Michigan Minds: When tightwads and spendthrifts can agree on spending

Greta Guest: Welcome to the Michigan Minds Podcast where we explore the wealth of knowledge from faculty experts at the University of Michigan. I'm Greta Guest, State Communications Manager for the University of Michigan's News Office. I want to welcome Scott Rick to the podcast.

Scott Rick is an associate professor of marketing at the University of Michigan's Ross School of Business, his research focus on understanding the emotional causes and consequences of consumer financial decision-making, with a particular interest in the behavior of tightwads and spendthrifts. The overarching goal of his work is to understand when and why consumers behave differently than they should behave. He is the author of "Tightwads and Spendthrifts: Navigating the Money Minefield in Real Relationships." Welcome, Scott.

Scott Rick: Greta, great to see you. Thank you.

Greta Guest: So most people are probably familiar with the terms tightwads and spendthrifts, but please tell us how you define them and how might they differ psychologically?

Scott Rick: Yes, they are strange terms, but I mean them both with love. A tightwad is someone who might look good on paper, financially speaking. You might look at their account balances and think this person has no anxiety at all about spending money, but their psychology doesn't match the numbers.

A lot of tightwads feel very anxious about spending money, and they end up not buying things that they kind of recognize that they should buy, certainly things that their spouse or kids recognize that they should buy, and they can kind of beat themselves up over it. They feel some regret about these missed opportunities. Some opportunities, you're only on vacation in Paris once with the kids, and then things change, and you can't get it back. And so there are some missed opportunities there.

I like to quote a character from "Love in the Time of Cholera," Uncle Leo. He grew up poor, but worked his way up, he became a rich industrialist, and someone said, "Hey, you're rich." He's like, "No, no. I'm not rich. I'm a poor man with money. That's very different." A lot of tightwads have that mindset, that they're just on the verge of everything collapsing.

On the other side, you have the spendthrifts, people like me. Weird term. The idea was, "Oh, your ancestors were thrifty. They saved up money, and then you go out and spend it." That's where that comes from, but yes. We are a little looser with money. We're not just buying to fulfill current obvious needs, but we're buying for potential needs. Like, "Oh, I'm out shopping for work clothes and maybe I'll pick up a velvet blazer that would be fun at a holiday party. I'm not invited to any such party, but what if I was? I'd love to have that blazer."

So I like to quote another podcast. It's called Ask Ronna. The comedian plays Ronna Glickman, and she's a spendthrift. She says, "I'd rather be looking at it than looking for it." That's our approach. We don't want to be without it in case we need it.

And, yeah. We have worries about the future also, but our worry is what if I have lived a life without the experiences and stories and fun? And so that's what we're worried about. But you can imagine that can lead to a lot of regrets, a lot of purchases like, "Ah, I probably didn't need that so much." So there's a lot of regret to go around.

Greta Guest: So it sounds like spendthrifts are probably a little bit more comfortable with looking at a zero balance in their bank account?

Scott Rick: Yes, we are. Spendthrifts are just less money-minded overall. Tightwads tend to be more mathematical, more about the numbers, whereas the spendthrifts might take an easy come, easy go approach, like, "This will somehow sort itself out."

Greta Guest: Given the election and the state of the economy, do you think tightwads and spendthrifts will stay true to form this holiday season?

Scott Rick: Well, I would not be surprised to see a bump across the board, a little retail therapy if people have been stressed out. I think you sometimes see this after an outcome where some people are disappointed that shopping, particularly holiday shopping, can be a nice little form of Tylenol for the pain.

But, yeah. I mean, yeah. It kind of depends on are you kind of happy or not so happy about the outcome? If people were feeling a pain of pain before, if they were distressed about spending, spending might not be the cure for that. But in general, when people are distressed, they often go shopping. And some of my research shows that, yeah, shopping can actually help with sadness, at least. Helps you feel more in control, and that's a good thing.

Greta Guest: Is that true for both tightwads and spendthrifts?

