The $25,000 Personal Finance Experiment

How does the human psyche react when normalcy is compromised? How does the mind treat manufactured drama? I was able to answer both of these questions with my latest Personal Finance Experiment.

The Premise:
Put $25,000 in someone’s checking account for two weeks to see if it changes their spending habits. The money isn’t necessarily meant to be spent on anything, but it is placed there to add a layer of comfort and security that one normally doesn’t have.

The Test Subject:
Me. Who else would I give $25,000 to? I simply took $25,000 out of my emergency reserves from another account, and placed it in my checking account for two weeks. Before we go to much further, it is important that we clear up a few points:

  1. This experiment wasn’t about me telling you that I have $25k to throw around. In fact, if I didn’t have $25k at my disposal, then I would possibly be the worst Personal Finance Expert on the planet. Why would you take advice from someone that hasn’t demonstrated the ability to effectively save money?
  2. I am not exactly a financial angel. I have my weak moments. Most relationships have a spender and a saver. My wife is the saver, and I traditionally have been the spender.
  3. The experiment is not necessarily about spending the money. The experiment is meant to measure the change in everyday spending habits based on access to a ridiculously large amount of cash inside of a checking account.
  4. I don’t have any debt other than my mortgage, so I was never tempted to “just pay off my debt.”

I’m still a monkey

I am a dumb animal. I really am. Any degree of financial success that I have had is based on me tricking myself to financial security. For instance, I normally keep my checking account super-low so that I don’t blow-through money that I don’t NEED. In addition, I don’t have credit cards. I don’t trust myself to win the mental battle between the credit card companies and my small dinosaur brain. You see, credit card companies are in the business of taking my money from me. They know exactly what they are doing. They offer points and rewards and other forms of BS in order to get my hard earned money. In lieu of a battle of the minds that I would probably lose, I have decided to just not participate in their game.

So the first challenge that I encountered was my own animalness. Yeah, animalness. New word. Work with it. I had protected myself for so long from dumb decisions that I was actually nervous that my brain couldn’t handle the challenge. By the way, not enough people protect themselves from themselves. I highly recommend it. Trick yourself into financial success.

It’s on

So I deposited the $25,000 into my checking account.  No big deal really. I didn’t feel any different in regards to my spending habits, but I was a bit nervous about having that sort of scrilla in my checking account. I didn’t want some bandit to force me into cleaning out my account by using some of the most brutal slap and tickle techniques around. I decided to carry my Swatch Swiss Army Knife that I bought back in the summer of 1987. In the event that I was accosted, I figured that I would use the scissors to cut the criminal, or use the tweezers to clean up his brow line.

Although I did tell you that I’m the spender in my relationship, it’s important that you know that I don’t really spend as much money as I used to. My spending is usually limited to food, wine, gifts for Mrs. Planner, or possibly a nice tie that would look snappy on television. That being said, two questions now arise:

  1. Would I spend more money on the areas that I already tend to spend money?
  2. Would I add spending categories to my spending habits?

My answers? Yes and No. Yes to #1. No to #2. I didn’t ever feel compelled to start buying things that I normally wouldn’t buy, but my radio co-host, Chip Maxwell, was making headway on his mission to get me to join him in the ranks of iPad owners. I can say with great confidence that every purchase I made during the experiment was affected by the $25,000. Check that. Maybe I should say that differently. Most purchases are make are generally affected by the low balance that I normally keep in my checking account. Therefore, the $25,000 addition lulled me to financial apathy. I didn’t consider the principles of scarcity that I normally employ when making a spending decision.. This, alone, was worth the experiment. I value scarcity. I believe it to be a valuable financial tool. Removing scarcity could be damaging to my financial life. This was very scary. Many people don’t know that they are subjecting their savings to the possibility of extinction simply by keeping it in their checking account.

I’m somewhat famous for my $62/week grocery store trip. My $62 trip became $80/week during my two week experiment. I know this was because I didn’t take the time to consider the necessity of the things that I was purchasing. I had grown accustom to considering the importance of every item that I put into my cart. I believe that we should all scrutinize the items that we purchase. By having the $25k cushion, I learned that my scrutiny was tied directly to low account balance.

I did buy Mrs. Planner flowers two more times than normal over the course of the two weeks. I consider this a good thing. I believe that I purchased at least two more bottles of wine than I normally would have. My palate tells me that it was good thing too, but it wasn’t. I made two additional nominal charitable contributions. I didn’t mind that, but we have a pretty structured giving plan so it surprised me that I deviated from it.

The bottom line

I made at least 8 purchases in the two week experiment that I normally wouldn’t have made. Many people keep too much money in their checking account all the time. If I kept up my new spending pace over the course of an entire year, then I would have spent money 208 more times than usual. Money changes behavior. It just does. I did prove to myself that my assumptions about myself were true. I am a dumb animal. I need to continue to trick myself into financially favorable situations.

I would love to hear what you think about this post. How would your behavior change if you were faced with a $25k experiment?

7 thoughts on “The $25,000 Personal Finance Experiment

  1. Great experiment! It brings up a somewhat-related question… what type of account do you recommend keeping your emergency fund?


    My prediction for us is that it would not have an effect, since we live via the budget, and spend up to that, but not over. We are every in tune to the numbers within the budget on the spreadsheet, (ie, we are under the food budget so will use that for something social like beers out etc) but less in tune on a daily basis to the total in the account. I would not even notice/have in my brain that the extra money is there. Wonder if it would really be true if we did it.

  3. Great experiment Pete. I would probably be in the “put it as additional principle on the mortgage” group simply because I wouldn’t trust myself with it in my checking like that.

  4. For this experiment to be truly effective, I think you should deposit 25k in someone else’s account to really see what would happen. Since you did it to yourself, you knew that you couldn’t blow through the money because it was going to go BACK into YOUR account. I think decisions would move past extra flowers and bottles of wine. 🙂

  5. Pete, great idea and this made me think. I don’t like to spend money and complain when we go to the grocery and spend $200 for 2 weeks of groceries. (that is for 2 adults and one very quickly growing 7 year old son that eats a TON). With that said, if I had $25K extra as a “cushion” I would probably spend more and not worry about the “little” things like extra snacks, a lottery ticket while filling up the car or a lunch out with the family. I really don’t believe I would “blow” it, but wouldn’t save it either. Thanks for the post, great idea!!!

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