Question

According to orman, why do people spend money so freely

Answer 1

According to Orman, people spend money so freely due to several factors including the emergence of a middle class, the availability of credit, personal preferences, and the expense of being poor.

Step-by-step explanation:

According to Orman, people spend money so freely due to several factors. Firstly, the slow emergence of a middle class and the growing practice of buying on credit presented more opportunities for people to participate in the consumer culture. Stores allowed people to open accounts and purchase on credit, which allowed consumers to buy without ready cash. Additionally, personal preferences play a role, as some people prefer to consume more in the present rather than save for the future. Finally, the expense of being poor can also impact spending habits, as people with more resources have more purchasing options and can buy in bulk, while those with fewer resources face higher costs for housing and other necessities.

Answer 2

People spend money freely due to historical habits of consuming surpluses, the allure of consumer culture, personal spending preferences, and psychological biases that override rational decision-making. The introduction of credit and targeted advertising has facilitated spending, while behavioral economists seek to correct these patterns with nudges toward rational spending and savings behaviors.

Step-by-step explanation:

According to Orman and various sociological and economic perspectives, people spend money freely due to a combination of historical, psychological, and situational factors. In historical context, there was a time when people did not think of money as something to save but rather to spend freely on immediate needs like food or leisure because it was impossible to anticipate having a surplus again in the future. The earned money was promptly used for consumption, without giving much thought to savings.

The emergence of consumer culture, the introduction of buying on credit, and the increasing advertisement of products that promise a better lifestyle led to increased spending. Creating a desire for goods and making them accessible even without ready cash facilitated this spendthrift mindset, which has become a part of the American consumerism culture. Furthermore, personal preferences play a significant role; some prefer to live in the moment while others plan for a luxurious future or to leave a legacy.

Behavioral economics has shown that traditional models assuming complete self-control are not always accurate. People's state of mind and feelings, such as the tendency to value a dollar lost more than a dollar gained, influence spending decisions that traditional consumer theory does not account for. In response, behavioral economists are designing 'nudges' to encourage rational spending behaviors and saving habits to counteract these non-rational decision-making patterns.