Thursday, August 6, 2009

Spending Mind Games

Every so often I play a little game where I see how long I can go without spending any money. It usually lasts for only a few days, but it’s amazing how easy it is do without the small purchases in life when it becomes a competition. I'll leave it to others to stimulate the economy with their spending.

I should point out that I have an advantage over many people in this game because my wife makes almost all of the grocery purchases. What usually trips me up is having to buy gas for my car.

I don’t really keep track of my results, but going for a week without spending a single penny is not unusual for me. I suspect that some of my more frugal friends can go this long without even realizing it, but not so for my more spendthrift friends.

Some people average two stops for drive-through coffee and doughnuts each day. They also buy pop and chocolate bars from vending machines regularly. They seem addicted to spending money in small amounts frequently.

I’d love to learn more about the psychology of people’s spending habits on small purchases. The best source of such information is likely the research groups doing work for companies on the money receiving end of these small purchases.

5 comments:

  1. I recently read that when we see something we want to purchase, our brain is stimulated in the pleasure centre. Then when we look at the price, the pain centre is engaged.

    Spendthrifts apparently feel the pain less, and thrifty people feel the pain more.

    As far as little purchases go, maybe the pain of spending under five dollars is negligible for easy spenders.

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  2. Gene: The idea of a threshold for spending pain is interesting. I've noticed with a couple of friends that anything under $20 seems to qualify as insignificant.

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  3. For several years now, my wife & I have tracked every penny we spend month-to-month. Now that we have built up lots of experience, going into each month we have an excellent idea of what we are going to have to spend on what we call 'expected expenses'. These even include a bi-weekly personal cash 'allowance' each to cover anything fun we want to do or buy. The intention of these allowances is to try and help limit minor withdrawals, impulse buying, ATM fees, and personal spending-related guilt. Overall, This system has really worked out well for us.

    HOWEVER, we still have lots of unplanned expenses that really add up and drive me NUTS. Take July for example:


    Purchases <$50 - 22 at a totaling of $565
    Purchases $50-100 - 5 totaling of $400
    Purchases >$100 - 1 totaling $129

    So there you have it - almost $1100 of unplanned spending of which more than 1/2 was small purchases. Grrrrr......

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  4. Chris: It sounds like you have a good system. The way that small expenses add up may be frustrating, but at least you're tracking it, which puts you ahead of most people.

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  5. Thanks Michael, it ain't perfect but it helps. My wife & I aren't exactly lavish spenders but it was amazing how we were able to turn 6-figure salaries into near-negative account balances each month. Her weaknesses: lunches with friends and magazines. Mine: Beers & wings with the guys and gardening crap. We still do all that stuff, but in moderation!

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