Money Hacks: spend money smarter by staying off the bandwagon
Money Hacks is a series exploring Behavioural Economics concepts, illustrating how unconscious biases influence the decisions we make with money. By understanding these biases and learning to avoid them, we can spend smarter, save more, and make better financial decisions overall.
Most of us have heard the term “jumping on the bandwagon.” It means suddenly becoming interested in something after it becomes popular. For example, becoming a fan of a team that’s having a winning season or buying a brand of clothing that everyone’s wearing.
In other words, we copy what we see others doing. “Jumping on the bandwagon” is usually seen as a bad thing, but it’s something that almost everyone does – at least once in a while. And, when we do, it can wreak havoc on our budgets.
Why do we “jump on the bandwagon”?
The Bandwagon Effect simply means we place greater value on decisions that conform to the preferences of our peer group. In other words, we make certain choices simply because we want to fit in. This can be relatively harmless when it comes to following a winning sports team or popular performer. But when we try to keep up with our peers by buying that expensive new cell phone or trendy brand, it can put a big dent in our longer-term financial plans.
Staying off the bandwagon can improve your financial situation
We buy things for a lot of different reasons. And, it can be tough to determine if we really need something - or if we’re just trying to keep up with others. Before we buy something, we should ask ourselves a few questions:
- Will I still want this if everyone else stops using it?
- Would a less expensive version of this meet my needs just as well?
- Will buying this have a negative impact on my near or long-term finances?
- Will this make me happy?
There’s no right answer to these questions. And it doesn’t mean you should never treat yourself with something nice. Instead, just be aware of your motivations before you buy something. If the main reason you’re buying something is because everyone else has it, take a stand. Make the choice to stay off the bandwagon. Consider it a gift to future-you.