FRIDAY Aug. 15, 2008 -- Can't save money? Spending too much? Both? Don't blame just the economy or old habits.
Psychologists and marketing experts have found that the time frame of your savings goals, plus your sense of well-being and your spending style, could all play a role in your personal cash flow situation.
"Some people think, 'We have no incentive, that's why we don't save,' " said Leona Tam, an assistant professor of marketing at Old Dominion University in Norfolk, Va., who was expected to present her study findings at the American Psychological Association's annual meeting, Aug. 14-17, in Boston.
But Tam has found that the ability to save money has more to do with whether people focus on short-term goals -- planning to save money next month -- rather than long-term goals -- planning to save next year. Those who focus on short-term goals do better, she said.
Tam asked 678 adults to estimate how much they could save in the next month, and then how much they could save in a specific month in the future, or the next year. The participants always saved closer to the estimate -- or even more -- for their next-month goal, and fell short for a specific month in the future.
"Savings are significantly lower for people who estimate higher for a future time frame," she said. "They think they can actually save more in the future," compared to the very near future. "That could explain why most of us don't save enough."
The solution? Set short-term savings goals, Tam said, to close the gap between estimated and actual savings.
A second study scheduled for presentation at the meeting found that your consumer "type" and your sense of well-being affect your spending habits.
In past research, study author Miriam Tatzel, a professor of psychology at Empire State College, State University of New York, found four consumer "types," based on attitudes about money and how materialistic people are. Her new study involved 329 adult college students, on average 38 years old.
"Value Seekers" are materialistic but tight with money, while "Big Spenders" are materialistic and loose with money. "Non-Spenders" are tight with money but not materialistic, while "Experiencers" are loose with money and not materialistic, she wrote.
Tatzel then gathered information about well-being to gauge which types of spenders are happiest. The least happy are Big Spenders, who often have credit-card debt. The happiest are the Experiencers, she said.
The discovery that Experiencers are happiest doesn't surprise Tatzel. "Studies in the literature show that when people reflect on how they spend money, money spent on experiences tends to leave a stronger feeling of being happy than money spent on objects," she said. Spending on travel, workshops or education, for instance, gives a happier feeling than spending on a car for these people.
And a third study found that impulse buying results in either feelings of guilt or shame, and guilt is more productive.
Sunghwan Yi, a professor at the University of Guleph in Ontario, Canada, asked 222 college students how they felt after buying something on impulse. Those who felt guilty used healthy coping techniques, such as making a plan to reduce impulse buying. Those who felt shame used avoidance responses, such as denial, the study found.
For more on how finances can affect your mental well-being, visit the American Psychological Association.
Posted: August 2008