What would you do if your wallet became harder to open as your spending approached or exceeded your budget? Would you think twice about where your money was going?

A product designer at the Massachusetts Institute of Technology who created a working prototype for such a wallet thinks so, and he may be on to something.

Part of the reason so many people spend too much, or fail to stick to budgets, is because parting with money has become an abstraction in increasingly cashless societies . Credit cards
provide immediate gratification, but no immediate consequences. Plucking actual dollars from your pile of cash, research
suggests, is more painful, and leads you to spend less.


Learning to harness emotions to control bad spending habits.


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There’s another factor that prevents people from being model financial citizens (besides, of course, circumstances like joblessness). Humans are notoriously poor at following through
with their plans. Sticking to a budget feels too much like dieting. And we often fail at both for the same reasons: too much focus on the restrictions, not enough on fun. So it’s not surprising when people end up bingeing later, more than making up for dollars not spent or calories not consumed.

On Mint.com, a money-tracking Web site, top goals among the nearly half a million users include paying off debt, creating an emergency fund and saving for retirement.

The battle, say money and psychology experts, is finding ways to close the gap between good intentions and human nature. So when every dollar counts, how can you accomplish what you’re not necessarily wired to do?

It may be a while before that smart wallet hits the shelves (a hinge in the middle of the wallet, wired to your bank account
balance via a Bluetooth connection to your cellphone, makes it harder to open as you reach a spending limit). The main inventor,
John Kestner, said he’s working on bringing its retail price down to $60, to “avoid obvious irony.”

The best budget strategy is not to think about it as budgeting at all. Instead, set up broad goals and automate all savings and other priorities where you can. “Self-control is wonderful, but it’s just not sufficient,” said Meir Statman, a finance professor at Santa Clara University in California who focuses on
behavioral finance.

Start by becoming more conscious of your spending, whether you jot it down in a notepad, on a spreadsheet, or on a Web site . Then, give your spending plan a sense of purpose; budgets with a goal, whether it’s a vacation or buying a home, tend to be the
most successful.

“For there to be sustainable change, there needs to be some sort of positive motivation,” said Amanda Clayman, a financial therapist in New York. People tend to set unrealistic goals
that don’t factor in their lifestyle, she said. “Ultimately, what we want our money to be is an energy source,” Ms. Clayman said. “It should help us get somewhere or do something.”

One strategy to keep spending in check is to employ what’s known as mental accounting — dividing your money into separate mental accounts that you treat differently. The easiest way to set up a system, experts suggest, is to put your income into separate
accounts or subaccounts, including one that distinguishes spending money from money needed for recurring household expenses. And think about working backward, as a way to keep things simple: instead of setting up an overly detailed budget, first decide how much you want to save for retirement and other goals, then work with what’s left over. If you want to cut spending, attack a few big categories where you can make the biggest difference.

And don’t rely on doing it yourself. Arrange to have the money withdrawn from your paycheck. “We need to exploit automaticity,” said Professor David Laibson, a behavioral economist at
Harvard University.

He points to the success of automatic enrollment into retirement savings plans . “We need to build in more of these commitment mechanisms, so we can live up to our intentions.”