By Oyin Adedoyin
Jan. 26, 2024
Luria Freeman called off her 30th birthday festivities with a public display of financial planning.
“I have a few big financial commitments coming up this year and canceling London became the most responsible choice (boo adulthood),” the New York-based producer messaged her friends Jan 2. in a group chat, including the eight who had already said they would book the four-day trip. There would still be a party, but a modest one.
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Making a public declaration to rein in spending helps tighter budgets stick, Freeman and other proponents say—an idea supported by behavioral economics research. An added function: Using personal finance as an excuse to back out of plans with friends can help you save face as well as money. The practice, which gained currency on social media in recent weeks, was also given a new name: loud budgeting.
“There’s something to the idea of sharing financial constraints or saving intentions in a more open way that can be useful and good,” said Scott Rick, an associate professor of marketing at the University of Michigan, who has studied what makes people overspend.
With prices and interest rates still high, credit-card balances ratcheting up and savings dwindling, financial advisers say it is more important than ever to resist temptations to overspend. By going public with austerity plans we will feel greater pressure to follow through, behavioral finance researchers say. It is also an easy way to steer friends or family to less expensive activities or gifts.
Sharing your financial goals and obligations with others serves as a commitment device, a strategy to make it harder for yourself to bail on your financial goal, Rick said. In this case, the device is enlisting your friends as bank accountability partners.
An antidote to quiet luxury
Loud budgeting began as a joke, said Lukas Battle, the 26-year-old comedian who coined the term in a December TikTok video after a night of overspending.
When Battle’s friends then messaged him asking to go out to an expensive Italian restaurant in Manhattan’s East Village neighborhood, he proposed they all cook dinner at someone’s house and have a game night instead. It was a riff on “quiet luxury,” the trend of favoring well-made, expensive, but understated fashions.
Battle’s video took off, generating over one million views and more than a thousand comments. Hundreds of people have shared their own examples of how loud budgeting helped them save money.
“People want a break or some sort of relief from this constant need to be spending and buying,” said Battle, who lives in New York.
A license to say no
Loud budgeting has helped some combat the peer pressure to spend.
Madeleine Burke, 26, said her best friend visits the nail salon every two weeks for a manicure and pedicure. The last time Burke went with her, she paid $45 for a pedicure and instantly regretted the decision.
“I cannot believe I paid for that and I could’ve done it at home,” said Burke, who lives in New Orleans. The next time she was asked, she felt more comfortable declining. She credits loud budgeting with helping change how she approaches spending.
Burke said her friends now host more potlucks at each other’s homes and go secondhand shopping together.
Spend like it is 2024
So far, cash registers continue to ring louder than Excel spreadsheets. Americans have been on a spending spree since the end of the pandemic and consumers show little sign of letting up.
An idea like “‘loud budgeting’ has the potential to reduce consumption expenditures, but it hasn’t hit consumption expenditures yet,” said Nobel laureate economist Robert Shiller, who advocates for more research into the way the stories we tell about the economy affect behavior.
In loud budgeting’s favor, there is some evidence more people want to embrace conspicuous nonconsumption.
Nearly 30% of Americans surveyed said they wanted a financial adviser to help them budget, up from 21% the year before, according to the Edelman Financial Engines’ 2023 Everyday Wealth in America Report.
“In the last several years we’ve been a little free in our spending habits and we’re starting to really see people rein that in,” said Kelli Smith, director of financial planning at Edelman Financial Engines.
Write to Oyin Adedoyin at oyin.adedoyin@wsj.com
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