WHY DO WE MAKE spending decisions that we later regret? Yes, we tend to live for today and give scant thought to tomorrow. But it’s more complicated than that—which brings me to four insights from psychology.
I find the insights below fascinating, in part because they describe how I behave with uncanny accuracy. Many readers, I suspect, will also catch a glimpse of their own behavior:
Moral licensing. If we do something good—exercise, give to charity, work late, purchase an eco-friendly product—we often give ourselves permission to do something that’s not so good, such as rewarding ourselves with junk food or a new pair of shoes. In fact, research has found that simply thinking about doing something good, even if we don’t follow through, can prompt not-so-good behavior.
This is certainly a mindset I have. If I’ve been careful about my eating all week, I feel I “deserve” something unhealthy. Two decades ago, when I regularly ran marathons and half-marathons, I’d typically do my long runs on Saturday morning—and spend much of the time pondering the Italian sub and fries I’d devour afterwards.
Willpower budget. As with moral licensing, this is another explanation for why we slip from the straight and narrow. The notion: If we’ve been disciplined all day—eating carefully, focused on work, going to the gym at lunchtime—we might reach the end of the day with our willpower budget depleted, leading us to have that extra glass of wine or an extra-large slice of pie.
Can we expand our willpower budget? It isn’t clear. But if we can take our desired good behavior and turn it into habits—perhaps we make it a point to always exercise on certain days, always have a salad for lunch and always max out our 401(k)—these things may come to require little or no willpower. Our good habits may not expand our willpower budget, but they could free up part of that budget for other areas where we’re trying to improve our behavior.
Even so, we’ll occasionally find our self-discipline at a low ebb. If you’re like me, you have much more discipline early in the workweek—and far less come Friday, when pizza, a movie and a glass of wine prove irresistible.
Signaling. We’re constantly projecting an image of ourselves to others with the possessions we buy and the activities we engage in. A BMW sends one signal. A Prius says something quite different. The danger: We end up spending money in ways that send the desired signal, but aren’t things we truly care about
I’ve become perhaps too aware of signaling. As I read emails and talk to others, I find myself paying careful attention to what’s said—and what self-image the person is trying to project. Some folks are more subtle than others, but we’re all doing it, consciously or not.
End-of-history illusion. As regular readers know, I just moved to Philadelphia. It was a big change—returning to city life, downsizing, buying a place where I hope to spend the rest of my life—and it seemed like the end of a turbulent time and the start of a new, more settled, more tranquil period.
When I mentioned such thoughts to my daughter, she laughed—and rightly so. I am suffering from what’s called end-of-history illusion. We look back and recognize all the upheaval in our life and how much we’ve changed, and yet we assume all the learning and growing is now over—and there will be far less change in future. And we are, of course, kidding ourselves: What we want from life will continue to evolve.
One implication: The consumption decisions we make today—the homes we buy, the furniture we purchase, the art we hang on the walls—may prompt a rueful shake of the head a few years down the road. If it’s a modest purchase, this probably doesn’t matter, because the flared jeans and combat boots will likely wear out before our tastes change.
But if it’s a purchase that’ll potentially be with us for years to come and that’s difficult to undo, we should probably think hard about our future self and how he or she will view today’s decision. We’re talking here about things like second homes, backyard swimming pools, boats, timeshares—and, of course, body piercings and tattoos.