Change

The season is changing. We get to watch it happen a little bit at a time when we go to Bridle Trails, a wonderful benefit of consistently going to the same place every week.

Last week, we noticed the first pussy willows and carefully petted them. We also saw our first flowers — it reminded me that I want to get a plant identification book to bring along occasionally.

We keenly anticipate the arrival of trillium flowers, as there’s a trail in the park called the Trillium Trail. Benji seems to be under the impression that we will only see trillium on that trail and nowhere else. I hope he’s in for a surprise!

The Geopolitics/Diplomacy Game

I think I’ve mentioned that countries have replaced planets (mostly, for now) as Benji’s area of interest. This is slightly more interesting to us, too, because after three years of planets we had started scraping be l the bottom of the barrel as far as planet books for kids go. There are lots, it’s true, but we also read lots.

Anyway, we’re on to countries of the world! Benji has spent hours poring over our old have of Take-Off, which hails from my childhood, and consequently he’s learned Europe with West Germany and Yugoslavia, etc. He invents different games about countries, like having one in each continent marked that we have to guess.

Well, last night he came up with a new game: the geopolitics/disputed border game. In this game, he and Ian are two countries that are fighting about a border. They want things like access to imaginary rivers or to the real stairs. I’m the UN, and I come in and offer various possible compromises until I come up with one they both agree on. Borders are represented with pillows laid on the floor.

It’s a decently fun game, even for adults, but we had a hard time not laughing at the fact that we were playing it at all. What kid plays geopolitics and diplomacy?! … But it’s much better than some of the fairly boring planet games, so I’ll take it.

Dollars and Sense: Book Review and Response

Ian got this book from the library after hearing an interview with the author on NPR. Long after, actually, given the wait time on new library books… Anyway, he read it and what he told me about it convinced me to read it, too.

I like to think we make reasonably good financial choices. We try to save some, after all, and we love within our means, not gathering a lot of debt.

What this book did was open a window into how we–all of us–think about money wrong almost all the time. The book explored the behavioral psychology of financial decisions, spending most of the time covering the pitfalls we all make.

According to the book, these are the main ways we think about money wrong:

  • Relativity: We think of how much we’re “saving” when buying stuff on sale, when we’re actually still spending money. If you were going to buy the thing anyway at full price, then great, you did actually save. On the other hand, if you only bought the thing because it was on sale, then you’re still out that cost. But we compare the same price with the nominal original price, and in so doing are tricked into thinking it’s a deal. Really, the “original” price is irrelevant: only the sale price matters. Takeaway: Don’t look at sale vs. original; instead, only look at the current price and think in terms of it costing you that much.
  • Mental accounting: We tend to sort money into categories like entertainment, living expenses, etc. When it seems like there’s extra money in one bucket, we tend to spend more because it’s “extra.” Actually, there are no buckets: it’s all just your money, and spending it is spending it. Takeaway: Mental accounting can be helpful when it keeps you from over-spending, but watch out when it feels like you can spend extra. There’s only one bucket: your money.
  • Pain of paying: We feel actual pain when we pay for stuff, moreso when we pay with cash than a credit card, and much more than paying online with something like Amazon one-click. This actually helps us choose not to spend. The easier and more painless it is, the more likely we are to spend without thinking. Takeaway: It’s not a bad thing to have some pain when spending. It helps keep us in check. Don’t always make it easy to spend.
  • Anchoring: We are influenced into thinking of the price of an item by seeing other numbers, even miners that have nothing to do with the item. So if you see a car listed at an MSRP of $30,000, you start thinking that’s what it’s worth. If you get it for $27,000, you then think you’ve gotten a great deal. But you could see the same vehicle listed for $20,000 and you’d think the vehicle would be worth less. Takeaway: Seeing an initial price makes us base other pricing and expectations on that… even random numbers!
  • Endowment effect and loss aversion: We start to feel a sense of ownership for things, even for things we don’t yet own. Once you start feeling like you own a thing, that makes it harder to give things up — or harder to not buy them.
  • Fairness and effort: We’re working to pay more if it seems like someone worked hard on something. Conversely, we expect to pay less if something seems easy (even if it’s not) or takes a short amount of time. For example, when a locksmith comes and opens the locked door for you in 30 seconds, then charges you $200, that doesn’t seem fair. But we don’t take into account the expertise required to do a job quickly and efficiently or all the time it takes to attain that expertise.
    Self-control: How easily we give in to concerns about money in the present rather than prioritizing future self. For example, you can defer your annual bonus to your 401k, out it can be deposited into your checking account. Since it’s a bonus, you didn’t count on it, and it makes sense to save it for the future. But it’s hard to see the value to your future self, while spending the money in a new TV will definitely make your present self happy… For a while.
  • Overemphasizing money: How hard it is to compare price of a product with actual value/how much it actually makes your life better. Money is so abstract, and our global economy so complicated, it’s really difficult to say how much value something provides. For example, I’ve been looking at buying an $80 computer mouse for work. I’ve gotten to try borrowing one for a while and I really like it… But is it really worth $80?
  • Pay for experiences. To answer the question above, perhaps; some things may be worth paying more for, if they make the an experience more enjoyable for you. For example, going to a fancy restaurant and having the sommelier describe the wine may help deepen your enjoyment of the drink. Paying more for that kind of language and rituals can bring greater value, as can paying ahead and then anticipating the experience. expectations, such as planning and issuing for a vacation ahead.

After reading this, I really have been thinking about choices differently.

For example, the book talks about setting yourself up so you can’t make bad money choices. It cites the efficacy of taking retirement savings out of a salary before you ever see the money, so it feels like it was never there and you just live on the smaller amount.

I’m that vein, the bonus deferral example I mentioned earlier is real. I deferred 100% of my bonus without knowing what it was but knowing that, while we didn’t need it to live right now, we very well might appreciate that extra in 30 years.

… Then I learned what my bonus was and I thought, “Dang! I could have done some amazing upgrades to my bike with that!” But it was already gone into my retirement savings. I guess I feel glad about that, in an intellectual way, but I still kind of wish I’d gotten the bike parts, too.

I know that I’ll be thinking about and mindful of these mental traps for a long time. I definitely recommend this book for insight on how you–we all–think about money, and how to use those thought processes to our advantage rather than our detriment.