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Financial success has more to do with mastering the grey stuff between your ears than how much you earn. Sometimes I find myself buried deep in articles from academics from magazines and websites such as Psychology Today and PsychCentral. A wide variety of academics, most of whom have PhDs write for these publications, pulling really useful personal finance concepts out of otherwise turgid research reports. Their findings can really benefit consumers who want to master their money. Case in point is that we all know what's it's like to have no self-control in the two Fs - that's food and finances. We have self-discipline for a nano-second and then it's gone. It turns out, self-control is a finite resource. There is only so much we can exercise in our lives says Utpal Dholakia of Rice University. "When a person exercises restraint, the self-control resource is spent," Dholakia wrote in Psychology Today . "Less of it is available the next time self-restraint is called for. Replenishment takes time, so that by the end of the day, we are running on empty." READ MORE:Positive cash flow for first time investorsDiana Clement: Who wants to be a millionaire?Diana Clement: Five Ds for Auckland property investors It turns out that we can't restrain themselves in more than one activity conducted at the same time. So if we don't buy that TV we might treat ourselves with a donut. The good news, however, is that we can practice self-restraint and increase the size of our self-control reserve. Dholakia also recommends forming and maintaining synergistic habits. One such habit might be cooking from scratch at home. It makes you eat better and save money at the same time. And consumers can transfer skills that help them succeed in one area. If, for example, you succeed at the Weight Watchers programme you can transfer those planning and monitoring skills to budgeting. More correlations with dieting and money come from David Just and colleagues from the United States Department of Agriculture . It turns out that students paying with cash purchased healthier food for lunches than those paying with an unrestricted debit card. Snap. Behavioural economics researchers have found that there's a link between paying on plastic and spending that is detrimental to your financial health. The pain of paying is worse when we use cash. Unfortunately students the world round are showered with credit cards as soon as they Pass Go (leave school).

Howell points out that our incomes have grown over the past 70 years, but we're no happier. That's because we're spending money on the wrong things - literally.
Another academic whose name comes up again and again is Ryan Howell of San Francisco State University. Howell points out that our incomes have grown over the past 70 years, but we're no happier. That's because we're spending money on the wrong things - literally. If we focussed our spending on experiences such as concerts, vacations and dining instead of material objects such as clothing, jewellery, and electronics we'd be happier. Researchers at New York University found that the more choices we're faced with the greater the chance of poor decision making. Professor Paul Glimcher of New York University calls this the "curse of choice". When researchers posed as jelly salespeople offering six flavours, customers were much more likely to buy than if offered 24. Being frugal needs to be cooler or it's not going to take off argues John F Gaski, of the University of Notre Dame. It's not cool to say: "I didn't buy that iPhone to save money." We need a significant change in attitudes towards saving and spending, argues Gaski. Unfortunately, I've noticed the attitudes new in New Zealand are often moving for the worse - towards the idea that debt is normal. Having said that, as people's KiwiSaver balances grow, we might see a healthy change in attitudes towards saving.
If your friend or colleague has made a "killing" on the property market or some other investment, take it with a pinch of salt. They're probably exercising the "self-enhancement bias".
One of Howell's recent research projects involved looking at how to trick your brain into spending less. He found that the simple act of having to write down what you spend reduces the enjoyment of the actual process of shopping. So by using a spending tracker such as TrackMySPEND or even a notebook you can start to break the cycle of spending impulsively. Howell wrote a thought provoking article about windfalls. I, myself, save 100 per cent of small windfalls, but this is not common and nor is it necessarily the best psychological use for the money. The people Howells studied who were happiest saved around 25 per cent of the windfall, gave 12 per cent on average to charities or as gifts to other people, and spent about 40 per cent on life experiences. If your friend or colleague has made a "killing" on the property market or some other investment, take it with a pinch of salt. They're probably exercising the "self-enhancement bias". Italian academic Matteo De Angelis and colleagues wrote in the article On Braggarts and Gossips that consumers are receiving a skewed view of the world from their friends and fellow consumers. Combine that with the human bias to believe that past performance indicates future performance and investment decisions become very unscientific indeed. It's probably too late to get a piece of their successful action anyway, added De Angelis.
Research has shown that our neighbourhood influences our perception of wealth. Kerching. In my street a house featured in NZ House & Garden magazine in June. This is likely to make local residents want to live up to their standard and spend on things that won't actually make them happy, according to Howell's argument.
"Relative deprivation" is a popular discussion. Research has shown that our neighbourhood influences our perception of wealth. Kerching. In my street a house featured in NZ House & Garden magazine in June. This is likely to make local residents want to live up to their standard and spend on things that won't actually make them happy, according to Howell's argument. It would appear that instead of striving to live somewhere nicer, I would feel much better off by transplanting my existing home to Manurewa because my material belongings, style and consumption patterns would be high compared to my neighbours, whereas they're not in my street. Denise Cummins at the University of Illinois at Urbana-Champaign wrote in Psychology Today that children who received no allowance, and had to present an argument or sales pitch for money turned into adults who thought that getting a better grade or a pay rise was down to negotiation, not their performance. Those who expected a pass mark or pay cheque for simply turning up were most likely to have received an allowance unrelated to chores, and those who saw a causal link between hard work and performance had to work for their money in childhood. According to Kit Yarrow of the Golden Gate University and author of the book Gen BuY whilst the global financial crisis made parents more thrifty, it was seen as a putting life "on hold" to the Gen Ys until they could get back to "normal". Yarrow also found that parents shielded their children from the impact of the recession AKA "reality" by tapping into their own resources to help their offspring. It put the parents' financial futures at risk at the same time as negating the duty to teach children to stand on their own two feet.
Perhaps those children might learn more by accepting reality and waiting until the property market gets back into balance, as markets always do eventually.
This idea of shielding the children from reality made me think about the parents in Auckland and elsewhere who are tapping into their equity to help the next generation into a home. Perhaps those children might learn more by accepting reality and waiting until the property market gets back into balance, as markets always do eventually. Dholakia also grabbed my attention for an article he has written about equity crowdfunding, which is new in New Zealand. Investors, he says, use the wrong criteria when making crowdfunding decisions and invest for idiosyncratic rather than practical reasons. As a result they tend to buy investments in companies that appear frequently in the news media. Here in New Zealand that's the likes of movie launches and Internet start-ups. "In equity crowdfunding, people may gravitate towards start-ups that appear glamorous and promise revolutionary products, but which are risky with small chances of success," says Dholakia. He recommends that individual investors may be best off staying on the margins for now until more is known about success rates and factors of equity-based crowdfunding investments.