Choice Architecture, is the study of how changing the way options are presented can also change what option people naturally choose most often. When it comes to making spending decisions, most people think of it as exchanging money for something they want. But rather than focusing on the money you’re giving up, what if you focused on something else you might have bought with that money? For example, if the money you’re about to spend on shoes is money you’re going to need to cover your mortgage payment, you may be less likely to buy the shoes. If it’s money you were just planning to spend on going out to eat, then maybe you’d be fine using that money to buy the shoes instead. Understanding what you’re giving up, or in other words, your opportunity cost, changes your emotional attachment to the money you’re about to spend. Scientific studies have shown that the less people understand their opportunity cost, the more likely they are to buy things they later end up regretting.  This is why one of the core goals of SpendPal to make your opportunity cost as clear as possible whenever you’re about to spend money.  

Here’s how we do it. We start by automatically dividing up the money in your checking account into spending categories that are meaningful to you. This means the money in your checking account is no longer JUST money. Now you have your grocery money, your entertainment money, money for your bills, and so on. If you’re out of Clothing money, to go ahead and buy a new pair of shoes anyway, you’d have to steal from a specific Category. 

Here’s the kicker, we don’t care if you buy the shoes or not. The goal of SpendPal is not to make you always save your money. The goal is to help you better understand the trade-off you’re about to make. If you understand what you’re giving up to buy the shoes and you’re ok with it, then we’re ok with it too. If you see that what you’d have to give up is more important to you than getting the shoes, then your emotions naturally nudge you into saving that money for the more important thing. Using Choice Architecture to change your emotional attachment to your money is just one way SpendPal helps people naturally spend smarter and live better.   

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