People spend money in different ways.  Some keep track of daily, monthly, or general spending, others have no structure, and some follow a strict budget.  The cadence by which people spend may require adjustments from time to time, especially if something unexpected comes up.  Speaking of which, unexpected expenses are a good reason to start a regular savings plan- paying yourself first– as part of any budget, whether formalized or not.

As much as budgeting and spending come in many forms, how spending is categorized is remarkably similar for many people.  Consider that those who spend more than expected for a meal out may cook more at home to make up for it.  The sticker shock of the high restaurant bill may prompt an act of cutting the family dining budget for the coming week or more.  Research conducted by Chicago Booth in the article below gives a thorough explanation of how people categorize spending.  In the example above, the high cost of the restaurant bill can also be made up by cutting back on gifts or putting off the purchase of clothes instead of associating it with cooking more at home.

On the flip side, an unexpected discount or bonus may be accounted for in different ways.  Knowing it would be spent otherwise, some take the savings and put it away, while some (maybe even most) spend it on other things.  For example, someone getting a surprise credit or discount on a plane ticket may spend more on a nicer place to stay.  Some argue it’s like getting a nicer place for free.  For those who pocket the savings, it’s like getting the same trip for less.

Money burns a hole in the pocket for some, while others can rub two nickels together and get a quarter.  The personal savings rate in America has declined when compared to before Covid, but is starting to rise again.  Spending habits just depend on how people are wired.

The Booth researchers take a deep dive into spending habits here, so take some time to read it- and let me know what you think by clicking here to email me.  Enjoy- and I’m interested in what you think!

~ Brian Kasal- The Leadership Matrix

Click here- Your Spending Habits Are All in Your Head

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P.S.- Did you see my last Leadership Matrix post?  Out of Sight and Out of Mind?