered the housing market during the Great Recession suffered psychological scars and enduring financial stress. Once bitten, twice shy.  

The stock market's gyrations during the pandemic — a sharp drop, followed by a record recovery — is likely to leave scars on today's savers. Those who sold in panic during March and April might never trust stocks again, and might be tempted to keep more of their money in cash or just spend it.

The mental hack: Focus on the decision-making process rather than the result

Life is full of risk calculations large and small. That means you might sometime make what seems like the "right" choice, but you'll get the "wrong" result.

Maybe you just bought a new car and now you can't drive anywhere because of stay-at-home orders, and you wish you didn't have that car payment. Or maybe you finally decided to put money in a high-yield savings account in February and saw your interest rate plummet by April. It was still a good choice, and you should use that same process the next time you make a choice. The existence of bad luck doesn't mean you should abandon good logic.

If the logic of the purchase was sound, you made the right choice. Remind yourself that you suffered bad luck, as everyone does from time to time. Instead of over-focusing on the unsatisfying outcome, give yourself positive affirmation for having made the right call with the information you had. 

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4. Availability and recency bias

People have a strong tendency to base their worldview on the few anecdotes they see around them. Those who don't know anyone with Covid-19 are less likely to see it as a threat. Those who see a local newspaper full of Covid-related obituaries take it more seriously.

We can't help but be influenced by the data most available to us. That includes the people we spend time with, which leads to a related bias, groupthink, or false consensus.

Similarly, if you just recently heard about a friend with Covid-19, that is likely to dominate any other impression you have of the virus. With your emotions aroused by recent events, you may be even more likely to panic buy or engage in stress-shopping or have a harder time seeing the point in saving money for the future.

Recency bias plays a big role in many bad investing decisions. No matter how often people tell themselves they are investing for the long term, they still sell after the stock market has a bad day, which is usually the worst time to sell. When recency bias drives a decision, a single bad day outweighs years of data about long-term market gains. 

The mental hack: Spotlight your values

When you make financial choices, ask yourself if they align with your values and your identity. The late night buying might feel good for a moment, but the pile of cardboard boxes in the basement might not be consistent with your concern for the environment. If your goal is financial independence or starting a business one day, will spending on a big vacation help or hurt that goal? Clear values can act as a helpful guardrail against more primal cognitive urges.

"Ask yourself If it's something you can tell your mom about, tell your spouse about," Kreisler says. "I know that sounds like soft science, but we are seeing more and more evidence than this actually works." 

Bob Sullivan is an author and consumer reporter. His columns can be found at or you can follow him on Facebook or Twitter @RedTapeChron

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