This awesome book, "Dollars and Sense", taught me how my mind works when it comes to spending and saving. The authors outline a variety of techniques marketers know well, and now we can too.
Problems with spending and saving include the following:
- · We forget to consider Opportunity Costs.
- · We spend Relatively.
- · We use Mental Accounting to budget.
- · Anchoring causes us to spend relative to our anchor.
- · We overvalue Fairness & Effort.
- · We overvalue what we own already, also called the Endowment Effect.
- · We value Loss Aversion more highly than increases.
- · Language and Description affect our purchasing decisions.
- · We Discount the Future Value of Money.
After you hear all the ways you can get into trouble, they outline ways you can succeed:
- · Consider Opportunity Costs to budget.
- · Pleasure the purchase will bring to you
- · Consider the true Benefit a purchase will provide.
If you imagine these tricks and techniques don't apply to you, consider this epigram:
"A wise woman knows herself to be a fool;
a foolish woman opens her wallet and removes all doubt."