A conversation with Tightwads and Spendthrifts author Scott Rick

WELCOME BACK TO THE JOINT ACCOUNT

Hi there, you beautiful subscribers! It’s Douglas.

Last month, Heather mixed things up on The Joint Account by sharing our first author interview, and it turned out to be one of our most-read newsletters this year! So, I’m following her lead by interviewing another amazing author, Scott Rick. Scott is the associate professor of marketing at University of Michigan’s Roth School of Business, where he focuses on understanding the emotional causes and consequences of consumer financial decisionmaking.

Scott’s new book, Tightwads and Spendthrifts: Navigating the Money Minefield in Real Relationships, examines why we behave the way we do when it comes to our spending. His book highlights how our spending behaviors impact our relationships and offers relatable advice on how we can improve them. This, of course, aligns with one of our main goals here at The Joint Account: helping you build stronger partnerships and lead more meaningful conversations with your S.O. around money. I am thrilled to share some excerpts (edited for style and brevity) from my conversation with Scott…

D: What is the tightwad-spendthrift scale, and how was it developed?

S: It was developed just based on a kind of observation that people seem to feel very differently about spending money. Some people get very anxious about it. Other people, like me, don't get anxious enough. We wanted to understand where people are in this continuum, and that's what motivated the development of the scale. It gives you a score and lets you know if you are a tightwad, someone who's very anxious about spending and spends less than they think they should, or a spendthrift, someone with the opposite problem that spends more than they think they should. Both are typically filled with regret and are conflicted in a sense. Then there are people in the middle, the unconflicted consumers. They are less interesting, but they are kind of psychologically well off and happy enough with how they use money. But the extremes are the ones who have captured my interest the most.

D: Based on the data and research you’ve collected, roughly what percent of people are tightwads, spendthrifts or unconflicted consumers?

S: It certainly depends on where you do the cutoffs, but the way we've done it and looking across all kinds of different samples, it's roughly 25 percent tightwads, 50 percent unconflicted consumers, and 25 percent spendthrifts. That’s a very North American sample, but that seems to be what we see.

D: Is it harder to communicate about money with a tightwad or a spendthrift, and who's more receptive to having an open dialog about their personal finances?

S: I don't think either are more open when it comes to money. It does seem like tightwads are more interested in talking about money, and I think they're just more money minded. Whereas, spendthrifts kind of want to keep things happy; like, let's not get into the numbers of it all and enjoy ourselves today. And within a marriage, if one partner is a tightwad and the other is a spendthrift, the tightwad gets more irritated with the spendthrift than the other way around.

D: Does having similar spending behaviors help us or hurt us when it comes to talking about money? 

S: Actually, in terms of productive but difficult communication related to money, it might be your mixed couples that have an easier time with those conversations. Two spendthrifts might avoid the topic, but they also avoid arguing altogether. However, it can also get quite explosive with two spendthrifts in the house. Usually, there will be long stretches of peace and avoidance of difficult things before things eventually get loud. Meanwhile, a dual tightwad house is peaceful, but they also seems to be a little boring. They rate very highly on measures of living a serene and uneventful life. However, that is what they're good at.

D: Why do you think talking about money is so hard for couples?

S:  There are lots of reasons. For some, there's just not enough of it, and even when there is enough of it, we all have different worries. Worries about abandoning our future selves and hurting that version of ourselves. And then there are worries about missing out on the fun of life. There's no right answer, so you can go around in circles forever. There's just so much uncertainty about what the future will look like. Will we be healthy enough to enjoy the money, or if we take this trip, will we actually have fun? Will the kids kind of be a nightmare if we do this? And it's just very understandable that it would be such a mental minefield, so to speak.

D: Since talking about money is so hard, what's the best approach for couples to begin exploring their spending behaviors together? What's that first move?

S: I think completing something like the tightwad-spendthrift scale can be helpful here. Try even filling it out for your partner and kind of guess what they would have done. There are other questionnaires out there that can be good for this as well, but the important thing is to figure out how you see yourself and how your partner sees you. Try to figure out why there are differences between you. “I thought you were so loose with money. But you're saying you're really anxious about that? I'm surprised. Why do you feel that way?” It does take an openness and a level of curiosity about your partner's inner psychological world. You have to tap into their memories and the stories they tell themselves about money.

D: How much does account and financial structure matter when it comes to the long term success of a relationship?

S: I think the way we set up our accounts can produce all kinds of psychological dynamics that are not there otherwise. Sometimes it is about the money and how it moves. For example, in an experiment, we found that newlyweds can stay at a high level of happiness for at least two years if they merge their finances, versus people who kept it separate or just kind of stayed undecided. I think operating out of a joint account does a lot of good things psychologically. It prompts some conversations that might be difficult but are good for getting us on the same page or at least understanding each other. You want to get away from scorekeeping as much as possible. I also think the account structure can reinforce messages like, “I value what you're doing” and that “we're in this together.” You want to keep things communal. We help each other when we need it, not because we're prepaying for favors or keeping track of things so closely. It's a way to kind of match actions with words.

D: Let's talk a little bit about mistakes. Who, tightwad or spendthrift, is most likely to experience or make a money mistake? And who is more capable of correcting that mistake?

Tightwads are more mathematical and more financially literate. They are more money minded for sure. And so they are less likely to make a debt related mistake, like paying off a 5% APR debt when they have like a 25% one staring them in the face. But they are capable of making other kinds of penny wise, pound foolish errors like not investing in someone like a financial advisor for advice. They won’t spend money to make money sometimes. Tightwad mistakes, I think, reveal themselves over time. Spendthrift mistakes, however, have a more obvious immediate cost to them. It's very clear in the moment.

D: How do changes in our finances or financial situations shift our spending identities?

S: When tightwads come into money, you would expect them to really loosen up and shed their anxiety around it. But they’ve developed a kind of a protective shell that can be really hard to shake once things improve. And they’re just kind of constantly worrying about, well, what if I get fired or what if the house catches on fire? They're good about ruminating about worst case scenarios. It’s not easy for them. Also, one of the shocking things over the years with this research is that current income is not a good predictor of where people fall on the tightwad-spendthrift scale. I would rather know what their household looked like in their formative years. That would be the first piece of information I would want.

But ultimately, circumstances force the hands of change. I think about my wife, who was very much a tightwad and is less so now, but she is doing most of the household spending. And with all these kids running around it requires what feels like an endless stream of purchases. So eventually, a pitcher is going to have their arm warmed up after they've thrown enough practice pitches, and they're going to be ready to go. So, I think you can kind of just by sheer force of circumstances learn to decondition yourself from a particular spending identity.

You can buy Tightwads and Spendthrifts here and learn more about Scott here.

Don’t be alarmed, but we’re taking next week off. The Powers That Be scheduled two separate spring breaks for our two children, so we’ve got one home this week and are headed for warmer weather next week. But we promise to take pictures.

Should you have any feedback or wish to chat with us for our book or The Joint Account, you can find us here: [email protected].

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