Posts Tagged "manage money"

A messy desk covered with pens, pencils, paper, and coffee stains.

Are You Conscientious?

In a recent study of five personality traits, conscientiousness was the strongest determinant of an individual’s financial well-being.

Angela Lee Duckworth at the University of Pennsylvania and David Weir at the University of Michigan compared how people did on a personality test with their financial well-being after age 50. They examined the Big Five traits: conscientiousness, emotional stability, agreeableness, extroversion, and openness to experience.

Their finding about the power of conscientiousness adds to a spate of research combining psychology and economics to predict why people earn more, save more, or prepare for retirement. In another study, Australian researchers found that a child’s level of self-control, as early as age 3, can predict whether he or she will experience financial problems later in life.

So, what is conscientiousness and do you have it? I could tell you about it, but watch the video interview of Duckworth instead, on the University of Michigan Center for Retirement Research’s website.

Hint: is your desk clean?

Full disclosure: The research cited in this post was funded by a grant from the U.S. Social Security Administration (SSA) through the Retirement Research Consortium, which also funds this blog. The opinions and conclusions expressed are solely those of the blog’s author and do not represent the opinions or policy of SSA or any agency of the federal government.

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A giant snowball rolling down a snow covered hill.

Spenders Yield to ‘What the Hell Effect’

We all know the feeling. While mentally savoring the appetizers on the menu, our resolve to diet slips away. That same feeling has already hit by the time we slap our credit card down on the counter at Macy’s.

It’s so common that psychologists have named it the “what the hell effect.” Once poised at the edge, we might as well leap, right? But after the leap, people who usually try to maintain a certain level of self-control in their everyday lives feel awful.

Three marketing professors have now teased out the conditions that trigger this during the act of charging something on a credit card. They have found that people spend more money if they already have a balance on their credit card. But, oddly, a high-dollar credit limit on the card can mitigate that effect and help to restrain the cardholder’s spending.

Their findings are counterintuitive and a bit difficult to grasp. Here’s how Keith Wilcox, a marketing professor at Babson College in Boston, explained them in a recent interview with Squared Away: … Learn More

A man pulling open his dress shirt (Superman-Style) revealing a bullseye on his chest.

Fraud Victims Can Be Profiled

Which profile describes the most common victim of investment frauds like Bernie Madoff’s?

a. Tech-savvy young adult
b. Man over 50 earning high income
c. Elderly widow on fixed income

Widow, you say? That’s the stereotype, said Laura Carstensen, founder of Stanford University’s new Research Center on the Prevention of Financial Fraud.

“The old woman who’s demented and living on her own, and the guy who knocks on her door and sells her the policy – that does exist, but it doesn’t represent older people,” she said. Older people who have a history of long-standing relationships are often better at determining who they can trust, she said.

The correct answer is b: Man over 50 earning high income.

Fraudsters feed successful men’s egos by appealing to their investment savvy, enticing them to get into a deal others might not understand. By building up their egos, a fraudster ensures that the victim isn’t thinking clearly when he agrees to invest, said Doug Shadel, a member of the Stanford Center’s board who co-authored the AARP Foundation National Fraud Victim Study.Learn More

Colleges Help Students with Finances

With more college graduates piling up debts, an increasingly popular program on campus is trying to help them stay out of trouble.

More than 600 colleges are now enrolled in the National Endowment for Financial Education’s (NEFE) online program, so they can offer free assistance to four-year and community college students. CashCourse is a sort of private-label personal finance program: each academic institution puts its logo and school colors on NEFE’s online package of cash- and debt-management tools, tips, and workshops.

The University of California, the University of Texas, Purdue University, and State University of New York are among the schools posting NEFE’s materials to their websites or customizing financial programs to meet their students’ unique needs.

“We want every school to figure out what works for them,” said Ted Beck, NEFE’s chief executive.

Student Debt

Leticia Gradington, program director for Kansas University’s program, said it’s not unusual for students to have $20,000 to $30,000 in college loans and credit card debts.

“You’ve got students every day who are worrying about how they’re going to pay their debt back,” she said. If students can learn just how expensive the debt is before they borrow, “They pay more attention to it.” …Learn More

Journal to Spotlight Financial Behavior

JMR logo

The Journal of Marketing Research (JMR) will devote a special issue to interdisciplinary research on the hot topic of financial decision–making and behavior.

The issue is a smorgasbord of 15 articles on behavioral, marketing, economic, and psychological research on various financial activities, from borrowing money to establishing trust in financial transactions.

The November issue’s guest editor-in-chief, John G. Lynch, a psychologist who “wandered into marketing and consumer decision-making,” said the interdisciplinary approach advances everyone’s understanding of complex financial decisions.

“A given field understands a part of the answer. But we’re missing the larger whole,” he said. The special issue “would bring people together to read each other’s work and have an effect of causing more cross-fertilization.”

Squared Away plans to cover some JMR articles in a series of blog posts in coming weeks. Here’s a preview: …Learn More

Painless Personal Finance

I keep bumping into Tim Maurer’s videos – he’s an active tweeter – and decided to share the fun. This Baltimore financial planner’s clients include a lot of 30-somethings, so he produced a series of humorous 90-second videos that knock down the barriers to understanding the basics of various personal finance topics.

With many people either returning from or heading out on vacation this week, he suggests in this video how to eliminate the anxiety around spending money on trips.

But a couple of Maurer’s funniest videos include “The Bias of Life Insurance Agents in 90 Seconds or Less” and “How to Spend $1 million at Starbucks in 90 Seconds or Less.” At a time of historically low mortgage interest rates, a new video may be of interest to pre-retirees: “Pay off the Mortgage in 90 Seconds or Less.” Learn More

Why Baby Boomers Can’t Retire

A centuries-old trend of retiring at an earlier and earlier age has completely reversed, concluded a July report by the TIAA-CREF Institute.

In 1910, men didn’t retire until they were about 73 but that dropped to age 63 by the mid-1980s, the golden era for generous union- and employer-sponsored pension plans. Then the retirement age and labor force participation ages started heading back up, according to TIAA-CREF’s report, “Early Retirement: The Dawn of a New Era?” Women experienced a similar though less dramatic trend.

The report provided numerous explanations for this, including the demise of the mandatory retirement age for most American workers; the improved health of older Americans; and technology that has created options about when and where they work. Many retirees go from full-time work to part-time “bridge” jobs.

But what about the economic and cultural forces that have left baby boomers, myself included, financially unprepared for retirement? Delay for us isn’t a choice but a financial imperative. …Learn More