ATHENS, Ga. — Does your money quickly disappear right after payday, or do you carefully account for every last penny? A new study finds that how people think about their money impacts how they spend it. However, answering three simple questions can change the way you handle your finances and even help you save more money.
Researchers from the University of Georgia surveyed over 230 people who had to rate how much they agree with these three statements:
- I can predict the situations when I will spend more than I meant to.
- I know what I should do differently to manage my money better.
- I know what motivates me to spend or save the way I do.
“We can all think of those things that we know we should do but don’t,” says lead author Kristy Archuleta, a professor in the College of Family and Consumer Sciences, in a university release. “Like, I know I should get up and work out every day. I know I should eat more fruits and vegetables. But do I do those things? For me, it depends on the day. The same is true with our money.”
Knowledge is (financial) power
The volunteers also reported on their personal money habits, including how often they save money for retirement or pay off their credit card bills in full. Then, researchers tested each person on their knowledge of stocks and inflation. Finally, the team asked the group about their level of anxiety regarding the state of their finances.
Researchers discovered a connection between how people think about their financial situation and the actions they take with their money. Moreover, the team found that improving how much people know about finances, finding something to motivate people to change their spending habits, and reducing financial anxiety all helped the participants to engage in healthier financial habits.
Study authors say that if you know what money issues trigger you to spend more, you can figure out the best way to avoid those situations and hold onto more of your cash.
“Maybe when you’re stressed, you know you’re going to spend more money because that’s how you cope with that stress,” Archuleta says. “So maybe you get up and go for a walk instead of sitting at your computer looking through Amazon.”
“If I know what motivates me to save money, maybe I’m going to be more likely to do it,” the researcher concludes.
The study is published in the Journal of Financial Counseling and Planning.