My brother sent me a link to On a tight budget? Odds are you’ll spend more. Since the article’s title suggests that trying to micro-manage expenses was a failing strategy, I was intrigued. After all, and as long-time readers know, I like the rule “Major on the major, minor on the minor” Therefore, I figured the article would support my theory.
You: Did it?
No.
You: A-ha!
Not really. The article reports on a study down in Atlanta that supposedly proves that people who shop in a poorer area of town do a much worse job at estimating the amount of money in their grocery carts than do those who live in the affluent part of town. While both groups of people underestimated the cost of the goods they had in the cart, the poorer folks were off by three times as much.
The study then concluded that it is the complexity of the precise math that the poorer people try to do (as opposed to the simple estimating techniques used by the more affluent) that results in this problem for the poorer population.
The journalist writes:
Oh ironies. We already know that people with less money end up paying more interest on everything from credit cards to home loans. Now, it seems that penny counters actually spend more than intended in the checkout aisle, too.
Allow me to throw out a question:
Isn’t it possible it’s the other way around? Perhaps it’s that those who understand how to calculate the true cost of things wind up spending less and are therefore more affluent. Why rush to judgment that it is the “penny counting” attitude that makes people financially poorer? Surely you have met plenty of people who watch every penny and yet are quite affluent. It’s not even rare. While it’s not necessarily the path I recommend, it surely is a viable strategy.
If you’re spending more than you can afford at the store, don’t let the media blame your math skills – bring a freaking calculator.
Thoughts?
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That was definitely my first thought. The rich get rich by not spending. So it’s likely that people with money are plenty aware of the costs in a grocery cart.
I agree about the rich get rich by not spending. They are the ones at outlets buying the $13.00 Levi’s while some fools is paying full price.
we are very aware of the price of things in supermarkets and especially pay attention to Unit Pricing. What surprises me is that most folks are not and figure because they have a coupons they are getting a better deal, which is not always the case.
@Abigail and Fiamma: What’s amazing is how surprising your conclusions would be to the vast majority of people. Get rich by spending less? Hardly. Most feel the rich got rich by making more. Indeed, both are part of the equation, but many of us can only control one thing in the short-term, and that’s spending – not income.