It’s a pretty good bet CU professor Peter McGraw could tell you how you’d spend any unexpected money that may come your way.
McGraw, assistant professor of marketing at the Leeds School of Business at CU-Boulder is an expert in a field called mental accounting – an area of study that examines how people categorize money.
A few years ago, McGraw, along with Jonathan Levav, a professor at Columbia University, got to talking about how people could, in certain circumstances, have mixed feelings about unforeseen windfalls (it might be money you won via a lottery, bingo, gifts from relatives, a 10-spot you found on the sidewalk or any money you didn’t expect). Then the two wondered how those mixed feelings might affect how people would choose to spend the money.
In a study published last year, “Emotional Accounting: How Feelings About Money Influence Consumer Choice,” the two set out to learn more. In one experiment, McGraw and Levav surprised participants with $2 for completing a task. Half were told the money came from a grant donated by a leading computer manufacturer (this is money they call “positive” money, money associated with positive feelings), and the other half were told the money came from a cigarette maker (“negative” money, linked to negative emotions). Those given the cigarette windfall were twice as likely to buy something more virtuous such as textbooks instead of something frivolous like ice cream.
McGraw says when people spend negative money it’s really about protecting their ego – they spend that money in a way that makes them feel better. And psychologists say we’re good at this – we’ve learned how to shake off bad feelings easily.
“People are highly motivated to remove negative feelings,” he says. “In psychology, it’s called affect regulation.”
McGraw, whose early interest was psychology, says marketing gradually won his affection. Still, his research mixes both, and his current work examines decision making and emotion.
“I’m interested when these two topics intersect” he says.
Adding to McGraw’s conclusions, James Gross, a Stanford University professor and a leader in the field, says people are very capable of avoiding situations that make them unhappy and employ many strategies to reinterpret situations in a more favorable light.
“If I find money that’s obviously someone else’s, this threatens my positive sense of self,” Gross says. “So I find a way to spend the money to justify my actions. I may tell myself I needed the money for an important cause, and so it was OK that I took it.”
More practically, David Adler, author of Snap Judgment, a book about avoiding money mistakes, says one implication of the study is to realize you’re more likely to spend unanticipated cash faster than anticipated money, such as a paycheck.
“With paychecks, you’ve probably already mentally decided what to do with the money,” Adler says. “The sudden windfall is a surprise and unaccounted for, and so you spend it.”
Doug McPherson is a freelance writer in Centennial who says he rarely meets with unexpected money. But when it happens, you’ll likely find him celebrating with food that’s bad for him.
