Mindless Spending 2: You'll Get By with a Little Help from Your Friends

The following is a guest post from Marotta Wealth Management.

Both mindless eating and mindless spending rely on our subconscious need to follow scripts to pace our consumption. Community plays a huge role in regulating our financial destiny--either a path of savings that builds real wealth or a path of spending that leads to impoverishment.

In one study cited in Brian Wansink's book "Mindless Eating," people were invited several times to a lunch of pizza, cookies and soft drinks. They were watched both eating by themselves as well as in groups of four or eight. When the subjects ate alone, researchers used a baseline that allowed them to categorize people as typically light or heavy eaters. Interestingly, when people dined in the groups, the quantity they ate changed.

Light eaters ate more in a group, and heavy eaters ate less. Both kinds of eaters conformed somewhat to the average pace and quantity of the group's consumption. Mindless spending works the same way.

If you tend to be a conservative spender, shopping in a group can easily entice you to buy more than you would normally. Conversely, if you have trouble saving money, taking along a frugal friend will help you resist. In fact, following the lead of penny-pinching friends or family can help you evaluate your own lifestyle and change the way you view money.

Millionaire couples may have very little in common except that they all answer "yes" to these three questions: "Are you frugal? Were your parents frugal? Is your spouse even more frugal than you are?" A culture of frugality builds a lifestyle of wealth. You subconsciously learn an appropriate lifestyle from those around you.

My wife and I formed our spending habits right out of college. Our first community of friends earned very little. Their lifestyle made even ordering pizza an extravagance. Combined with the example of my parents' depression-era thrift, we started saving and investing early.

In contrast, if your parents golf at Farmington or play tennis at the Boar's Head Country Club, you may struggle to maintain a frugal lifestyle. If your friends live rich, you will too. Your spending scripts will be based on comfort and convenience. You will get the deluxe model with all the features. And you will invariably buy the added service, protection and accessories.

Spending money just to socialize with friends is an especially common trap. Teenagers who work all day for minimum wage and then go out for dinner and a movie can easily end the day having spent more than they earned. Meals out in expensive restaurants with elaborate appetizers, drinks and desserts add both to the bottom line as well as to your waistline. Consider inviting friends over for potluck and a game night, and everyone might afford to send their children to college.

Spending money is contagious. If you go to the mall and a friend is hunting for the perfect purchase, it's easy to get caught up in the excitement. If you want your turn in the spotlight, you have to be shopping as well. Even if what you buy is small, the expense still depletes your finances.

And if you don't spend money or you resist going to the fancy restaurant or the full-priced movie, you risk being perceived as cheap. You may even worry that your friends won't invite you because you spoil the party.

By voicing your concerns, however, you may allow others to agree without feeling as uncomfortable. Truth be told, the person most worried about the expense is often the most secure financially. After all, wealth is what you save, not what you spend. And if your friends won't adjust to help you meet your financial goals, maybe you need different friends.

A life of country clubs, facials and galas will obligate you to spend money. If your social life includes such activities, budgeting will be difficult. Your financial stability may ultimately require developing relationships with people who are more fiscally conservative. It's your choice either to live rich or actually be rich.

Spending habits begin very early as we follow the lead modeled by our parents. In many homes, financial matters are a well-kept secret. Children are left to guess and infer from their elders’ actions and cryptic remarks. As a result many children learn habits that threaten their ultimate happiness and success.

George Kinder, author of "The Seven Stages of Money Maturity," asks his clients to write an autobiography that focuses on their relationship to money and the beliefs they have acquired. This exercise can help you examine your ingrained assumptions about money. Belief is powerful. As people think, so they will act.

And if everyone around you is doing something, it seems normal. Consequently, one person in a family can't single-handedly change the family's financial DNA. Deeply entrenched traditions generally will overwhelm any one family member who tries to question them.

So galvanize the whole family behind budget changes. It takes explicit communication. Children as young as four years old can contribute and learn from the process. There's no stigma attached to living within your means. If a budget isn't a team effort, then one family member will end up holding the purse strings and everyone else will be resentful.

Both spouses must start on the same page and with the same degree of humility. Every financially struggling family has one partner who believes he or she is the careful one with money and that any financial problems are the other person's fault. Most of the time, this generalization is untrue. It is relatively easy to be frugal by comparison if you abdicate all the spending decisions to your spouse. That way you can enjoy the results of spending without any of the guilt.

Serving as a role model in the family includes setting the pace and nature of spending. Learn to regulate when and how much money gets spent. Norms are set in the trenches of everyday spending, not in criticizing the number of presents on Christmas morning.

