How you think about money affects what you do with it

Changing the way you think about spending, saving can change financial behavior, study suggests

You know you should set aside some savings with every paycheck, live within your means and invest your money wisely. But do you?

A new study from the University of Georgia suggests that answering three questions could give people insight into their spending and potentially help them change their behavior in the future.

More than 230 people rated their agreement with three statements:

  • I can predict situations where I will spend more than I wanted to.
  • I know what I should be doing differently to manage my money better.
  • And I know what motivates me to spend or save the way I do.

“We can all think about those things that we know we should be doing but aren’t doing,” said Kristy Archuleta, the study’s lead author and a professor in the College of Family and Consumer Sciences.

Kristy Archuleta

“For example, I know I should get up and train every day. I know I should eat more fruits and vegetables. But do I do those things? For me, it depends on the day. It’s the same with our money.

Participants also reported on their financial habits, such as how often they set aside money for retirement or pay their credit card bills in full. And they were tested on their financial knowledge of things like stocks and inflation and asked about anxiety about the state of their finances.

Researchers have found a link between how people think about their finances and their financial behaviors. The study showed that improving financial knowledge, seeking motivation to change spending habits, and reducing financial anxiety all led to an increase in positive financial behaviors.

Recognizing spending habits is key to improving financial habits

Identifying situations where you are likely to spend more can help predict triggers. Once you know what these triggers are, you can find ways to avoid them.

“Maybe when you’re stressed, you know you’re going to spend more money because that’s how you deal with that stress,” said Archuleta, who works with coaches and financial planners to help them better help customers. “So maybe you get up and go for a walk instead of sitting at your computer looking on Amazon.”

Understanding what drives you to spend or save the way you do can motivate you to make lasting changes to budgets. “If I know what motivates me to save money, maybe I’ll be more likely to do so,” Archuleta said. The three-question assessment is a good starting point for people to start assessing why they do what they do with their money.

The statement “I know what I should do differently to manage my money better”. It’s awesome. … What is one thing you can do today to help you do that? —Kristy Archuleta, College of Family and Consumer Sciences

For financial advisors, the assessment also provides an easy entry point to dig deeper into why people save or don’t save as they should.

“For example, the statement ‘I know what I should do differently to better manage my money.’ It’s awesome. Follow up with a question such as: What is one thing you can do today to help you do this? said Archuleta. “Maybe it’s making your lunch before work so you don’t have to spend money on eating out. What’s the doable thing? What motivates you?”

Published in the Journal of Financial Counseling and Planning, the study was co-authored by Christina Glenn, Derek Lawson, Joy Clady and Syble Solomon.

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