Everyone makes financial mistakes, but it's all too easy to dwell on them. And unfortunately, dwelling is counterproductive. When it comes to your finances, you're better off looking to the future rather than the past.
The more you focus on your past spending pitfalls, the more likely you are to repeat them. This is what a recent study published in the Journal of Consumer Psychology suggests. Researchers wanted to take a look at how our memories of past financial mistakes or achievements affect our present habits. In one experiment, when subjects were asked to remember past spending mistakes, they were more likely to incur debt during an imaginary trip to a shopping plaza.
Other subjects were instead asked to remember instances in which they made good, prudent spending decisions. But they had to remember a lot of these instances, and when they couldn't, those subjects went spend-happy at the shops, too.
The study concluded:
We show that while recalling successes seems like a good idea, in cases when such recall is difficult, this strategy may backfire...Further, compared to easy recall of successes, recalling failures does little to enhance self-control, despite conventional wisdom that one learns from their past mistakes. In fact, our results instead argue that focusing on one's past mistakes may doom us to repeat them. Given that many factors may lead interventions and help programs to fail, every 'nudge' matters — we hope that identifying this danger of recall may help design more effective programs.
The study suggests it's best to move on from money mistakes, and leave the past in the past. It's good to learn from those mistakes, sure, but dwelling on them seems to make us feel like we're doomed to make them again. Check out more about the study at the links below.
Haunts or helps from the past: Understanding the effect of recall on current self-control [Journal of Consumer Psychology via Vanderbilt University]