Even the most reclusive among us relies on spending scripts and norms to regulate when to open their wallet and when to refrain. If you are happy with your spending scripts, that's great. But if you are trying to change them, you need a little help from your friends.

Behavioral changes are best reinforced when you ask everyone you know to help you make the change permanent. It takes explicit thought and energy within your social network to overcome mindless spending scripts. And it takes a consistent effort for at least a month or more before new habits begin to take root.

The task is challenging but certainly not impossible. And small behavioral changes can result in building significant long-term wealth. The reward of financial peace and security is worth developing a prudent and thoughtful lifestyle.

Comments

[Holly]

It is interesting how easily one can get caught up in the shopping frenzy while in the company of those who spend freely. It can be difficult to embrace frugality when companions see thrift as boring or unnecessary. Just like the story of the grasshopper and the ant, the friends who've been mindlessly spending will be knocking on your door when times get tough. You may need to pretend you're not home!

[Crystal]

Did the writing seem a little choppy to anybody else?

That said, I do completely agree that a group changes its behavior towards the average. When my friends and I go out, I always end up spending a little more than I normally would and they end up spending a little less.

My closest friend always comments that we should do all our shopping together after one of our outings. I always reply with a grin that I couldn't afford it...it gets a laugh every time. :-)

As a side note, my husband and I are in a couple of board gaming groups that get together monthly at each other's homes for a themed potluck and board gaming nights. They really are an inexpensive way to have a bunch of fun. The homeowner provides the main course and everybody else brings the sides. It usually runs $20-$30 for the host and $5-$10 for everybody else and we switch out every month. I think it's more than worth it for a complete evening of fun (6pm-2am) and TONS of different food...sometimes we all bring tupperware to split up the leftovers.

[Tyler]

One advantage of a recession... its a lot easier to cut back without feeling any social pressure. "Its a recession," makes for a great excuse!

[Old Limey]

America is very big on Groups.
I know people that are in so many that they rarely spend an evening at home. This is not the way it was at all when I was growing up and from what I gather it hasn't changed very much back home. The group activity starts early in U.S. schools and involves the parents a great deal. At my all boy's grammar school in England there was ZERO parent participation, all sports activities were also intramural, i.e. we never competed against other schools in any form of athletics. That's a huge cultural difference between two English speaking countries that are similar in many other ways. One outgrowth of this is that in England there is a broad acceptance of individuality - it isn't a problem if you are eccentric and want to be different. However I noticed very quickly when my children started in the U.S. educational system that it was very important for them to be one of the group and to be accepted and that it wasn't cool to be an individual and be different.

The effect of group pressure on one's behavior is definitely quite significant - most people want to be well accepted members of the group and not to feel like a loner or an outsider. Although the two group activities that I am involved with don't involve money, i.e. my hiking group and a U.S. history class that we take, I can see that if spending money were part of the group activity that the "group psychology" effect would kick in and there would be an insidious pressure for a frugal person to follow the group and spend more than usual.

I think one thing that has helped my wife and I a lot financially is that we are both on the same page and we don't give a hoot what others may think about our spending habits. We like our individuality and being different and we both decided decades ago that neither of us would join anything that took us out of the home in the evening on a regular basis. It was always very important for the family to have its evening meal together. We have carefully thought through many issues and arrived at our own conclusions about what we believe in rather than following the herd the way many people do, and if others choose to disagree - so what!

[Mike Hunt]

Old Limey,

Good observation. In my experience many US churches are like this- from the aspect that your donation is semi-public and social pressure can push people to donate. And for many the church plays a very important social role.

Is the UK like this in the church aspect?

-Mike

[Old Limey]

Mike: I went to church because my parents decided that it was good for me. England has a state religion and the Queen is the head of the church. My grammar school had a mandatory class in comparitive religions that was most interesting. I actually taught Sunday school and Bible school for a while but the big attraction for me was that it was a good place to meet girls, though I met my wife at a dance hall. My wife and I were both baptized and were married in the Church of England in a little, many centuries old, stone church. When we first arrived here we looked into the Episcopal church and the pastor visited us. The turnoff was that the first topic of conversation was "Money" and then "How Much money", that's when we lost interest. Since then we have thought about religion many times and learned a lot about other religions from our travels, but with age came the realization that it didn't make any sense so we are now both atheists but believe in the Golden Rule, of course. To answer your question, in the UK, 50+ years ago they would pass around the collection plate and people put in coins and notes, not little envelopes, so your donation was quite public in those days.