The Research Brief is a short take about interesting academic work.

The big idea

When asked to estimate how much money they would spend in the future, people underpredicted the total amount by more than $400 per month. However, when prompted to think about unexpected spending in addition to typical expenses, people made much more accurate predictions.

These are the main findings of a series of studies and experiments that we conducted and which have just been published in the Journal of Marketing Research.

In our first study, we began by asking 187 members of a Canadian credit union to predict their weekly spending for the next five weeks. Then, at the end of each week, we asked them how much they actually spent.

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For the first four weeks, people underpredicted their weekly spending by about $100 per week or $400 for the month.

In the study’s fifth and final week, we ran an experiment to see if we could improve people’s prediction accuracy.

Specifically, we randomly assigned participants to one of two groups. In group one, participants estimated their spending for the next week just as they had done in previous weeks. These folks once again significantly underpredicted their spending.

In group two, participants were asked to think of three...

Read Full Story: https://journalstar.com/business/investment/personal-finance/we-tend-to-under...