According to a recent study in the Journal of Consumer Research, consumers tend to spend more with worn bills as compared to crisp, new bills. And they’re also more likely to break a worn, larger bill as opposed to spending crisp, smaller bills.
The authors delved into why this is true and found evidence for a “push-and-pull emotional mechanism” wherein people are disgusted by worn bills (which are perceived to be filthy) while taking pride in crisp currency.
Interesting stuff! And these findings gave us an idea for a newer, better budgeting method, one that combines the frugality of the personal finance blogs, the know-how of the travel blogs, and the latest cutting-edge research in behavioral psychology. We call it the Super Awesome Budget. Are you ready for us to rock your wallet? Here we go:
STEP 1: Load a Target Amex prepaid using a 2% cashback credit card, either the Fidelity Amex or the Priceline Mastercard. You can load up to $1,000 at a time, and the Target Amex charges a $3 fee, so you’ll net 1.7% out of this.
STEP 2: It’s believed that people spend more with credit cards than cash, so you want to use cash for your actual spending as much as possible. Fortunately, it’s possible to pull cash off the Target Amex. You get one free withdrawal each month, then it’s $3 each time thereafter. If you can find a no-fee ATM that lets you get $400 at a time, then you’re looking at an additional $6 in fees per thousand, bringing your credit card yield down to 1.1%. (Just to be safe, make a couple of small purchases per month on the Target Amex so it doesn’t look like you’re laundering money.) If you spend more than $1,000 per month (in other words, if you’re married or have kids), then your credit card yield will be closer to 0.8%–but still, every little bit helps, right?
STEP 3: If those bills aren’t crisp and new as per the article above, go to your bank and trade them in for some new ones that you’ll be less likely to spend.
STEP 4: Use one of those strict budgeting systems like the Envelope Method. It got us through the Great Depression, so it must have something going for it, right?
And that’s it. It combines the best of the frugal living crowd with the best of the points-and-miles crowd. And as the points-and-miles crowd would point out, there is room for improvement here. For example, instead of the 2% credit card you could sign up for credit cards with good sign-up bonuses and use them to load the Target Amex. Or you can use some manufactured spending techniques to juice your returns a little bit. Chasing The Points or Frequent Miler could probably think of a bunch of ways to spice this up, and for all we know maybe there’s something better than the Target Amex.
We haven’t actually tested this Super Awesome Budget yet, seeing as how we just thought it up today. But that doesn’t make it any less super or awesome. If you can think of a better way, let us know. But you probably can’t, because this budget method is super awesome.
Happy Friday, and enjoy your weekend!
UPDATE: This post was linked at AdamHagerman.com’s Carnival of Personal Finance.