Spending Wisely: An Experiment in Student Spending

College students have tremendous buying power. According to the 2017 College Explorer Market Research Study, published by the millennial-focused Refuel Agency, college students spend $207 billion in discretionary expenses annually – $62 billion of that is on food alone.The level of student debt is also on the rise – according to the Federal Reserve, college students now have $1.41 trillion in total U.S. student loan debt, a 7 percent increase since 2015. So with so much debt, why are college students spending so much? The answer could be psychological.

Impulse Buying

According to Kristin Roche, associate professor of business administration, people tend to buy things that they don’t need due to irrational thinking.

“We like to think that we’re really rational when we’re making buying decisions, but in reality we’re pretty irrational,” Roche said. “We are impulsive, we are short-sighted, so we think more about the short term versus the long run.”

Beth Vogel, Mount Mary University business professor, said we are quick to rationalize purchases in certain situations.

“Sometimes if you’re grocery shopping, you’re hungry and it just hits you that you really want those treats,” Vogel said. “You convince yourself that you need it at that time because it’s been a bad day or something like that. You rationalize why you think you need this item and why you need it enough to buy it.”

Influence of  Advertisements

In some ways, whether to buy something on impulse is our personal choice. We are often influenced by marketing tricks and advertisements. One marketing method is known as the decoy effect, in which marketers set up two products so the more expensive one looks like the better value.

“Let’s say you’re at the movie theater and you can buy a small popcorn, a medium popcorn or a medium popcorn with a drink,” Roche said. “You weren’t going to buy a drink, but the medium popcorn with a drink is only two dollars more than the medium popcorn. Marketers know how to add in a decoy (the medium popcorn) to make it look like you’re getting a better value.”

Marketers know how to appeal to customers and so do advertisers. Advertisers, who know their target audiences, do a great job of persuading potential buyers. Vogel said that when advertisements can relate to us, we are more likely to buy the product.

“They certainly pick up on who they want to sell to,” Vogel said. “They know what appeals to them. It could be seeing people who look like you in the advertisement, age-wise or ethnic background-wise, so you think, ‘Oh, those people use that … I must also use it.’”

Consumerism and Society

Our culture and the nature of our products play a significant role in consumerism. Roche said that disposable products contribute to the problem.

“You buy something, you use it and throw it away,” Roche said. “In other cultures, they reuse things more often. They have a culture much more efficient with their resources.”

In our country, products are made to be thrown away and replaced. Although culture is the main culprit for the need to replace items, the social aspect is also important. Roche said that Americans often buy new, expensive items that they don’t really need just to outdo their neighbors and friends.

“People don’t care so much about how much money that they earn or the assets that they have or the stuff that they buy, but rather how much they buy compared to the people that they’re next to,” Roche said. “Whether that’s their neighbor or their friend, they always compare relative to somebody else.”

We live in a culture where nobody is happy with what they have because they are too busy looking at what those around them have. They want to stay updated with the world around them and sometimes spend thousands of dollars to do so.

“Maybe they would’ve been happy with the car that they bought had they not looked over to their neighbors and seen that their neighbor has the next model up or a little bit of a nicer car, and then they want to be better than they are,” Roche said.

Failure to Budget

Having a personal budget can be helpful to keep track of how much money someone makes and how much money is left over to be spent on fun things. The problem is a lot of people don’t make a budget and spend whatever they want on things they can’t really afford.

“I’m a big believer in budgeting, and I think when people don’t do that, they’re surprised at where they spent the money,” Vogel said.

People spend without keeping track of their income, and they think they have all this money to spend, but when it comes time to pay bills, there is a problem.

“What are the first things you need to do so that you have enough money to buy food and keep a house over your head?” Vogel asked. “What I urge people to do is break down everything they spend, and it can be surprising where they spent money and what it really adds up to.”

Without a budget, it is easy to spend a lot of money without even thinking about necessities first.

“We buy something because it makes us feel good,” Roche said.

The Experiment

We live in a country heavily based on consumerism. To find out just how much consumerism affects our daily lives, three students participated in an experiment to determine what they purchase in a typical week and whether they could go a week without spending. During week one, the students were only  allowed to buy necessities. Week two permitted normal spending, while keeping track of purchases.

Reactions to the Experiment

Nicole Holstein

“Overall this week went by fast. I had a big show coming up at the Mitchell Park Domes, so I had to make a few purchases in preparation for that but I tried to keep it to a minimum. While shopping I was tempted to buy everything, but I told myself I couldn’t. Usually I am more of a window shopper to begin with, so I frequently shop but rarely spend money unless I have to. I usually eat at home or bring a lunch from home so I don’t usually spend money on food. I like to observe and I see many people sucked into the market that surrounds us. Instead of always buying like most people, I just like to browse and get inspiration for my own projects.

The second week went by fast as well. I don’t usually spend that much money but this week I spoiled myself a little. I won some prize money from the Domes fashion show, so I saved majority of it and used some on myself as a reward. This week I ate out more than I usually do, but that is mostly where my money went. For me the no-indulging week and the regular week were pretty comparable. I try to not spend money in general unless I desperately need to. That’s the way you live as a broke college kid though.”

Julia Wachuta

“Most of what I bought that was of questionable necessity was food. I feel like it’s a necessity, but it’s not at the same time. I find it especially hard not to buy extra things if I am in a store. I see things that I like and I buy them. Dragging myself out of Hobby Lobby with only what I came for hurt me emotionally briefly, and that is upsetting to me.

I tend to spend first and think later. There are days I spend nothing, some a little and some days I go overboard. It’s so hard to buy only what I came for, especially if there is a sale and it’s something I previously wanted. I need to make a budget because I think I am spending more impulsively than I am spending on necessities.”

Elaina Smith

“I found myself not feeling as stressed as I thought I would. I felt better saving my money, although I did get annoyed quite often. Buying gas and other necessities was something I never thought I would question, and the slight rise in anxiety as I tried to make sure I adhered to the restrictions even when I bought them was unexpected. I never thought so much about my purchases and I encouraged others to do so throughout the week. It was much easier to put things down than I thought it would be, and I spent a lot more time enjoying scenery (whether by walking or driving) instead of going in a store or hanging around a place where I could buy things. Being forcibly de-tethered from my wallet allowed me to find other things to satisfy me, and I was only stressed when I had to buy something and had to really determine whether or not I had to.

Obviously the regular week was a lot easier to manage, but I did still practice a little of what I learned from the reduced spending week. I thought more about my purchases as a result, and if I bought something I didn’t need, I compared prices and looked harder for options. If I bought something to eat, for example, I took my time enjoying it, and if I bought something to wear, I thought more about how much effort it would take to wash and looked at tags. During the regular week although I had the freedom to buy what I wanted, I was more observant of the long-term effects and maintenance of my purchases. If it was something I would only have for a few short moments, I considered how I could stretch it a bit more. If it was something I would have for a long time (or wanted to have for a long time), I thought about maintenance and whether it was worth the extra care.”

 

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