How To Save Money: Focus on the Present

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Do you put away more personal savings by focusing on the future or the present? It seems counterintuitive, but the answer, recent studies say, is the present.

Life is a beach. Do you ever notice how many books about personal savings show someone relaxing on the beach on its cover? The message is to visualize your future self, the one with tons of money in the bank, living the good life—- maxin' and relaxin'.

Researchers Leona Tam and Utpal Dholakia put popular financial advice, which focuses on the future, to the test in three studies they conducted related to cyclical vs. linear time orientation. They published their findings in January in Psychological Science. Their jargon-laden article is written for fellow academics, but I'll do my best to distill the findings into a simple, news-you-can-use takeaway.

First, what are linear and cyclical time orientations anyway?

...a linear model of time characterizes life events in past, present, and future terms...Under the linear model of time, the individual’s focus is on the forward flow of time and on an improvement from the current state.

...a cyclical model sees them [life events] as a series of recurring experiences...and the diagnostic significance of current actions provides motivation...
In three studies they found that study participants who were encouraged to adopt a cyclical mindset with a focus on the present made plans to save more money and did save more money. In one of the studies those in the cyclical orientation group had a 70% higher estimate for how much money they planned to save in the coming two weeks and, afterwards, reported saving 82% more than those in the linear orientation group.

Why? When we feel optimistic about our future — our earnings and our ability to save— we are more likely to defer putting money in the bank until a time when we feel in a better position to save.

So how do you adopt a cyclical time orientation, at least when it comes to savings? Well, here is a script Tam and Dholakia provided to the cyclical group in one of their studies:

This approach acknowledges that one’s life consists of many small and large cycles, that is, events that repeat themselves. We want you to think of the personal savings task as one part of such a cyclical life. Make your savings task a routinized one: just focus on saving the amount that you want to save now, not next month, not next year. Think about whether you saved enough money during your last paycheck cycle. If you saved as much as you wanted, continue with your persistence. If you did not save enough, make it up this time, with the current paycheck cycle.

The future will be exactly like the present: if you save money now, you will save in the next pay period. If you don’t save money during the present pay cycle, it is likely you won’t save money in the next cycle. We want you to focus on your personal savings in the present, and that is all. What’s more, at the end of the day, you will be able to look back and see how much personal savings you have achieved.

The bottom line: Be a financial pessimist. Look at your piggy bank as half empty. If you do, your future piggy may have a lot more to spend at the market instead of crying wee wee wee all the way home.

On the off chance your subscription to Psychological Science goes astray in the mail, you can read a summary here and find the full article here.

(Image credits: Shutterstock)

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