A specific plan for saving money isn't enough to ensure you'll reach your goals. Turns out abstract thinking plays a big part, too.
Trying to save more money? You might be surprised to learn that success is more dependent on asking why you should save, rather than how you should save.
According to a 2010 study in the Journal of Consumer Research, those who concentrate on how to achieve a goal could find it more difficult to be successful than those who take a big-picture approach. According to the authors Julia Belyavsky Bayuk, Chris Janiszewski, and Robyn LeBoeuf:
Imagine a person who has a goal to save money...We investigate how this plan influences the person's response to other money-saving opportunities. For example, would the person be more likely to order a cheaper meal at a restaurant, avoid making an impulse purchase, or combine errands to save money on gas?
The findings showed that when people get too specific about how they'll achieve their goal, they close themselves off to other money-saving opportunities that weren't in their original plans. On the other hand, those who focus on why they are working toward a goal are more likely to take advantage of new opportunities they might not have originally considered.
How savings goals influence spending
Four experiments were conducted in the study to learn about consumer behavior and savings goals. One experiment consisted of a group of people who were asked to create a plan to save money and another group who weren't asked to make a plan. Some of the participants were then asked to think about why they wanted to save the money. Afterward, everyone participating in the study was offered candy for purchase.
The results showed that the group with a specific savings plan were more likely to purchase the candy than those who didn't have a plan. But among the people asked to think about why they were saving, those with a plan were best able to resist the temptation to purchase on impulse.
Savings goals improve savings rates
For example, let's say you want to put aside an extra $200 each month in a high interest savings account for a dream vacation to Paris. You decide to start carpooling with your coworker. You've formed a plan and you have a clearly defined goal. Even if your coworker moves away, you still want to see the City of Lights, so you're more likely to find another carpooling partner or look to other options like public transportation, rather than giving up on your dream because your plan "failed."
The real key is flexibility, because if your original plan doesn't work out, you have to be flexible enough to chart another path to reach your goals.