The Financial Hawthorne Effect

The Hawthorne Effect (also known as the Observer Effect), is something I have observed in my life more than once. The main thing I have seen is that when I start observing and taking close note of what I am doing, financially, I change how I act with money, thus I end up changing my lifestyle, but then having the wrong perspective on my financial life.

The specific example I can give, is when I decide that I am spending too much money (usually happens at least 3 times a year) and I want to see where the money is going. I  start watching what I am spending, by becoming (even more) anal about recording expenditures in Quicken (my normal method for watching spending).

Hawthorne Effect

The Hawthorne Effect (I always thought this happened)

Typically when I start noting my financial life I end up:

  1. Not buying lunch at the cafeteria at work, or limiting it to 1 or 2 meals a week, and eating more left overs for lunch
  2. Attempt to have “no spending days” where at the end of the day I have the same amount of money in my pocket as when I started, but that becomes a bit of a cheat with Interac and Credit Cards.
  3. Doing weekly and monthly reports to look at where the spending is happening and then “discussing” that with Mrs. C8j (OK, so it ends up in a fight because inevitably in the discussion I use the “What were YOU buying at Store Z?” phrase).

Doing all of this causes me to alter my spending habits, thus the data I am collecting is at best skewed and at worse, incorrect.

The best way I can do a real study on my spending habits is by looking at past data (in Quicken) and act on that data, however, when I do try to watch myself financially, I end up acting like I am supposed to act, so maybe that side-effect makes the whole exercise well worth while ?

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  • September 24, 2015, 8:19 AM

    We see a similiar effect by using a fee-based financial planner for our income/spending monitoring.

    Once a month we meet, review what we’ve done, look at where we’re going, etc. Keeps us on track by having a look at it.

    Gotta do it. it’s too easy to forget to pay attention and slip back into imperfect financial decisions.


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