Our Financial Mindset

Why do people spend down their savings?

People are comfortable with predictability, and have a hard time getting used to new situations. So, if they grew up in an environment where there was never enough, and suddenly have a lot, no matter how painful, people will spend themselves down to the level that they are most comfortable with. If you never had more than $500 in your checking account, and all of a sudden are given a bonus of $1,000, people without financial goals will find a way to spend that $1,000 down to zero, because they are more familiar with having $500 at the most in their checking accounts. A person committed to attaining a financial goal will get the money, and put it away in a safe place, and pretend as if it didn’t exist, and not change his/her spending behavior at all. Goal-oriented people will change the way they view their checking account, and decide that having $1,500 is the minimum to keep for a balance than the previous $500. While the spender is spending all of the excess, the saver has changed his minimum view to $10,000 and is setting aside this extra income to reach that new goal.


This is a web preview of the "The Handy Personal Finance Answer Book" app. Many features only work on your mobile device. If you like what you see, we hope you will consider buying. Get the App