Genius Ideas on Managing Money

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."