Tax rebate? Tax bonus? The semantics of spending

If President Bush wants us to spend that tax rebate, he needs to call it a tax "bonus." Or so wrote behavioral scientist Nicholas Epley in a New York Times guest column.

"A rebate, psychologically speaking, is the return of a loss of one's own money ... so it is unlikely to be seen as extra spending money," wrote Epley, a professor at the University of Chicago Graduate School of Business.

In one experiment at Harvard, he and some colleagues gave out $50 checks. Half the study participants were told it was a "rebate," while the other half got a "bonus." A week later, the bonus recipients had outspent the rebate crowd by more than 50 percent.

• Bing: Should you save or spend a tax rebate?
  

Can simple word choices really make that much difference? Sure they can. The word "budget" makes some people's jaws clench. Somehow the phrase "spending plan" sounds a lot better.

Force vs. choice
"Budget" sounds like deprivation, lack, bean-counting. It feels like something being taken away, namely the ability to spend one's own hard-earned dough.

A "spending plan," on the other hand, is a nice balance of action and autonomy. Here's some money. Plan carefully before spending. But do spend it.

"Budget" is a faceless authority figure hectoring you over every dollar. "Spending plan" is a direction in which those dollars could go -- or, as Smart Spending partner blogger J.D. Roth calls it, "a roadmap for your money." 

I like maps better than lectures. The former gives me a chance to direct my own route in life. The latter makes me feel like a naughty child who's about to get grounded, or at least lose dessert privileges.

Call it what you will
When the clock nudges 8 p.m. at a baby-sitting job, here's what I say to the child in my care: "Do you want to read a story before or after you put on your pajamas?"

The fact is, it's bedtime and that's that. But if he feels that he has some choice, however small, there's a lot less whining.

It's the same for us tall kids. There really is no difference between a budget and a spending plan. Yet if a semantical switch is what you need, then use whatever phrase you like. Call it a spending plan or a roadmap or even Bob the Budget, just as long as you take charge of your money.

Track your spending. Craft some financial goals. Implement them. Note your progress. If necessary, retool your goals or -- best-case scenario -- add more.

And as for the tax rebate/bonus? Call that whatever you like, too. Just be sure to factor it into Bob the Budget.

Published Feb. 8, 2008