It sounds crazy, but yes, personal finance can be exciting. Not like, "we're going to Disneyworld!" exciting, but more like, "how exciting, I finally have control of my debt." Problem is, sometimes we get so excited about getting control of our money situation, that following the rules too closely can backfire. Photo by StockSnap.
Some of the best personal finance habits can backfire, and that's especially true when saving money turns into hoarding it. A study published in the American Marketing Association Journals found we become so obsessed with saving, we'd rather go into debt than use our savings for an emergency. The people in the study were presented with an emergency: a $5000 furnace repair. They had the choice of either using savings to pay for it, or putting the expense on a high interest credit card. Oddly, they chose the credit card:
Across six studies, we find that people's tendency to preserve savings in favour of borrowing from a high interest rate credit option varies as a function of the savings' intended use. Paradoxically, people are most likely to turn to high interest rate credit under the belief that doing so is the responsible option.
Of course, using the credit card for rewards and then paying it off is another story, but the study specifies the subjects would be borrowing money.
It's another reminder that money is all about mindset. Sometimes the fear of not having enough or the desire to control your finances can cloud your judgement. It happens all the time. This is why money rules are important, but being resourceful is better. The bottom line: don't forget to consider the big picture in your money decisions. LearnVest weighs in on this at the link below, and you can check the study out for yourself, too.