The Best Way to Control Your Spending

Source: Photo by Damir Spanic on Unsplash

What is the one strategy that would help you finally ignore all those tempting purchases and stay within your budget every month? Perhaps you should create detailed budgets? Leave all cash at home? Leave everything else and bring only cash with you?

Or, perhaps you already know the best way to control your own spending.

What the research says

Recent research published in the Journal of Experimental Psychology suggests that financial self-control strategies people already use are best at reducing their spending — and that these strategies outperformed expert advice such as empirically tested and published financial self-control strategies.

Dr. Peetz and Dr. Davydenko at Carleton University assigned participants to either read about empirically tested financial self-control strategies that were deemed effective in the academic literature or to list their own personal self-control strategies they’d already been using. They then tracked participants' spending over a month and compared these two groups' spending to a control group in which participants were not reminded of any financial strategies.

Across two separate studies, participants who listed their own financial self-control strategies once on the first day of the month and again several times during the month spent about $230 less during the month (or about 10% of their total monthly spending) than the control group. In contrast, participants who were informed of several expert strategies did not spend significantly less money that month compared to the control group.

The effectiveness of personal spending strategies

Why were personally generated strategies so much more effective? Were they perhaps simply "better" strategies? A closer look at the types of strategies people listed contradicts this possibility — about half of the strategies people generated were very similar to the "expert" strategies.

However, personal strategies tended to be more specific than generic advice. Compared to general advice such as setting a budget, people described using a particular budgeting app that worked well for them or described making daily, weekly, vs. monthly spending plans. Some strategies were very idiosyncratic such as converting each dollar spent into the minutes spent working to earn it to increase the pain of paying.

Overall, personal strategies were rated as being a better fit with their personality by participants than the provided strategies. Thus, personal strategies may be more effective than expert advice in part because they align with personal values and personality traits. For example, a person who is future-oriented and conscientious might benefit from strategies such as budgeting, whereas a person who feels emotions strongly might benefit from strategies such as anticipating regret over unnecessary purchases. The same strategy won’t work equally well for all people.

Source: Photo by Emil Kalibradov on Unsplash

So, if you are struggling with spending more than you’d like, the most effective way to reduce spending may not be to look for others’ advice but to think about what strategies have worked for you in the past. Call those financial self-control strategies to mind and keep using them!