Everett Collection / Everett Collection
Maybe all over-spenders need is a little peer pressure.
Consumers who realize they’re spending more than their peers—those who are of similar ages, incomes, locations and credit scores—will actually cut back on their spending, researchers at the University of Chicago’s Booth School of Business and the University of Maryland’s Smith School of Business found. Their study will be published as an academic paper later this summer.
Researchers analyzed the spending habits of 6,000 people who used the personal-finance website Status Money between September 2017 and April 2018. The researchers said they conducted the study independently with no financial incentives from Status Money, but they were given permission to use aggregated anonymous data from the app.
Status Money allows users to see how much their peers spend on groceries, restaurants, gas, among other purchases. When users saw that they were outpacing their peers on spending, they reduced their spending significantly—by $600 a month on average. When they realized their peers spending less money, they grew more concerned that they were living above their means.
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Part of the reason that reduction is so high: The average Status Money user tends to be affluent, spending some $4,000 in a month, said Francesco D’Acunto, a researcher at the Smith School of Business, who was one of the authors of the study. Plus, their users may be especially interested in finding ways they can save more, he said.
Consumers in the lowest income group on Status Money—earning $40,000 a year on average—were particularly swayed when they saw their spending compared to others, researchers said. They reduced their spending for the month by 19%, while those in the highest income group—earning $120,000 a year or more—reduced their spending by 10%.
This isn’t the first study to show that some people want to keep up with the Joneses’ thriftiness. Researchers conducted an experiment last year where members of an Arizona credit union were given the chance to see how their spending on restaurant meals compared to their peers. Whey they found out their peers were actually spending less, they decided to reel in their own spending.