If you do most of your banking via app, then you may have set up a spending alert that tells you when your account balance is running low.
But when you've received that ping, perhaps after a weekend of marathon brunching or an end-of-summer beach trip, did it actually help curb your spending?
The answer to that may depend on whether you are an overspender to begin with, says a recent study out of the University of Wyoming that sought to test how well electronic nudges worked to limit the spending of self-professed spendthrifts, tightwads, or people who believe they are neither.
Researchers set up an experimental auction in which subjects were given money and a generic jar of honey that was theirs to keep. They were then given the opportunity to bid on presumably higher-quality, locally produced honey — although they were told that the higher the bid, the less cash they would take home in the end. During the auction, they were given electronic reminders that the less they spent over the course of the experiment, the more money they would have for other purchases.
One of the study's authors, Linda Thunström, told the Wall Street Journal that they expected the alerts to work best on spendthrifts and the neutral people, because these types are typically less aware of how much they spend. Instead, only the tightwads saw a reduction in their spending. Why? The researchers believe that because tightwads already feel pain from parting with their money, the alerts only exacerbated their discomfort; they didn't evoke the same level of emotion in the other subjects.
In other words, the alerts only seemed to work on the people who didn't need it to begin with. For controlling the spendthrifts, Thunström believes that using automated withdrawals to regulate how much money they have to spend may work better than automated alerts.
If that sounds familiar, it's probably because it sounds a lot like our One-Number Strategy. This budgeting method starts with your monthly take-home pay and subtracts your fixed costs, financial goal contributions and any savings you're putting toward paying nonmonthly expenses. What's left over is your "one number" that you can spend on any flexible costs, whether that's take-out, gas, shopping, movie tickets — even premium honey. Divide that figure by 4.3, and you've got a weekly number to work with that's yours to spend however you like.
Not only does this method let you spend your money guilt-free (tightwads, this means you can enjoy yourselves), but it also helps you know that you're not living above your means (listen up, spendthrifts). If you need to get your budget in order, learn more about the One-Number Strategy here.