Expert: New frugality is here to stay
We're creatures of habit, and our new habit of saving more is sinking in.
Will people continue to save, pay down debt and pursue frugal ways once the economy noticeably improves (oh, and can that day come soon enough)? Everyone has an opinion about that, but when Dan Ariely speaks, we tend to listen very closely.
Ariely thinks we’re developing a new set of habits.
He’s the Duke University behavioral economist (formerly at MIT) who wrote the bestselling book, “Predictably Irrational: The Hidden Forces That Shape Our Decisions.” In it, he examines why we make the spending choices we do. For instance, “free” compels us to do strange things.
Here’s one example from The New York Times:
In one experiment, to test the power of "free," Ariely and two colleagues set up a table in an MIT cafeteria. They offered normally high-priced Lindt chocolate truffles for 15 cents and ordinary Hershey kisses for a penny. Customers had to pick one or the other, not both. Seventy-three percent of the customers saw a good deal and went for the truffles. But when the prices were cut to 14 cents for the truffles and free for the kisses, 69 percent of customers went for the kisses, even though the truffles were an even better deal.
"Few of our decisions are made after a cost-benefit analysis," he told Mary Cornatzer of the Charlotte Observer. "Instead, we do things based on habits. ... This economic recession was a chance to slow down, stop and have a chance to think. We get to adapt to a new pattern of change."
Rather than doing the math, we think about how we feel when we spend money. If we get in the habit of feeling uncomfortable about spending, that’s likely to stick with us, Ariely said.
Even Ariely, a tenured professor who probably has a pretty good income, says he feels like that, even though so many things like vacation travel are being discounted now.
The Observer story also said Ariely encourages people to think about how they can get more happiness from the money they spend -- now and in the future. “What gives you more pleasure, a cup of fresh-roasted coffee or cable TV?” Cornatzer wrote. “Figure out how much each is costing every month and which you get more value from before deciding what to cut.” You'll be more likely to stick with the decision.
What do you think? Do you have new spending and saving routines, and are they going to remain in your life when the economy gets better?
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