What You Need To Know About Making Better Spending Decisions

If you're like me, the crawl toward re-opening has meant the (more sudden) re-opening of your wallet. Having more plans means spending more money, whether it's on brunch, booze, baby showers, or big trips. In some ways, it's freeing! We get to see our friends and families again and can return to activities we loved.

But that freedom is a double-edged sword. Spending more money can feel good in the moment, but letting your guard down could result in the old end-of-the-month scramble for rent. There's no shame in it: we're so encouraged to spend money, especially now, that we can lose sight of our "future selves."

This is what I wanted to talk about today. Over a year ago, I started doing this thing when I wanted to spend money on something, whether it was a new eyeliner pen or an extra order of takeout, I thought of how my future self would feel about the money I spent. Would she be happy to have that cool new eyeliner or eat that pricey meal? Or would she wish she saved that money for something else? More often than not, the answer was the latter.

Now to be clear, part of the reason that this works for me is that I know that I value safety and security. If I envisioned myself saving money instead of spending it, I was able to think of my future self feeling calmer and more grounded. Maybe that sense of calm isn't what does it for you though. The motivator could be feeling like you have enough money to travel, or donate, or help a family member out when they need it.

Scientific studies show that this thinking is effective, but it depends on how you do it. According to a 2011 study published in the Journal of Consumer Research, "The less consumers are closely connected psychologically to their future selves, the less willing they will be to forgo immediate benefits in order to ensure larger deferred benefits to be received by that future self."

Another study, this one published in Psychological Science in 2013, put a different spin on the topic. The researchers found that rather than simply thinking about your future self — the smarter/cooler/hotter/stronger version we all imagine — thinking cyclically about the future is more helpful when you're trying to save money.

The researchers told some of their participants the following: "The future will be exactly like the present: if you save money now, you will save in the next pay period. If you don’t save money during the present pay cycle, it is likely you won’t save money in the next cycle. We want you to focus on your personal savings in the present, and that is all. What’s more, at the end of the day, you will be able to look back and see how much personal savings you have achieved."

They told the other group that "saving money is not an action that is the end goal, but rather a means to the more important goal of attaining something which lies in the future, such as your retirement or a better life in general."

On average, the folks in the first group saved 82% more money than those in the second. In the first case, the participants are still thinking about the future: they're just presented with a more realistic version of it. It's a matter of momentum, rather than optimism.

So maybe that's the key to improvement: not simply thinking that you'd like to be better in the future, but you must instead take an action now that sets you up for success.

Now, there are limitations to this thinking. First, in some cases, there is an impossibility to "thinking of your future self." Sometimes you have to plunk money down right now for a big hospital bill because uh... you have to live. Same goes for choosing between buying food for yourself now vs. saving money for things later.

However, if you find that you're chronically overspending on things you don't need, this brain change may be exactly what you need to get through this great re-adjustment.