This post 7 Tips for Saving Money Backed by Science appeared first on Daily Reckoning.

Last week I told you why Millennials and Boomers suck at saving.

Today, I thought I'd share some tips and facts on saving you probably haven't heard before. It

For instance, did you know there was a study done in 2016 that found when people win the lottery, their neighbors start spending more money, often to the point of bankruptcy?

There's a simple explanation for why this is true and an easy fix. Duke University behavioral economist Dan Ariely is at the forefront researching these irrational money mistakes that we all make. Here are some of Dan's best tips for saving money you wish you knew growing up.

Money Saving Tip #1
Make saving visible again

?A thousand years ago, when we dealt in goats and chickens and cows, the nice thing about that was we could compete with our neighbors on who had more cows or goats. But then, when we invented money, we made spending very visible, but we made saving completely invisible,? says Ariely.

It's natural to compete. That's why you spend more money if your neighbor wins the lottery. The problem with money today (paper, digital, and plastic) is that we have no visual cues telling us who's saving more (you or your neighbor?), which makes it hard to compete.

Ariely says, ?Because it's so natural to compete on whatever we can compete on, and with money, we've just made it so that we can't compete on savings. Moving from animals to gold to cash had lots of benefits, but it comes with some baggage…Do we want people to have zero payment pain and not to see what they're saving, or do we want people to be a little more thoughtful about money??

Ariely suggests a simple fix: try to make saving more visible. ?It could be talking to your spouse about how much you have in your 401(k), it could be driving a little nail in the door every time you save another $10,000 in your long-term account. Do something that serves as a reminder of saving and not spending.?

Money Saving Tip #2
Think relativity

?If you're buying something big, like a car, and for $1,000 more you can add a stereo, the odds are that you will spend way too much once you've paid a lot already. One way to do this is to think about something you really love,? says Ariely. ?For example, our family loves going to a particular movie place, have dinner there and go and see a movie. I know how much it costs, so then, when I look at something else like shoes, I can say, ?Instead of these shoes, I can have X movie nights.' Compare what you're thinking of buying to something you know and love.?

Make a list of activities you love spending money on every month. The next time you're in a situation where a salesman is pressuring you with an upsell, think about what on your list you could spend that money on instead.

Money Saving Tip #3
Understand the pain of paying

?Imagine that tonight, you're going to dinner, your bill is going to be $200 for a fancy dinner, and you're going to pay with cash or a credit card,? says Ariely. ?Paying by cash feels much worse and it will definitely slow you down from spending more, whereas the credit card would feel much freer; you would not feel the pain of paying and you would more easily spend more.?

Ariely doesn't believe all modern money is bad. He recognizes the convenience of plastic and digital currency. One way to get the best of both worlds he says is to use prepaid debit cards.

?Think about prepaid debit cards, which from a planning perspective are even better than a credit card because you have a spending limit,? says Ariely. ?Of course, credit cards were not sold as being a way to spend money without thinking about it and being surprised at the end of the month. Maybe it wasn't the declared marketing plan, but that's what they did…Technology is not necessarily bad, but the way we've designed technology so far has been at the service of the payment industry, not the savings industry.?

The tip here is acknowledge the pain or lack thereof when paying.

Money Saving Tip #4
Think about purchases you regret

This is a savings tip Ariely has researched extensively at his Common Cents Lab at Duke University. The tip is simply to focus on the purchases you regret. So next time a package arrives on your doorstep, notice any money-related feelings of regret you may have. Learn from these feelings so that next time you're in the heat of ordering something from Amazon late at night, you stop and think will I regret this purchase in 2 days?

Money Saving Tip #5
Spend on friends and love ones

?In contrast to financial regret, you can maintain a healthier relationship with your finances by gravitating toward purchases that are deeply satisfying. The Millennial Regret Spending Report shows that people feel most satisfied with purchases made in December: i.e., right around the holiday season,? says Ariely.

This odd advice of spend more on others is doing one thing for you: it's fostering a healthier relationship with your money. When you save money to spend on others, you start spending smarter and more consciously day to day.

Money Saving Tip #6
Money is time

Like tip #2 above it's good to think about the opportunity costs of money.

?If I buy X, I'm forced to buy less of Y.?

Another approach when assessing financial trade-offs is to think about time. If you're spending $200 on a new pair of shoes, how many hours of work did those shoes take? And what could you have done in that time instead?

If it took you 6 hours, those are 6 hours you could have spent with your grandkids or love ones going on a hike or reading books.

?By thinking of money spent as time wasted (or conserved), you can approach your finances from a new perspective and begin to clarify and prioritize your goals,? says Ariely.

Money Saving Tip #7
Ignore sales and discounts

?We evaluate things not based on the product itself, but on a whole range of other attributes, like the effort that has gone into it, or the language used to describe it,? says Ariely. ?Companies like Apple are very good at this: They go on stage and tell us about little things like the type of metal they use for laptop hinges. Then we say, 'Look at this amazing design, and how much effort they put into this!' And we pay all this money.?

This is your irrational mind tricking you into a state where you think you're being rational. Dan says the way you get out of this mindset is you have to start valuing things correctly. ?Try to ignore sales and discounts, which basically mean nothing. If a $200 shirt is marked down to $100, don't think about it being 50 percent off; think about whether or not you want to pay $100 for a shirt,? says Ariely.

As you can tell, saving is not easy. There's a lot of things working against you. However, if you follow Dan's advice, you'll be better off than 90% of people trying to build better saving habits.

To a richer life,

Nilus Mattive
Editor, Rich Life Roadmap

The post 7 Tips for Saving Money Backed by Science appeared first on Daily Reckoning.