Jul 15, 2022
Today I am very excited to
introduce you to Dr. Chuck Howard, an Assistant Professor of
Marketing in the Mays Business School at Texas A&M University.
In his research, Chuck asks questions like, “Why do consumers so
often underpredict their future expenses?” and “Why do people who
work in the gig economy over-predict their future income?” He then
designs simple solutions for these problems that help people
improve their financial well-being.
Chuck’s research has earned
awards from the Society for Consumer Psychology, the Society for
Judgment and Decision Making, and the Behavioral Insights Group at
Harvard University. Chuck earned his Ph.D. in Marketing and
Behavioral Science from the University of British Columbia, and his
BA in Economics and Finance from Ryerson University.
I met Chuck on a recent trip to
College Station and we have had a few conversations since then.
Upon hearing about some of his recent research I thought it would
be something that you would find interesting (I sure did!) and
while it is more on personal financial decision-making, we
definitely talk about this from a business aspect, and the insights
are relevant to everyone -- especially all the people in the
financial industry who I know listen to the show.
- [00:41] Today I am very excited
to introduce you to Dr. Chuck Howard, an Assistant Professor of
Marketing in the Mays Business School at Texas A&M
- [03:36] Chuck and Melina didn’t
meet in the same way as most guests of the show.
- [04:04] Chuck shares about
himself, his background (including a “gap decade”), and how he
found himself in this space.
- [06:30] He was able to combine
his passion and knowledge of psychology and economics to land on
studying consumer financial decision-making.
- [07:38] Making ridiculously
optimistic budgets or underpredicting your future expenses can help
a lot of people spend less money. They often spend more than they
budget (but still spend less than they used to) as long as they
track their spending.
- [10:12] Melina and Chuck talk
about some weird common sayings and how they don’t always translate
around the world.
- [10:51] There are a number of
situations in which you need to have an accurate view of how much
you are going to spend in the future.
- [13:14] He was motivated to
understand why people underpredict expenses and how we can improve
their predictions and accuracy. He wanted to help people make
better financial decisions to improve their financial
- [14:25] People’s predictions of
expenses are deeply grounded in their past experiences. The problem
is they are only thinking of the very typical things they have
- [16:18] In their research, they
never found that the tendency to underpredict expenses or
over-predict income is tied to being an optimist. It is simply
about what comes to mind most easily when you are making the
- [18:23] Chuck shares about a
study they did where they asked people over several weeks to tell
how much they spent the week prior, how typical their spending was
that week, and how much they think they will spend the following
- [19:25] Atypical expenses are
common in the sense that they happen a lot of the time, but then
they are uncommon because it is not the same thing repeated over
time so people don’t think they will happen
- [22:20] If the person you are
thinking of is similar to you then it could be helpful to think of
their spending. It could help you gain perspective on your
- [24:59] To make more accurate
expense predictions they prompt people to consider a handful of
reasons why their expenses will be different than usual. This helps
them think of those atypical expenses and increases prediction
- [26:23] So far, they have
people type out the reason that their budget could be atypical.
Writing it down may help because it takes a load off your working
- [29:00] They were motivated to
do budgeting research because there was a debate about whether or
not budgets actually work.
- [30:08] Even though peoples’
budgets are wildly optimistic and they never end up spending as
little as they have budgeted, they still end up spending
substantially less than they used to.
- [32:23] You have to be tracking
your spending against your budget. Once a week is
- [34:58] At the end of the day
it is typically about understanding why.
- [36:53] Be very conscious of
what information you are giving to people and
- [38:55] Even if you haven’t hit
your budget (because most people don’t), you are still spending
less than you used to.
- [41:40] They found that budgets
are an effective way to decrease spending across a number of
different personality traits.
- [42:11] Tracking and monitoring
your behavior against a goal can be very powerful.
- [45:21] Melina shares her
- [47:40] If you enjoy the
experience I’ve provided here for you, will you share about it?
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a friend (or 10!)
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