How Can Setting a Budget Actually Make You Spend More? — Dollars and Sense
People looking to buy something often set a price limit for themselves. But as new research found, that may not be such a good idea -- in fact, budgeting could even make you spend more.
In a study examining the spending habits of consumers, researchers from Brigham Young University and Emory University asked some buyers to set a spending cap and others to be more flexible when purchasing a variety of objects.
In one example involving people buying pens, almost 60 percent of participants who set a budget spent about a dollar or more on a pen, but just 39 percent of those who didn't have a spending limit shelled out that much. And this pattern wasn't just seen with pens -- the same was true even with big-dollar buys like TVs.
Why? The researchers say that when we set a budget, we only look at a narrow range of products around that price point, so small differences between them look more significant. That in turn makes us seek out products with small incremental benefits over the others, so we often wind up buying more expensive items.
But when we look at things without a budget in mind, we examine the quality of a broad range of products, giving us a better idea of the smartest price -- which typically results in spending less.
So instead of focusing on price, the researchers suggest looking at a wider range of attributes. For example, if you're looking for a 15-inch laptop, check them all out -- that'll provide a big-picture view that can then lead to a lower price.