Scott Rick: Well, yeah. I think spendthrifts especially can benefit from the retail therapy. But tightwads, if you do it the right way, but certainly, it's tightwads need to plan for it. They need to kind of say, "Okay, next week, I'm going to shop with this money." But if you just kind of throw them in, they can't justify the purchase. They need to warm up to the idea.

Greta Guest: That's interesting.

Scott Rick: Yes.

Greta Guest: So it's definitely easy to sink into that retail therapy this time of year. What does this kind of spending create for spenders and savers? And is it enough to temper the splurges of either one?

Scott Rick: Yeah. Well, most people find spending on others less painful than spending on themselves. That's true for tightwads and spendthrifts. Now, it's certainly true that gift-giving comes with a lot of anxiety and you want to get it right, so it's not a purely positive experience going out and shopping for gifts.

But, yeah. I do think even tightwads, if they know what the person likes and they're confident that the gift is going to land, I think even they can kind of loosen up and enjoy it somewhat. But certainly, in any setting, I'm going to bet on the spendthrift having a better time with the shopping, even if it's gifts.

Greta Guest: That's good to know. So as you know, opposites attract. So how common are these odd couples in the world?

Scott Rick: Yeah. I think sometimes they attract. We often kind of run with people like ourselves, and there's a lot of birds of a feather flocking together. What's interesting about tightwads and spendthrifts is they don't love this aspect of themselves. I'm different. I write about this stuff, I think about it, so I'm very comfortable being a spendthrift. But a lot of those extremes, they don't love it.

And then when you go out and you encounter someone who has your problem, your flaw, that can be unpleasant to look at. That can really shine a spotlight on it and you can think, "Do I really look like that? Is that how I sound to people? That's awful." And so it could be a real turnoff at first.

And so we find that the mismatched pairings, the tightwads with a spendthrift, they hit it off, and they are more likely to marry each other than they are to marry someone like themselves. That's a pretty consistent finding, and that can lead to some tricky marriages.

And sometimes, things that are fun at first are less fun 10 years into a relationship when things get more serious, and it's just relentless. And there's a lot of things like that in couples. Things that are charming and novel. There's a flip side to it that you discover later.

Greta Guest: So how does the marketing world drive a wedge between these two?

Scott Rick: Yes. Well, I think, I mean, the marketers, no one's looking to kind of help the spendthrifts calm down. They're trying to turn everyone into spendthrifts as if we needed the help, but if you want to calm down your spending, you kind of have to take it upon yourself, you know?

And one way to do that is if I'm a spendthrift, it helps if I go shopping with my wife who is a tightwad and luckily doesn't mind me telling the world about our business. But that is one thing you can do. Kind of shop with someone who thinks differently, a friend, a spouse, someone, an outside perspective, not a salesperson.

But, yes. Left to your own devices, you might misbehave, but we behave very differently when we're being watched than when we're not. It's like at Whole Foods at the pizza counter, you had to ask for pizza. When you would ask, you'd get one. Now it's self-serve. What do people do? They get two. We are a little looser when we're just in private. So if you want to calm the spending down, make sure there's someone else there.

Greta Guest: Great tip. So what are some of the ways that couples can avoid these minefields in their relationships, and especially a time when there's so much spending?

Scott Rick: Yes, yes. I mean, you can't fully avoid it. It's just that's the issue. There's so many money-related decisions that couples face, and even things that aren't really obviously about money are often also about money. Like, "What kind of sports should the kids play?" Or, "What should we do with our vacation time?" Money's all wrapped up into all of that.

And so just know that it's unavoidable, but it's good if you have kind of a balance of power, and kind of like the US government to some extent, you want to separate some powers. Like my wife and I, when we disagree about a material purchase, a new smart refrigerator or a new car, something like that, I tend to let her win those disagreements because the research is clear. There's a lot of new material goods that don't bring the lasting joy and happiness that we hope they would bring. That pains me to admit as a spendthrift, but it's true. So on the material goods, let the tightwads win those disagreements.

