If you have a new car, I want one too
The poll question taps into the notion of herd behaviour – or our tendency to follow the trend. An earlier eZonomics poll shows herd behaviour can influence people to support the same sports team as their friends, while the Behavioural Finance website shows herd behaviour can influence investing decisions, including property, shares and foreign exchange markets. The eZonomics video How peer pressure affects your wallet details how “peer effects” can hold sway in a wide range of decisions, from whether to buy a new car or how hard to work at school.
Keep “herd” tendencies under control with planning and budgeting
Just as this tendency to follow the trend can boost savings – which might be seen as positive – the flipside is also true. People with high spending friends might end up splashing out more often than they can afford. It might be a good idea to try to embrace friends’ positive influences but put plans in place to avoid picking up on the negative ones.
If going on a holiday with high spending friends, consider saving and budgeting for the event, then sticking to the set amount of savings. If the costs creep up and the savings start to run low, it’s a sign it is time to reign in spending.