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You Can Crowdsource Better Spending Habits
- October 30, 2019
- CBR - Finance
It’s easy to get caught up in trying to keep pace with your peers’ travel, entertainment, and other leisure pursuits. It’s harder to know how those peers’ overall spending compares with yours. But research by Chicago Booth’s Michael Weber and coauthors finds that having insight into the consumption habits of others can help calibrate and moderate your own habits.
The researchers analyzed data from a free application called Status, which lets users compare their monthly spending to that of others with similar financial characteristics. They find that, armed with information about how they stacked up against peers, overspenders cut their consumption by an average of $237 per month, while underspenders adjusted their habits more moderately.
Narrator: Your friends’ social media posts can often leave you with a serious case of FOMO. The amazing trips they take. The food they eat. The styles they wear. Trying to keep up with them can get expensive in a hurry. But those friends might not be spending as much as you think they are, or as much as you’re spending to keep pace. In fact, if you could see what your peers were actually spending, it might help you spend less.
Research from Boston College’s Francesco D’Acunto, Georgetown’s Alberto G. Rossi, and Chicago Booth’s Michael Weber shows that just knowing how much your neighbor spends could save you hundreds every month. The researchers made use of a free fintech application called Status, which requires users to plug in their age, location, income, credit score, and homeownership status. The app crunches these data and shows users how their average monthly spending stacks up against their peers.
Users that spent more than their peers cut their consumption by 9 percent, an average of $237 a month. Users that spent less than their peers upped their spending by $71 a month on average. The researchers also note that the more users’ spending exceeded that of their peers, the more they adjusted their spending. The changes were notably dramatic for overspenders in the lowest income quartile, and particularly subtle for underspenders in the highest quartile.
The findings suggest that even if you’re fighting to keep FOMO at bay, knowing how much your peers are actually spending can help keep your consumption under control.
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