But on the experiences, particularly shared experiences, family vacations, novel things, weekends out, that's the spendthrift specialty. That's where you want to let them win. I am our vacation booker, maybe I'm not fully honest with Julie, my wife, about what it costs, maybe I quote the pre-tax price, but not everyone needs to know everything. But those experiences are so important. You need the novelty, you need the stories and the memories.

And that is where you can really learn about each other. Kids learn about the parents, vice versa. Spouses kind of remind each other about each other. There's only so much you can learn in the day-to-day, who's going to let in the repair person, the routines. So you need these kind of novel things, and so that's where I like to let the spendthrifts be in charge.

Greta Guest: So do you feel like it's a fuller life when you're married to your financial opposite?

Scott Rick: Yeah, no. I do think these mismatched couples. If you're not mindful about it, if you don't actively try to manage these differences, you can devolve into fighting and really bad patterns. But I do think the mismatched couples have the greatest potential for happiness because you can kind of play to everyone's strengths and get this balanced perspective of how to balance financial wellbeing and happiness and psychological wellbeing.

And you don't want to maximize one or the other, I think. So my research, and I have this book, and there's lots of books out there about getting rich, like, "Okay, fine. That's not what I do. I'm about wellbeing and finding this balance between all these important things."

Greta Guest: So spendthrifts, I mean, you're making it sound pretty good. Is it a flaw?

Scott Rick: Well, yeah, no. I mean, it can be managed. It can be managed, like any condition, but yeah. We do see a lot of spendthrifts kind of fall into debt, and there can be a dark side to it, for sure. Certainly, two spendthrifts in a marriage, that is the most volatile pairing you can imagine. If you have the money to make it work, my goodness, have fun with it, but yeah. You can really get into trouble.

So for the spendthrifts who do want to kind of reel it in, I say find ways to set up speed bumps, psychological speed bumps, things to slow yourself down because nobody's looking to help you slow down. You have to do it yourself. Spend in cash, delete your saved account information from Amazon. Force yourself to log in each time, and just find ways to slow yourself down. Yes.

Greta Guest: That's a great tip. So if you really want to avoid overspending, whether you're a tightwad or a spendthrift, what are some of the other ways you can do it in addition to these speed bumps?

Scott Rick: Yeah. Yeah, no. I think it's shopping with others, thinking about your payment methods. Certainly budgeting is great for this. Budgeting can also help tightwads loosen up. They just have to plan for it. Everyone can use budgeting to either kind of dial up or down spending, so it's a great tool either way. But list-making, kind of the old-fashioned tips, I think, are still good here. Yeah. Just kind of plan ahead.

And if you go over, don't beat yourself up. There's all kinds of things I buy at Costco that I didn't plan on buying, but they're good purchases. Sometimes, you will stumble upon something that you hadn't planned on, but still makes sense to buy. So there's no right answers to this. Don't beat yourself up if at all possible. Yes. So be mindful, but don't worry too much.

Greta Guest: Did you know Julie was a tightwad when you first met her?

Scott Rick: I knew she was a tightwad by the end of the first date. I mean, it was obvious.

Greta Guest: What did she do?

Scott Rick: Well, no. Just the way you would debate, "Oh, what should we order? What kind of drink? And where should we go afterwards?" And you would hear hesitation and particularly like, "Oh, I want to, but no. Maybe we shouldn't." That kind of thing.

Now, early on, she would go shopping and come back and tell me about the things she wished she would've purchased. I'm like, "Just take me next time. We'll get it done," and, "That doesn't sound like shopping to my ear." So, no. It's very obvious.

And certainly, now that we have kids, habits of mine that might have been fun and playful, now that she sees me passing it on to the kids, it's like, "Let's talk. Maybe we want to correct that." But, no. It was clear early on, and I knew, "Oh, this is going to be interesting."

Greta Guest: Well, you bring up the kids, and that makes me wonder, what is the genesis? How do we form these particular money habits?

