The Syndrome That Explains Why You Spent Too Much Money This Weekend

Why do you come out of the weekends wondering why your wallet is so unaccountably empty? There are a lot of reasons, but the most telling is evocatively called the "what-the-hell" effect.

Most of you are taking some time today to curse your weekend self for spending all your money on . . . what? Can you even remember? You got a few drinks, and maybe you wanted the more luxurious treatment when you went to the salon, and maybe you got that hot dog at the game even with the stadium pricing. But how could that add up to so much money?

It probably started with the Denomination Effect, which gets its name from experiments which show that smaller denominations of money get spent more carelessly than larger denominations. When a group of students were given four quarters for participating in an "experiment," they were much more likely to spend them on candy for sale nearby (which was the actual experiment) than students who had been given a dollar. We are careless when we're spending what we see as "the change." This goes for large change as well as small change. The effect is so pronounced that we ourselves are aware of it. When people want to be careful with an amount of money, they specifically request it in a larger denomination. We know we'll be more reluctant to break a fifty than a twenty.

Here's the problem. Once a person has broken those larger bills, the entire leftover part becomes "change." Buying a fifty-cent candy bar with a hundred means breaking your resolve, just as much as buying a twenty dollar meal, or a fifty-dollar item of clothing. Once you've crossed that barrier, you tend to spend much more than you would have with medium-sized denominations. The only thing more costly than no will-power is not-quite-enough-willpower.

So if you want to save next weekend, either go to the bank and take out a denomination or currency so ruinous that you won't dare break it (or, ideally, even go outside with it), or don't try to make any resolutions at all.


[Via The Denomination Effect, Why We Spend Coins Faster Than Bills.]