First, have a wonderful Thanksgiving. I don’t know about you, but I am looking forward to my 71st straight year of overeating on Thanksgiving. According to abcnews.com, for dinner alone, the average American will consume a hefty 3,000 calories. Drinks, dessert and appetizers can bring the total calorie count up to 4,500. One cup of mashed potatoes alone is 214 calories, and a slice of pumpkin pie is 316 calories. Pun intended, but that’s “peanuts” for me.
In the last column I promised that in this column I would include a few things that I heard on an NPR interview that included the authors of the new book, “Dollars and Sense.” One of the main points discussed was that we don’t think enough when we spend our money — we are just not rational. That got my attention right away, because that morning, in a CARE presentation, I talked, as I always do, about how we live in a “hyper-consumer society,” where too many of us are on what I call “spending automatic pilot.” Advertisers bombard us with messages of who we should be, what we should wear, what we “need” to own, where we need to go, and what we need to do, and we buy into it, and want to “keep up.”
My answers to that, and to spending more rationally, have always been threefold:
First, have a budget that implements your financial goals and tracks your spending, so that you can make good choices about what you are spending, in order to meet your stated goals, and to stay out of debt as much as possible. That should be one of your primary goals.
Second, always remember that money is about hard work, so when you spend the money that you or someone worked so hard for, you will be motivated to get the best value for it.
Third, build good money-spending habits that you can fall back on. Where generally is the cheapest gas in the area where you live, work or volunteer? (You don’t want to drive 20 miles to save a few cents.) Who sells the deodorant and other things that you use all of the time for the best price? Stock up, but keep checking the price when you are around town, in ads or with coupons. (If the price is better — stock up.)
One suggestion that the authors, Ariely and Kreisler, have to help spend more rationally is that when you spend on something, think about the “lost opportunity costs.” What that means is, think about what else could you do with that money, and would any of those things be a better use of your money. What was interesting is that when people were asked to do that, they often thought within the same spending categories, rather than considering completely different spending options. For example, going to this restaurant or a cheaper restaurant, rather than comparing eating out with cooking at home and having money for a movie.
Another thing that was discussed, which I thought was absolutely brilliant, was about the benefit of using cash for your spending, rather than cards, phones, computers and pads — “digital spending.” Not to beat a dead horse again, but you know that I am a “cash is King” advocate. I always talk about cash keeping you connected to you hard-earned money, so that you are more conscious of getting good value for it, whereas digital paying disconnects you. The way the authors of “Dollars and Sense” expressed it was that, when you spend cash, money is an “object,” but when you make a digital payment, money is just a “concept.” The columnist and author Michelle Singletary, who was also on the program, had this insight: If we all had to pay for our cars in cash, actually go to the dealer and count out bills, we would all be driving Toyota Corollas.
Here are two other quick insights and tips from the program. First, we tend to think relatively little about big expenses, but obsess over little expenses. So we will spend thousands of dollars on a vacation, and think nothing of it, but then obsess over and complain about that extra $25 baggage fee. Second, if you splurge, for example by going out to dinner, and you do it on a special occasion or a holiday, you are not as likely to get on the “hedonistic treadmill,” and go out to dinner more. Whereas, if you splurge randomly, like just going out to dinner on a Wednesday or a Friday, you are likely to go out more, and maybe even make it a habit, because it is not tied to anything specific.
I have purchased the book, and, as promised, I will include more insights and tips in future columns.
You have probably heard this — 25 percent of men are married to women with more education. We will dig into that next time. I have noticed it with friends and family members — have you?
John Ninfo is a retired bankruptcy judge and the founder of the National CARE Financial Literacy Program. Find his previous weekly columns at http://www.mpnnow.com/search?text=Ninfo or at http://www.monroecopost.com/search?text=Ninfo