To Achieve Your Goals, Focus on Reasons

Quick, name your top money goals: Do you want to earn more? Save more? Stop wasting cash on stuff you don’t care about? Now, instead of focusing on how to go about achieving those goals– by keeping a spending diary, perhaps, or leaving your credit cards at home – meditate instead on the reasons behind them. Do you want to be debt-free? Save enough to afford a vacation? Stop worrying about overextending your bank account?

[Slideshow: 10 Things to Splurge on This Summer.]

By focusing on those big-picture reasons instead of logistics, you will actually improve your chances of achieving your goals, according to new research published in the Journal of Consumer Research. According to the paper, people become more close-minded when they focus on logistics, and less likely to take advantage of unexpected ways they can move closer to their goals. But people who focused on the abstract reasons were able to spontaneosly take advantage of ways to turn their dreams into reality.

For example, if someone wants to save money, the researchers explain, she might come up with a plan to buy fewer clothes on a trip to the mall. But then, she might miss the opportunity to save by having a cheaper lunch or avoiding an impulse purchase instead.

So, how did the researchers come up with this finding? They asked one group of people to plan how they were going to save money, and another group not to plan at all. A third group was asked to focus on why they wanted to save money. Then, all groups were offered a chance to buy candy.

The group that had formed a savings plan were more likely to buy the candy than those who hadn’t planned. (But the study authors add that among abstract thinkers, those who planned were more likely to avoid the candy purchase.)

“Planning is more effective when people think abstractly, keep an open mind, and remind themselves of why they want to achieve a goal,” according to the authors. “This strategy is especially effective when the plan turns out to be infeasible (cheaper restraunt is too far away, gym is closed today for a holiday) or when other goal-directed activities become available (walk instead of taking a cab, eating a healthier meal.”

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This discovery is just the latest from academia on how we should be managing our financial lives. Among other recent findings:

• Don’t be lured by credit card rewards: People tend to spend more on their credit cards as they get close to receiving card rewards, a behavior dubbed “purchase acceleration.” "People find their motivation increases as they get closer to goals," says Ran Kivetz, business professor at Columbia University. As people close in on a credit card reward, they're likely to spend money more quickly to reach it, he explains. That could mean buying a Prada purse that you don't necessarily want, or splurging on a steak at Morton's, to build up reward points when it would be easier—and, in some cases, cheaper—to just purchase the reward on your own.

• But don’t spend too little, either. Kivetz has also identified what he calls “self-control regrets,” which refers to the fact that people may actually wish they had spent more, because their sense of guilt over purchases dissapates over time while their sense of “missing out” does not. "People feel guilty about luxuries and it's hard to justify them, so they under-consume them," he explains.

• Beware the “placebo effect.” Think your $4 coffee keeps you more alert than the $1 one? Or that your $45 bottle of wine tastes better than a $9 one? Turns out it might all be in your head. "We have been conditioned to expect that higher prices equates to higher quality," explains Gregory Berns, a professor in the psychiatry and behavioral sciences as well as economics at Emory University. "Therefore with a product like an energy drink, you expect the more expensive it is, the better it works." But is it really better? It is if you believe it is, says Berns.