People’s mental representation of expenditures is crucial to how they budget. We propose that much like how people represent natural kinds (e.g., animals and plants), people represent expenditures in a hierarchical taxonomy. Across seven studies, supported by six norming studies and three pilots, we found evidence of a hierarchical representation of expenditures. We first recover people’s mental representations using a successive pile-sort method that asks people to form hierarchies of categories with common expenditures (e.g., rent, dining out, etc.). We found that there is consensus in people’s hierarchical representations of expenditures and that their representations are relatively stable over time. Further, we found that people’s adjustment in their spending behavior can be predicted by the distance between items in their representation. Specifically, when people overspent on an item, they were more likely to spontaneously adjust spending for items closer in representation than those further away. We examine this spontaneous adjustment behavior using both lab studies and field data with 6.5 million grocery shopping trips over twelve years. The findings highlight the connection between mental representation and consumer behavior, and they emphasize the importance of studying concepts and categories in the context of consumption.

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