Are You Really Saving?

In behavioral science, there's this cognitive bias called anchoring.

As social creatures, we're more prone to over-relying on the first piece of information offered (the 'anchor') when making decisions, even if it's irrelevant or misleading.

Of course, this isn't really something new until you look at it from the very subtle ways it influences our perception of value, especially in a world saturated with information and marketing tactics.

I personally always view this bias as a silent puppeteer, which guides everyday financial choices with little conscious awareness.

Perhaps an example could drive this point home more clearly.

Saving Vs Spending $100

Imagine walking into a store, or Browse online, and you see an item on sale for $100.

Before that, however, you notice a prominently displayed "original price" tag of $200, crossed out.

Doing a bit of mental gymnastics, you instantly calculate that you'll be purchasing the item for a full 50% off.

The $200 price point, as in the "anchor," has already set your expectation of value.

So your mind registers a significant "saving," maybe even viewing it as a triumph of smart shopping.

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But let's pause and genuinely ask:
Are you really saving?

It could well be that nobody, or very few, wanted to buy the item at $200.

That initial price might have been inflated as a strategic benchmark set specifically to make the eventual discount seem more appealing.

So, the sellers drop it to $100 aiming for clearing inventory or simply getting any sale where they otherwise wouldn't.

The true value of the item, independent of its original tag, might actually be closer to $100 – or even less – all along.

In some ways, you didn't really save a $100 by purchasing this item.

Rather, you spent a $100 that could have been invested in a genuinely valuable asset, saved for an emergency, or used to acquire something you truly needed or valued more deeply, something that wasn't dictated by a cleverly placed anchor.

Fluid Perception

I think this common yet insidious bias extends mostly beyond simple consumer purchases, and more so subtly influences our decisions in far more significant aspects of life and finance.

Anchoring influences everything from salary negotiations (where the first number mentioned often dictates the negotiation range) to political debates (where the initial framing of an issue shapes public perception).

Again, if one is observant enough of the underlying psychological mechanics at play, then you begin to see these invisible strings almost everywhere, which at least allows for more conscious and intentional decision-making.

However, it's also a reminder that our perception of value, fairness, even of necessity is far more fluid and manipulable than we often realize.

Playing Defense In An Offensive Game

Coming back to a similar aspect of saving, isn't it obvious that saving money will probably never make us rich, in terms of creating substantial, compounding wealth that truly liberates us financially?

Saving, at its core, is about managing your expenses more effectively.

Definitely a crucial aspect for stability and building a cushion, but it's ultimately a game played on the defensive side of the financial field.

Cutting expenses has a mathematical ceiling.

You can only reduce costs to zero, but zero isn't wealth.

Even if you eliminated every discretionary expense, you'd still be playing defense in a game that requires offense to win.

Focusing obsessively on 'saving' money through expense reduction is being anchored to the wrong metric entirely.

The discount tag tricks us into feeling victorious about a purchase, just as the savings mindset tricks us into feeling financially productive while we're actually treading water.

Both are anchored to scarcity thinking and we keep circling back to the same limited pool of resources rather than peeking into abundance creation.

In this context, the question on the title more so challenges the entire framework that equates frugality with financial progress.

I don't think the path to riches is paved with extreme frugality, which usually stems from a fear of not having enough.

But I guess it's an uphill battle when the entire financial system profits from keeping us focused on managing existing money.

Banks love savers, but they get rich from borrowers and investors.


Thanks for reading!! Share your thoughts below on the comments.