Ambient noise leads you to spend more | Inquirer Business
Money Matters

Ambient noise leads you to spend more

/ 02:08 AM October 25, 2023

Question: The holiday season is here. In fact, Pagasa has just announced the seasonal shift from southwesterly winds or “habagat” to the northeasterly winds or “amihan.” I do not want to end up buying too much for the holidays to the point of borrowing beyond my means to repay, just like last year. What is your advice for me on this matter?

Answer: Let’s do a little experiment. Which P10,000 is easier to spend for you, one that comes from a reimbursement of the advance you made for your office or one that was paid as a bonus at work? Chances are you will say the one that was paid as a bonus.

Behavioral economists say that since money is money, the source of the P10,000 should not matter in choosing which P10,000 to spend. Yet our brain tends to assign value to money depending on where it comes from, where it is kept and how it is spent. This is called mental accounting.


The human brain has been loss averse since the time of the caveman. The brain will avoid losses at all costs or will at least try to minimize them. Spending represents a loss of money. In our little experiment, a newly received bonus has not figurately grown roots in a person’s mental store of wealth as opposed to the advance he made for his office out of his own money. Thus, even if the funds to be received in either situation are actually the person’s own money, his brain feels less pain in disposing of the bonus. After all, bonus means extra to the brain.


But, from where does the ambient noise come? From the promotions done during the holidays of course. Bonuses are given out just in time for the holidays. And it is exactly at this time that there will be a flurry of ads and promotions on various types of mass media. Companies know that getting people to spend their bonuses is like the idiom “taking candy from a baby.” It is just that easy.

The challenge to Filipinos is made all the more difficult as there is a tendency to confuse the 13th month pay mandated by law as a bonus.

Companies spend a lot of money studying consumer behavior. Once they have found the code for buyer psychology, all they need to do is to tap into that code to lead their consumers into buying products and services. They dare not go against this psychology. That is why you will not see many promotions about investing during the holidays—it is the time for spending.

Now, how can you dampen that ambient noise to minimize spending during the holidays? Simply take advantage of your natural disposition to avert losses.

First, follow the reality cash flow. Record on your phone your cash on hand at the start of each day. Add the incremental amounts to your cash on hand as well their sources. If you say withdraw from an ATM, you will increase your cash on hand. The same is true with borrowing, including the use of credit cards. Then, in major categories, deduct your uses of cash. Before you go to bed, simply add your sources of cash to your beginning cash and subtract your uses of cash to arrive at your ending cash. Your ending cash for the day will be your beginning cash for the next day. Then do the process all over again.

You will see that if you apply the reality cash flow even for just one week, you will come to the realization of how money flows in your finances. Awareness is key. For how many times have you put money in your wallet at the start of the day without knowing how it was all used up by the end of the day. Awareness of your cash flow will make you more circumspect with spending.


And guess what, there is a way to still find buying investments during the holidays attractive. Since the holidays is a time of giving, why not gift yourself and your loved ones with a time deposit or a pooled fund that has a considerable pretermination penalty or redemption/exit fee, respectively. This will increase the potential pain of spending that money wantonly.

There are many other things you can do to avoid spending too much money during the holidays. But the general idea is to take advantage of how you would normally behave with money. That means tapping into your mental accounting and taming the rebellious you. INQ

Your subscription could not be saved. Please try again.
Your subscription has been successful.

Subscribe to our daily newsletter

By providing an email address. I agree to the Terms of Use and acknowledge that I have read the Privacy Policy.

Send questions via “Ask a Friend, Ask Efren” free service at, SMS, Viber, Twitter, LinkedIn, WhatsApp, Instagram, and Facebook. Efren Ll. Cruz is a Registered Financial Planner and Director of RFP Philippines, seasoned investment adviser, bestselling author of personal finance books in the Philippines and a YAMAN Coach. To consult with a YAMAN Coach, email [email protected]. To learn more about personal financial planning, attend the 104th RFP Program this October 2023. To inquire, e-mail [email protected] or text at 09176248110)

TAGS: Money Matters

© Copyright 1997-2024 | All Rights Reserved

We use cookies to ensure you get the best experience on our website. By continuing, you are agreeing to our use of cookies. To find out more, please click this link.