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Reasoning with Reasonability

There is an abundance of terms and phrases that American’s use to make the act of savings feel less painful, like evaluating, bargaining, or prioritizing. But no matter how you phrase it, saving can be difficult for even the most responsible person, especially with matters that have a strong emotional component. For instance, when it comes to once in a lifetime events, like a wedding, people are much quicker to concede on their financial plan. In fact, according to The Knot's annual Real Weddings Study, the average cost of a wedding (excluding the honeymoon) reached an all-time high of $31,213 in 2014, up 4.5 percent from 2013. This is the fourth consecutive year of gains. 

Pig - MarriedWhile many argue that increased spending may reflect the improving economy, The Knot’s study showed that the increase in spending goes beyond inflation and was represented across all income levels and regions. Additionally, 45 percent of couples said they strayed from their wedding budget, and 23 percent said they didn't even have a budget to begin with. From a financial planning standpoint, it may seem unreasonable to spend outside your budget, but is it any more reasonable to ask someone to concede on such an important, emotional event? Where do you draw the line?

Spending is, after all, largely connected with emotions. Working on and writing for the AICPA’s financial literacy programs for the last four years has often led me to ask myself: How do you help someone find a “happy place” between their emotions and their budget? Even if a person rationally knows that spending isn’t good for their budget, that doesn’t mean that it will necessarily feel reasonable to hold back. Even I run into this issue sometimes, especially when it comes to vacations; my default internal dialogue, which I imagine is very similar to those planning a wedding, is “it’s a once in a lifetime opportunity. Why not make the most of it?” What’s the magic answer? What can financial literacy experts, like CPAs, do to convince consumers that sticking to a budget is the reasonable thing to do? How do we shift the emotional pull to the financially responsible side?

As Financial Literacy Month approaches, I encourage CPAs to participate in helping advance this conversation. The AICPA has a series of tool and resources for CPAs to aid in your volunteer ventures. These are free to all AICPA members. For more information, you are welcome to contact me at ccieslak@aicpa.org.

Claudia Cieslak, Communications Manager - Consumer Education, American Institute of CPAs. 

 

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