MP Dunleavey: Your 'stealth budget' can control spending

Women in Red

How to control your sneaky spending

That shopping list in your head has more slack than the one in your hand. (It's how 'unplanned' purchases land in your cart.) Use this knowledge to your advantage.

By MP Dunleavey
MSN Money

One of the most common complaints I hear from readers is that they've never found a budget that works for them.

My response is usually along the lines of, "Hello, you have to make the budget work, not the reverse!"

Now, it seems, there's some scientific evidence for why budgets (and the people who use them) often fail.

A forthcoming study in the August issue of the Journal of Consumer Research has found that most people embark on shopping trips with two budgets in mind: the official "this is what I'm going to buy" budget and a stealth budget, which allows them to spend more.

That's right: You may wince when the cash register spits out a receipt for $74.97; you had no intention of spending so much! Again! But this new research suggests that on some level you knew what the final tab would be -- and that you even had a mental budget for it.

You sneak.

Obviously, there are hazards to double-budgeting. But by understanding your kooky mental accounting system, you can control your spending.

'In-store slack'

People like to think of accounting as based on ledgers and spreadsheets. But mental accounting, a bona fide aspect of behavioral economics, is less concrete and a lot more slippery.

You don't keep records in your brain, you may have noticed. (In fact, studies show that people's ability to recall the exact amount of a purchase they made just minutes before can be fuzzy. This is particularly true when you use credit cards.)

And although how much money you have, how much you want to spend and how much you allow yourself to spend should be related, they aren't always. For example, in the new study, "Planning to Make Unplanned Purchases? The Role of In-Store Slack in Budget Deviation," researchers document a phenomenon they call "in-store slack."

The study was conducted by Karen Stilley, a post-doctoral fellow at the Katz School of Business at the University of Pittsburgh; Jeffrey Inman, a Katz professor of marketing; and Kirk Wakefield, a professor of marketing at the Hankamer School of Business at Baylor University.

In two surveys, shoppers were approached as they entered a grocery store. Researchers asked them what they planned to buy as well as what they planned to spend.

Turns out, about 75% of shoppers entered the store knowing they were going to buy more than what was on their shopping lists.

People with fewer itemized purchases had more in-store slack and spent more on "unplanned" items. People with longer itemized lists had less money in their stealth budgets.

Either way, most people went into the store anticipating the final total -- and they were correct. The authors note that previous research has shown that asking people for their spending predictions doesn't influence the amount they spend. Thus, many shoppers do seem to possess a double budget.

Continued: An extra 33%?

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