Researchers have discovered an interesting payday behavior: even though people set budgets, those budgets don’t stick when people receive their paycheck.
Maybe you’ve noticed lines are longer on Friday? It’s not a heightened interest that’s drawing the crowd. When people feel like they have money, the budgets they adhere to on a regular basis don’t apply.
Rich or Poor, This Behavior Doesn’t Discriminate
When it comes to payday, everyone, no matter their income, tends to spend more money on things like clothes, entertainment, fast food and coffee when they have that “extra” cash.
Studies on electronic payments revealed more than 50% of the population increases its spending on paydays – and over 25%!
Over the years these spending habits have been linked to a lack of available cash (which could be due to minimal savings) among lower income families, or to wealth being tied up in houses and cars among those who are wealthier.
However, psychology may also be partially to blame due to a moment of feeling flush with the “extra” cash. Although most people know when they will be paid, they feel the urge to splurge more because they feel that they have more money than they actually do. This behavior is understandable but does not make sense from an economic perspective since people feel richer just for a few days each month.
Retailers Catching On
Retailers have caught on to this trend and some adjust prices to take advantage of this. To avoid falling victim to this, it is a good idea to automatically put some of your paycheck in savings to help you stay on track with your long-term goals.
What do you splurge on when you get paid? Put some money into savings, pay your bills and make sure you have enough left over for miscellaneous expenses.