August 23rd, 2013
Many, well actually most, economists use theories that suggest that all people are 100% “rational” or “logical” when making decisions about money.
The truth is that all people are 100% logical with money when it comes to relatively simple choices.
If you ask someone, “would you prefer I gave you $25 or $100″? everyone would simply take the $100. Even a total fool would know that a hundred bucks is better than less than that. But that’s too obvious. It’s too easy.
There are many times when people make “stupid” decisions involving money too. They act ‘emotionally’ instead of ‘logically’.
For example, people buy different foods if they go shopping at the grocery story when they are hungry. They are more likely to buy high calorie junk food, even if they don’t plan on eating it right away. That’s an emotional decision.
There are also many scientific studies showing that people spend more money when they are sad. If you show a group of people a sad scene from a movie and then ask them how much they would spend on some item, they will say MORE money than if they didn’t watch the sad movie clip first.
Marketers and advertisers take advantage of all of this human psychology when they do marketing. They will make people feel emotional about their product, which makes them spend more money on their product than they otherwise would.
I love to believe that advertising tricks don’t work on me because I study them. The annoying fact is that they totally do! I’m just as much of a sucker for good advertising as anyone else.
Last night I watched a really really interesting 1 hour documentary about how psychology affects people’s decisions about spending money. It also spoke a lot of the economic housing crash that happened in 2008.
An “economic crash” is when the economy suddenly gets very bad, very quickly. An example is the “housing bubble”. People believed that house prices would keep getting higher and higher, and that they would never come down. People were buying houses like crazy and pushing the home prices up super high. Then one day in 2008, thousands of people couldn’t sell their homes and there were suddenly no more buyers. Home prices fell very quickly and many many people who owned homes could no longer afford to pay the banks back. Many people, including me, believe that we are in another bubble right now and that one day within the next couple of years we’ll see another HUGE crash. I’m not sure exactly when, but I think it’s coming.
The USA has a debt of over 17 trillion dollars! That is over: $17 000 000 000 000 USD. That is INSANE. They are borrowing the money from countries all over the world (China is the biggest lender). The US government will never be able to pay this money back, and when countries start demanding that they get their money back, we are going to see economic problems like we’ve never seen.
Some people will make a lot of money from the crash. And people who don’t work on their skills and make sure they are in a good position to get a good job, will likely lose their jobs and be lucky if they can find a job at MacDonald’s. So…… Another great reason to be focussing on your English (I always like to give you guys extra motivation) but I really do think this will happen.
What do you think about all of this? Do you think marketing affects people’s financial decisions? Do you think the world is borrowing FAR too much money and this will cause huge problems in the near future? Do you believe that now is more important than ever to do what you can to make yourself more competitive in today’s job market? Please share your ideas and opinions below.
I decided to put the full documentary video here in the VIP community for you guys. I think you’ll really enjoy it. I loved it