The Hidden Reasons People Spend Too Much

How can people get their spending under control?

Ask most people, and you’ll get the same answers. They should set budgets. Cut back expenses to better match incomes. And monitor their purchases to keep themselves on the straight and narrow.

Yet all too often when people try to take those steps, they fail. Before they know it, the bills pile up and they end up right back where they started.

Researchers are beginning to discover why you can break your budget despite getting all the basics right. Why? What drives us to spend too much even when we seem to make all the right moves?

Researchers are just beginning to understand—and the answers seem to lie in psychological impulses and blind spots that are tough for people to recognize, let alone overcome, in their day-to-day lives.

People’s mental wiring, for instance, is great at forecasting future income but terrible at imagining future expenses, leading us to set unrealistic budgets. How we think about our emotional resources also matters: If people imagine willpower as something that’s limited, they feel the need to reward themselves with things like impulse purchases when they accomplish a goal. And sometimes people unconsciously place such a high value on seeming financially responsible that they end up making choices that cost more money—like making big purchases on credit instead of tapping savings.

Here’s a look at what science is uncovering about our hidden impulses to spend and save, and how we can correct some of our worst mistakes.

Source: The Hidden Reasons People Spend Too Much

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