You're been good all week, so what's the harm of having a donut for breakfast on Friday? Or shelling out for those new shoes? It could be the reason your bank account is empty but your belly is, ahem, a little full.
There's no harm in splurging once in a while, of course. The harm comes when we forget what we've splurged on, but we remember each and every donut we didn't eat. New research suggests we fallible humans often give ourselves outsize credit for all those moments of denial, but fail to properly weight the failures.
It's a phenomenon that's been labeled "progress bias" by University of Colorado researcher Margaret Campbell in a new paper published in the Journal of Consumer Research called "When One Step Forward Seems Larger Than One Step Back." Campbell ran a series of tests and found that people exaggerate the impact of their good choices and let mistakes slip their minds.
In one simple experiment, Campbell and fellow author Caleb Warren of Texas A&M measured people's reactions to either saving $45 or spending it. The savers credited themselves with 20 percent more progress than the spenders debited their mental accounts.
In a world where investors are fighting for every 1 percent they can find, understanding progress bias could make an enormous difference. You can't build up your savings by spending wisely 29 days each month, then blowing your budget on the 30th day—even if that feels like progress.
"It's very hard to repeatedly deny yourself the things you like ... that's why people seem to have a hard time pursuing these goals where they have to repeatedly do things that move them towards a goal," Campbell said. "You give yourself points and think you are a hero when you resist, but give yourself a bye, and think it's not such a big deal, when you fail. That's why you think, 'Wow, I'm making progress,' when you aren't."