Following on from some of the comments on last week's blog post, we take a look at how much of an impact advertising can have on you and your finances.
We see, hear or read thousands of marketing messages each day, consciously and subconsciously, and it has a huge effect on our buying habits. We all know advertising is incredibly successful at enticing people to part with their hard-earned cash, and in some cases this results in problem debt.
As a former marketing man myself, I tend to see adverts in mechanical terms; who they’re appealing to, how they’re doing it and why. Sometimes I admire them, and sometimes, despite knowing it’s all a ruse, I still buy into the hype.
I’m as guilty as anyone, justifying the purchase of a must-have product because I “need” it. So whether it’s buying a Coke from the newsagents or putting a VW Golf on the driveway, I’ve bought into a certain lifestyle that these adverts project.
I guess you’re different though. You’re not affected like I am.
Wrong. You are.
Many studies over the past 20 years have found that people who watch advertising say the same thing. Yes, the participants said, others would be influenced by the message, but no, they were unaffected. They were stronger-willed.
However, it was found that when psychologists looked at the results, “it was clear that participants were just as influenced [by advertising] as other people.”
The insight was dubbed the 'third-person effect': Advertising doesn’t work on me, but it affects others.
Even worse, the more a person disagrees with the message, the stronger the effect (hence the preoccupation with rival political parties, or if you’re reading this after seeing the provocative title of the article!).
For the majority of people that’s as harmless as it gets – they’re annoyed that advertising dupes them in this way, but they learn the self-control necessary to keep from buying more and more ‘stuff’.
However for a sizeable number of those in debt, trying to buy into the “must-have” lifestyle has seriously damaged their wealth. “Keeping up with the Joneses”, buying goods on the never-never or putting it on credit leads to debt, stress and mental illness.
In 2010 10% of our new clients claimed that overspending was the primary reason behind their debt problems. While it’s a lower number than many people expect, overspending is certainly an underlying cause of debt even if the tipping point into a debt crisis is something else.
But how do we avoid the same fate that befalls many people each year – buying too much because of advertising?
1. Admit it, you’re a dupe
We all need to understand that advertising is an attempt to appeal to our baser instincts. If we acknowledge our own thought processes we can raise our defences against the influences of advertising and take control.
2. Credit is advertising too
It’s not just physical products that are marketed; credit cards, loans and banks advertise as well, as they give the access to a lifestyle. They’re the gatekeepers, and credit is the key.
3. Understand the difference between “want” and “need”
I know I don’t actually need a VW Golf. What I need is some way to get from A to B, and given the journey, a car is the best solution. A VW badge is neither here nor there. Understanding the difference between want and need can lead to understanding as to what you should actually spend your money on.
4. Watch the spending
Keep tabs on your spending. Knowing how much money you’ve got until payday and resisting the temptation to splash the cash on a whim is key to staying debt free. This is where budgeting comes in.
5. Save up your pennies
An under-utilised technique nowadays, learning how to save up is still vital. If you want the latest TV then saving proactively (putting aside some money each month until you can afford it) is so much better than paying reactively (buying it on credit and then repaying the card company).
6. Learn self-control
As we talked about last week, self-control is vital to good money management. Understand your weak points and take action. If you lust after electrical products and you’re spending more time than is healthy “researching” in Currys or Comet then learn to walk away.
Advertising isn’t going to disappear. Due to the advances in technology the types of advertising seen in Minority Report will be with us soon, personalising marketing to a terrifying degree.
We know that millions of people are risking debt problems to fuel their lifestyle, but everyone needs to understand that it could be them that suffer.
Adverts don’t illustrate this side of the coin, but debt is much more likely than attaining the lifestyle the adverts show.
If you’ve been led on by advertising a bit too much and need to sort out your finances, try our online debt counselling service. That’s one bit of advertising that I don’t mind you taking in.