Mellody's Math: Battle of the Spending Sexes
Feb. 21, 2002 -- It is sometimes said that men buy and women shop.
After spending a day in Chicago with recent college graduates, Jennifer Breinig and Marvin Brown, one thing about their spending patterns was clear: Both are good spenders and bad savers.
In the early part of the day, Breinig went shopping, and was spending her money more quickly than Brown was spending his. But by the end of the night, she had spent $143.80 and Brown had spent $145.13. This experiment showed that the two sexes spent the bulk of their money quite differently.
It also gives credence to a study conducted jointly by researchers at Iowa State University in Ames, Iowa, and Kenyatta University in Kenya, which found that men and women perceive and spend money differently. Among their findings:
About 50 percent of both women and men worry at least sometimes about money. Twice as many women said money worries often interfere with their performance at work. A larger proportion of men than women said money worries interfere with personal relationships.
Though men still out-earn women, about 60 percent of men were dissatisfied with their level of savings, compared to 49 percent of women.
Women are more likely to engage in impulse shopping — spotting a handbag that they don't really need, and then hotfooting it to the register before second thoughts can keep them from their purchase. Researchers found that 36 percent of women buy things they don't need compared to 18 percent of men.
24 percent of women said they can not resist a sale, compared to 5 percent of men.
Women are more likely to consider shopping as an event, celebrating a promotion at work, or weight loss by purchasing a new pair of stiletto heels or a sleek suit. Researchers found that 31 percent of women said they shop to celebrate, but only 19 percent of men do the same.
The only category in which the sexes come out even? Having secretive spending habits. According to the study, they exist in 4 percent of us all.
Neither Keeps a Budget
In any case, the differences between the sexes certainly held up for Breinig and Brown.
Breinig, a manager for a non-profit organization, makes $35,000 a year. Her parents pick up the costs for her car, but she pays $650 a month in rent for her two-bedroom apartment, outside Chicago.
"I have an idea of how much money I can spend on things, and I kind of stay around that area, but I'm not really good with budgets," Breinig said. Since she moonlights at her health club, Breinig worked out for free last Saturday, but paid $2 to park her car at the club. After the gym, she picked up her dry cleaning, which cost $26.45.
"I try to hold back taking too much to the dry cleaners, but then I'll end up with a pile on the floor, and just take it all," Breinig said. She spends $3.25 per shirt at the cleaners. (By contrast, her male counterpart, Brown, never sends in more than five shirts a week, at $1.23 per shirt.)
Brown just started as a broker in commercial real estate, and he, too, makes $35,000 a year. He rents the entire third floor of a house for $275 a month, and saves money by cooking breakfast for himself.
But what Brown saves on rent and breakfast, he spends on his car and auto insurance, which costs $570 a month, which is twice his rent. He does not live on a budget.
"I kind of look at my checking account to see how much money I have, and try not to go over," Brown said. "I can't say I've saved a lot of money, but I don't spend a lot either."
Brown enjoyed a free workout Saturday morning too. Using his old student ID, he was able to get into his college athletic center for free. By noon, Breinig had spent $28.45, while Brown had spent nothing.
Night Falls, Wallets Open
After Brown's workout, he spent $5.63 on a steak burrito. Breinig went shopping for clothing, charging $68.35 to her debit card, which included $20 in spending cash and $3.94 for a salad.
"I tend to moderate what I get here because it is expensive, but there are certain things I've fallen in love with that I can't get anywhere else," Breinig said.
That afternoon, Brown withdrew $100 cash from an ATM machine, spending $20 of it at the barber. (Breinig normally pays $50 for a haircut.) Brown then spent $2.50 to wash his car. Over the course of the day, he spent $28.13, compared to Breinig's $96.80.
At night, the balance sheet started shifting. When Breinig went out for dinner that night, her portion of the bill was $36. Later that night, friends picked up her drink tab at both bars she visited. Her only other expense was $11 in cab fare, which increased her entire day's spending total to $143.80.
When Brown went out on a date that night, the spending piled up quickly, as he paid $65 for dinner for himself and his date, and $8 for a valet to park his car. Two rounds of drinks at a wine bar, and yet another valet added $44 more to the night's spending. His expenditures totaled $145.13
"It frustrates me," he said. "That's part of the reason I'm not in a relationship."
Here are my tips on how Brown and Breinig can save more, and spend less:
1. Start saving immediately: Neither Breinig nor Brown currently save money from their paychecks. I suggest they both begin investing in mutual funds. For as little as $50 a month, you can set up an account with a mutual fund company and automatically withdraw the amount from your paycheck. For Brown, $50 is the equivalent of about four burritos, two glasses of wine and one do-it-yourself carwash.
2. Know your fixed expenses:Everyone has essentials in their budgets they cannot live without. In order to save money, you must be familiar with your expenses and distinguish discretionary spending from non-discretionary spending. Food, housing and transportation generally fall into the non-discretionary category. But even within these groups, there are ways to cut costs. For example, you can save money by choosing what — and where — to eat more carefully. For example, Breinig admitted to "having a fetish for sushi." While this may be a healthy habit, it is also expensive. If she could limit going out to sushi with friends to three times a month instead of four, she would save about $36 a month and $432 a year. Her extra savings will be more memorable than the extra California roll.
Calculate A Budget
3. Get your debt under control:Brown admitted to a significant amount of credit card debt. Breinig, who also has credit card debt, made a smart move by switching from her credit cards to a debit card. The best way to get debt under control is to put a freeze on your credit cards and pay down as much debt as you can. Brown recently "retired" one of his two cards and is making a concerted effort to pay down the debt and puts $300 a month to pay off one of his credit cards. If you just make the minimum payments, of about $20 on a $1,000 balance, assuming an 18 percent annual interest rate, you'll continue to carry the debt for more than 7½ years. But if you are able to double the minimum payment to $40 a month, you will be debt free in almost 2½ years. Try Our Credit Calculator
4. Analyze what you can do now: If you are like Brown or Breinig, potential savings exist in your everyday expenses. For Brown, who is eager to move from a suburb of Chicago to the city, staying a couple of extra months in his current apartment would allow him to develop the necessary nest egg to move. And a nest egg is a necessary object for everyone.
5. Avoid impulse purchases:Breinig admits to occasionally shopping without a purpose. She will buy anything from jewelry and handbags to new plates and glassware only because she likes what she sees. If you are similar to Breinig, consider going home, thinking about the purchase, and then returning to the store only if you decide the item is something you must have. The waiting period is an excellent deterrent to impulse buying and will save your pocketbook from unnecessary strain.
Mellody Hobson, president of Ariel Capital Management in Chicago, is Good Morning America's personal finance expert. Click here to visit her Web site, ArielMutual Funds.com. Ariel associates Matthew Yale and Anne Roche contributedto this report.