Money is status, status is power, money is power — we all know the drill, even if we're not all that rich. While money can make you feel powerful in the abstract, new research suggests that most of us are all hat and no cattle. We like the idea of spending freely a lot more than we like actually doing it.
Put another way, economists at Ohio State University have shown that we say we're willing to spend about twice as much as we actually do. The good news? This means that for the most part, we respond realistically to financial pressures. The OSU economists were interested in hypothetical bias, which is just what it sounds like: preferring abstract or imaginary conditions to real ones. The research has big implications for large spending projects, such as disaster relief, which means policymakers have some psychology to overcome. For ordinary consumers, however, it could shake out in their favor.
The best way to figure out how you see your money is to sit down with it. Even if you're not feeling particularly grandiose about your spending, it helps to get a simple, accurate idea of what your needs and expenses will be, and how you're going to cover that. Living within your means doesn't have to mean pinching pennies and constant FOMO. But the best information to use for decision-making is clear, accurate data. A review might even show you've got more wiggle room than you thought, which means it's never a bad time to give budgeting a shot anew.