TIGHTWADS AND SPENDTHRIFT

 

Is spending painful for you? Or are you spending freely with your credit card that you live in a constant state of buyer's remorse? Either way, do not be too hard on yourself. How we feel about spending depends a lot on how we are wired, and that has implications for everything from debt to marital harmony.

Consider the results of brain scans performed on people while they made buying decisions. Researchers found that when subjects were shown products and then prices, about 30% of them experienced a fired-up insula. The insula is the part of the brain that is active when we are getting socially excluded or when somebody is unfair to us. The study also found that about half of subjects had a more measured response when contemplating a purchase, and 20% seemed to feel pleasure and little pain.

That study was the genesis of a scale that measures how likely you are to be a tightwad or a spendthrift. Spendthrifts do not feel enough pain for their own good, so they overspend, carry more debt and feel guilty later. Tightwads, however, experience too much pain, which leads to feelings of regret for not having spent enough. It is worse to be a spendthrift because of the financial costs but neither extreme is as good as the middle group, labeled as the unconflicted. Spendthrifts are bad off financially and psychologically. Tightwads have big bank accounts, but we find that they are less happy than the unconflicted group.

Where Do You Stand?

You do not need a brain scan to figure out where you land on the scale; a simple survey will do. In a 2008 paper entitled "Tightwads and Spendthrifts" the researchers found that spendthrifts were three times as likely as tightwads to be in debt, regardless of income. 

Fatal Fiscal Attraction.

A group of researchers applied their scale to a study of married couples, "Fatal (Fiscal) Attraction: Spendthrifts and Tightwads in Marriage." Although people who are alike tend to attract one another, the researchers found that tightwads and spendthrifts regret their spending habits and often marry spending opposites to compensate. Such a marriage starts out well. The spouses "help each other meet in the middle. When dining out, for example, they do not spend thousands of ringgit on a great meal.

Tensions rise with purchases that really matter, such as cars and houses. Such marriages might be refreshing at first, but then become maddening" as couples begin to bicker over spending issues. The study suggests that spendthrifts who marry tightwads tend to be better off financially than spendthrifts who marry spendthrifts. But spendthrifts who marry spendthrifts tend to have a happier relationship even though their financial situation is often worse. When two tightwads marry, they enjoy both better finances and a more satisfying relationship.

Balance Your Spending.

To help rein in spendthrift tendencies, you can focus on the opportunity costs of buying more than you need. For example, when buying a car, instead of spending RM 10,000 on the luxury-options package, think how that money could be put to better use.

Tightwads can frame some outlays as investments - think of a vacation as an investment in productivity. They can also buy with plastic because it is less painful than paying with cash.

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