Savings: Leaving your spendthrift ways behind

Just remember that budgets—like diets?—are all about moderation; overdoing it can lead to a relapse.

One silver lining of the bad economy has been that many of us spendthrifts finally scrutinized our spending habits, said Alina Tugend in The New York Times. The question is: Will we stick to our budgets when the economy makes a turn for the better? If ?history is any indication, unfortunately, most of us will eventually revert. “It takes both a long time and a complex combination of factors—often including some personal trauma, social stigma, and government policy—to promote any real transformation.” With the exception of the Great Depression, most recessions have been over too soon to make a lasting impression on most people.

It seems to be part of human nature that we “grow overly optimistic” during economic boom periods, said Carolyn Bigda in Money. The key to maintaining perspective, in good times and in bad, is to “trick yourself into staying on track.” Let’s say you’re saving a bit more now because you expect more bad news. Should things start to get better, “undermine your optimism bias” by setting up automatic savings plans that are earmarked for different? purposes. Give each account a descriptive name—the “If I Lose My Job Fund” or the “Alaskan Cruise Fund.” Setting aside money for specific purposes will help you “visualize” why you need that money, reducing the temptation to blow the balance on something else.?

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