The Washington Post has a neat little piece looking at people’s time horizons and their ability to manage money. Essentially the article is highlighting new research by famous psychologist Philip Zimbardo saying that people who are future oriented and mentally ready to improve their finances tend to have better outcomes.
In fact, the financial decisions many people make may have little to do with how good they are at math or how much they know about 401(k)s and more to do with their emotions. Specifically, financial decisions are strongly influenced by the way people view time, according to a new study by Philip Zimbardo, the psychologist who orchestrated the Stanford Prison experiment in the 1970s.
People’s financial health was correlated with whether they were more focused on the past, the present or the future, according to study Zimbardo did with MagnifyMoney.com, a Web site that helps consumers compare financial products. Perhaps even more troubling, people are unlikely to realize how their time perspectives are impacting their wallets”.
People who are too focused on the present, “the guys you like to have in the party,” who are primarily concerned with having a good time, are prone to living beyond their means and should avoid credit cards, Clements says. On the flipside, present-oriented people who stress their immediate needs– by focusing on decisions that need to be made today or bills that are due tomorrow– might never think about the long-term changes they can make to reduce their financial burdens, he says.
For more check out the story at the Washington Post here.
James Hendrickson
James Hendrickson is an internet entrepreneur, blogging junky, hunter and personal finance geek. When he’s not lurking in coffee shops in Portland, Oregon, you’ll find him in the Pacific Northwest’s great outdoors. James has a masters degree in Sociology from the University of Maryland at College Park and a Bachelors degree on Sociology from Earlham College. He loves individual stocks, bonds and precious metals.
Absolutely! I think the ability to truly save and frugalize one’s life is all about having a long-term financial destination. It’s certainly not about what’s the most fun in the short term. Thanks for sharing this!
Unfortunately, it is much easier to be focused on the here and now as opposed to the future. That is why so many people fail at saving for retirement. If you ever want to be financially successful, you really have to work on looking long term. Stop focusing on the monthly payment, look at how much it will cost you overall. Think of what that money for the monthly bill could be used for instead. The more you can think and question your spending, the better.
Miss Frugalwoods – excellent point. What research like this points to is the need to “hack” how you handle money, but building in reward systems or things you like doing to encourage your savings. For example, my wife and I drew up a giant picture of a thermometer and filled it in when were last saving up for a house downpayment. I really helped keep us motivated.
Jon,
Thats a tough one – for folks who are radically “now” oriented, they need some sort of approach which appeals to them emotionally. Just looking at their budget might not help. This is something we think a fair amount about at DINKs. They need some sort of system which is suited to their cognitive and personality styles.
For me, I frankly have a hard time saving money. So what I’ve done is put like 10 dollars a day into loyal3, that way I get my spending fix, but I’m also building wealth by investing in stocks. So its a mechanism which works for folks like me.
Thanks,
James