Are You Really Saving?

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In behavioral science, there's this cognitive bias called anchoring.

As social creatures, we're more prone to over-relying on the first piece of information offered (the 'anchor') when making decisions, even if it's irrelevant or misleading.

Of course, this isn't really something new until you look at it from the very subtle ways it influences our perception of value, especially in a world saturated with information and marketing tactics.

I personally always view this bias as a silent puppeteer, which guides everyday financial choices with little conscious awareness.

Perhaps an example could drive this point home more clearly.

Saving Vs Spending $100

Imagine walking into a store, or Browse online, and you see an item on sale for $100.

Before that, however, you notice a prominently displayed "original price" tag of $200, crossed out.

Doing a bit of mental gymnastics, you instantly calculate that you'll be purchasing the item for a full 50% off.

The $200 price point, as in the "anchor," has already set your expectation of value.

So your mind registers a significant "saving," maybe even viewing it as a triumph of smart shopping.


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But let's pause and genuinely ask:
Are you really saving?

It could well be that nobody, or very few, wanted to buy the item at $200.

That initial price might have been inflated as a strategic benchmark set specifically to make the eventual discount seem more appealing.

So, the sellers drop it to $100 aiming for clearing inventory or simply getting any sale where they otherwise wouldn't.

The true value of the item, independent of its original tag, might actually be closer to $100 – or even less – all along.

In some ways, you didn't really save a $100 by purchasing this item.

Rather, you spent a $100 that could have been invested in a genuinely valuable asset, saved for an emergency, or used to acquire something you truly needed or valued more deeply, something that wasn't dictated by a cleverly placed anchor.

Fluid Perception

I think this common yet insidious bias extends mostly beyond simple consumer purchases, and more so subtly influences our decisions in far more significant aspects of life and finance.

Anchoring influences everything from salary negotiations (where the first number mentioned often dictates the negotiation range) to political debates (where the initial framing of an issue shapes public perception).

Again, if one is observant enough of the underlying psychological mechanics at play, then you begin to see these invisible strings almost everywhere, which at least allows for more conscious and intentional decision-making.

However, it's also a reminder that our perception of value, fairness, even of necessity is far more fluid and manipulable than we often realize.

Playing Defense In An Offensive Game

Coming back to a similar aspect of saving, isn't it obvious that saving money will probably never make us rich, in terms of creating substantial, compounding wealth that truly liberates us financially?

Saving, at its core, is about managing your expenses more effectively.

Definitely a crucial aspect for stability and building a cushion, but it's ultimately a game played on the defensive side of the financial field.

Cutting expenses has a mathematical ceiling.

You can only reduce costs to zero, but zero isn't wealth.

Even if you eliminated every discretionary expense, you'd still be playing defense in a game that requires offense to win.

Focusing obsessively on 'saving' money through expense reduction is being anchored to the wrong metric entirely.

The discount tag tricks us into feeling victorious about a purchase, just as the savings mindset tricks us into feeling financially productive while we're actually treading water.

Both are anchored to scarcity thinking and we keep circling back to the same limited pool of resources rather than peeking into abundance creation.

In this context, the question on the title more so challenges the entire framework that equates frugality with financial progress.

I don't think the path to riches is paved with extreme frugality, which usually stems from a fear of not having enough.

But I guess it's an uphill battle when the entire financial system profits from keeping us focused on managing existing money.

Banks love savers, but they get rich from borrowers and investors.


Thanks for reading!! Share your thoughts below on the comments.



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7 comments
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Frugality cannot bring one into wealth because no matter how much we think we can reduce our expenses, we are only pushing them back to reappear at a later time in our lives.

Investing is the surest way to walking into legitimate wealth.

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Right, like pushing the can down the road, we will eventually have to confront it when the can reaches a wall and can't be pushed any further.

Indeed! Making our money work for us really fast tracks the journey into building wealth. I think savings is a gateway to investing in that regard, and not merely a destination.

Thanks for stopping by :)

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I have no idea, I just try not to be a big consumer, is it a way to save? :D

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I think it depends on what not being a big consumer entails, maybe reducing consumption to only the necessities could create an opportunity to save more but it's what happen next that really matters more. Save, then invest, rinse and repeat.

Thanks for stopping by :)

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....Saving, at its core, is about managing your expenses more effectively.

Indeed, you're right. I think people fail to realized that when money is not serving a ROI purpose then it's basically useless. Saving would be spending wisely and not actually keeping money in traditional banks or locking them away.

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Sure, having that mental framework for saving as a way to manage immediate or foreseeable future expenses instead of a way to keep money for the long term is very vital in this day and age. Inflation with other related mechanisms will gradually eat away its value and have us becoming poorer.

Thanks for stopping by :)

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