Sustainable Money – Tara Siegel Bernard on Why Budgets Don’t Work – NYTimes.com
Budgeting is a challenge for most people. I thought this article had some interesting ideas on controlling your cash flow.
What would you do if your wallet became harder to open as your spending approached or exceeded your budget? Would you think twice about where your money was going?
A product designer at M.I.T. who created a working prototype for such a wallet seems to think so, and he may be on to something. Part of the reason so many people spend too much, or fail to stick to self-imposed budgets, is because parting with our money has become an abstraction in our increasingly cashless society. Credit cards provide immediate gratification, but no immediate consequences. Plucking actual dollars from your pile of cash, research suggests, is more painful, and leads you to spend less.
There’s another factor that prevents people from being model financial citizens (besides, of course, uncontrollable circumstances like joblessness). As a species, humans are notoriously poor at following through with their plans. Sticking to a budget — a dirty word even among many financial planners, who prefer the more euphemistic “spending plan” — feels too much like dieting. And we often fail at both for the same reasons: too much focus on the restrictions, not enough on fun. So it’s not surprising when people end up bingeing later, more than making up for dollars not spent or calories not consumed.
On Mint.com, the popular money-tracking Web site, top goals among the nearly half a million users who set them include paying off debt, creating an emergency fund and saving for retirement. All virtuous goals, to be sure.
The battle, say money and psychology experts, is finding ways to close the gap between good intentions and human nature. So at a time when every dollar counts, how can you accomplish what you’re not necessarily wired to do?
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