Financial New Years' Resolutions Should Include Four Savings Goals, Says Baylor Professor

December 23, 2009
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Dr. James Roberts, professor of marketing and The W.A. Mays Professor of Entrepreneurship at Baylor University.

Reducing credit card use key to putting Americans on road to financial health

Media contact: Lori Fogleman, (254) 710-6275
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With 2009 in the rearview mirror, Americans are making resolutions for the New Year. Getting physically fit may top the list, but a Baylor University consumer behavior expert suggests that Americans resolve to get in good financial shape in the coming year.

Dr. James Roberts, professor of marketing and The W.A. Mays Professor of Entrepreneurship at Baylor, is a nationally recognized researcher on consumer culture and behavior, compulsive buying and credit card use and abuse. Roberts advises Americans to focus on four savings goals in 2010:

    1. Establish an emergency fund ($2,500)
    2. Save 3 to 6 months expenses
    3. Contribute to your retirement account
    4. Start your kid's college fund

In addition, cutting out the use of credit cards would be a great New Year's financial resolution for all Americans, Roberts says, and one that would put us on the road to financial health and well-being.

"This involves creating an environment that makes it easier to not spend money, such as avoiding the malls, shopping without credit cards and only with cash, using a 24-hour cooling off period for big purchases and paying yourself first to help you attain the four savings goals," Roberts says.

Roberts says that Americans have become desensitized to what he calls the "Pain of Paying," a concept that deals with the different levels of "pain" associated with how we choose to pay for our purchases. Cash, checks and debit cards have an immediate and "painful" impact on our wealth. Credit cards are the next less painful option, but these plastic "spending facilitators" lead most Americans to spend and buy more than necessary.

"Cash is the most painful, and I think we all understand why that is when we pay for things with cash. We have to have it in our pocket, we have to count it out, and when we pay for our purchase, that cash is no longer in our pocket. It's very painful and so we're much less likely to buy things when we pay with cash," he says.

Slightly less painful options are debit cards and checks.

"Debit cards are better than credit cards because we at least have some idea that we are taking money out of an account and that money is no longer there. Debit cards can be used for anything that credit cards are used for (on-line purchases, car rentals, etc.). But still, it's a little less painful than cash. Checks are pretty painful because we have to write down the amount and we know that money is coming out of our checking account," Roberts says.

The ease of credit card use comes with a "buy it now, pay later" mentality that makes it the next less painful option, but there's also a major disadvantage: higher risk of greater debt. Experts say with plastic we're more willing to spend more and likely to buy more than we can afford.

"When we pay with cash or write a check we have to count out that money or write out that amount. We don't have that benefit or barrier with credit cards," Roberts says. "There's a delayed impact on our wealth when we use credit cards. We have 30 days to figure out how to have the money available to make payments. As human beings we're optimistic that we'll come up with it some way and make that payment, but we got 30 days to think about it."

Credit cards also tend to "super-size" purchases. In fact, researchers have found that bills in fast food restaurants paid by credit card tend to be between 50-100 percent larger than bills paid in cash. And, it's not just that we spend more with plastic but that we are more likely to buy in the first place.

Jim Roberts' expertise has been featured by numerous media outlets, such as "ABC World News Tonight," NPR, The New York Times, The Washington Post, The Wall Street Journal, Kiplinger's Personal Finance and many others. He has published more than 75 academic articles, with research regularly appearing in many of the top marketing and psychology journals, such as Journal of Consumer Psychology, Journal of Economic Psychology, Journal of Marketing Theory and Practice and Journal of Applied Psychology.

He can be reached at (254) 710-4952 or His research page is