You think about setting aside money for recurring expenses that take a big chunk of your income, such as your mortgage or annual tuition bill for your children.
But you might not always follow up on those intentions. That’s because there’s daily, weekly, biweekly, monthly and annual spending for which you have to plan. And those expenses can creep up on you, Ariely said.
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Just looking at your checking account balance can be misleading.
Take two people who have the same income and mortgage payments. The first person pays the mortgage on the first of the month and the other pays the mortgage on the 20th. The second person will feel wealthier than they really are for those first 19 days, according to Ariely.
You’ve probably heard before that you need to budget, but that can be a very tricky endeavor, Ariely said. For instance, coffee typically goes in one category and supermarket spending goes in another category.
Instead, it helps to lump all discretionary spending together.
That way, if you link two spending areas together, such as your restaurant budget and your vacation budget, you can better track how one goal competes with another.
“Now I understand where the money is coming from,” Ariely said. “If I eat out more, it’s coming from my vacation fund.”
We are basically creatures of habit. A lot of what we do is because we’ve done it before.