An interesting article by Joe Pinsker
Footnotes: 'Behavioral Economics' |
PHOTO: BETTMANN / GETTY
The rule is simple: After you buy something, log the transaction on your phone, recording the price and what you bought. The idea is to increase the pain of paying, especially with a credit card, by forcing yourself to take note of what you're spending. A behavioral economics method on becoming a more conscious spender; improving your financial health now can equal to a secured financial future.
Some caveats: Perhaps the more definitive success of my system is the fact that, even as I have begun to earn more money, my monthly spending has remained more or less the same—a fact that I attribute in part to the increased clarity of my cash flow. (I also track my weekly spending in spreadsheets, which probably helps too.) Another benefit of keeping a ledger is that it alleviates the credit-card-induced stress of knowing that money will come due but not knowing exactly how much is owed until the bill arrives; in this way, my system adds some short-term pain but alleviates a longer-term discomfort.
Now that I’m almost three years into following this rule, I talked to some personal-finance experts to see what they’d make of it, and if they thought it might work for others. Dan Ariely, a behavioral economist at Duke University, was a fan. “Making a list of spending is very useful,” he told me, and said I’d successfully devised a way to increase my pain of paying.— Joe Pinsker
Citation: JOE PINSKER Articles via The Atlantic
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