Scott Rick: Yes. Well, this was an unfortunate lesson for me because kids get a lot of mixed messages. Dad might say, "Hey, get off your screens, but hold on, I got to make sure my LinkedIn post is getting some likes here." Do as I say, not as I do, but the research unfortunately is quite clear that the kids are much more likely to mimic what they see than they are to follow any advice that they hear.

And so I've had to kind of reel in some of my spendthriftiness, at least in front of the kids. Maybe go to bed and now I'm going to bid on something on eBay, but yeah. Just being more mindful of that. And I'm not saying I take away all the splurges, but I talk to them like, "Okay, if we go to the Tigers game this weekend, maybe that means we don't go to the arcade next weekend." And there are trade-offs and opportunity costs and trying to get them to think about that.

Spendthrifts don't always think about, "Oh, what am I giving up later by having fun now?" So I can't turn it off, but I can try to spell it out and be more mindful of these trade-offs.

Greta Guest: When did you first want to study the dichotomy of the tightwad and spendthrift?

Scott Rick: Very early on. I had a strange childhood where my grandparents kind of ditched us. They moved to Vegas. They were bored, and we all lived in Houston, they moved to Vegas, and then we kind of followed them out there every summer. And a lot of my childhood was in a casino watching people pursue happiness with money, and that was really interesting.

And I would go back to Houston, and my friends, their families, weren't like that at all, and so I just became very interested in how can you be so different and live in the same neighborhood, but have Mars and Venus kind of mentalities? And, yes. And certainly going into grad school, I was surrounded by tightwads and a lot of academics are tightwads, and so, yeah. I just became very fascinated by these differences and what makes us tick, why, and yeah.

It's all very me-search, like marriage, and now kids, I do research on all that. I always tell people, "If you see me researching divorce, you know something happened," and so you have a good lens on what I'm up to based on my CV.

Greta Guest: So how do you and Julie navigate together and think this would be instructive for other couples?

Scott Rick: Yes. Well, one thing that works for us is a combination of joint and separate accounts. Joint accounts for psychological money laundering, get rid of income differences. It's all our money immediately, and that helps. But then we each get to spend some of our money without the other person looking over our shoulder, so she knows what I spend in a month or in a week or every time I take money from the joint account, but the details of what I do with that, no, it's just kind of available upon request. And so far, there haven't been any requests.

But because we have different hobbies and interests, and spending on those, it's not jeopardizing the home's bottom line, but it might seem crazy to the other person. They don't have the context. But you need your own interests and passions and hobbies and habits that you enjoy that even if the other person doesn't understand this. So just there's a little separation here of church and state, a little discretion and privacy, but at a high level, we know what we're up to. Yeah.

Greta Guest: Great. So for other couples who they're in the middle of their marriage and they're just discovering the true financial identity of their spouse, what are some of the coping mechanisms? Because I mean, money's probably the number-one thing people fight about, correct?

Scott Rick: Sure. It's right up there with in-laws. Those are usually one and two. But, yes. I mean, figure out your account structure. The typical advice is, oh, openness, communication, get it all on the table. I'm generally for that, but I'm also for if there are things you don't need to talk about, don't talk about it. So I like to talk about high-level things, plans, goals, but the day-to-day spending, that's where I differ.

So people say financial transparency is good. I say financial translucency is better, where you have a sense of some things, you don't need the details. And so mismatched couples agree on the big stuff and put away the little stuff. I'm assuming we're already in a generally good, trusting relationship. If things are bad, then yeah. Maybe you need to print everything out.

But, yeah. If there's no trust, it's like me and my contractor working on my house. You're like, "Yeah, we need receipts. We don't trust each other." But if it's a loving relationship, then yeah. You can put some papers away.

Greta Guest: Great. Well, thank you so much. I appreciate your time today. Is there anything else that you wanted to mention?

Scott Rick: No. Just there are truly no right answers when it comes to spending and saving and shopping, so don't let anyone tell you otherwise. Find your own path, and good luck.

Greta Guest: Thank you so much.

Scott Rick: Thank you.

Greta Guest: Thank you for listening to this episode of Michigan Minds, produced by Michigan News, a division of the university's Office of the Vice President for Communications.