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Take My Money, Please

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People are fascinating.  I’m constantly amazed at the wacky way our minds work.  I think we all know that our thinking isn’t always rational.  Sometimes we celebrate that, and other times we jump through a lot of hoops to be rational and aspire to not letting our feelings get in the way of decisions…especially financial decisions.

Lost Rationality

I recently listened to the audio version of Stumbling on Happiness.  Sometimes the author is a bit long-winded and repetitive, but he entertains while he educates about the psychological research that’s been conducted about the way our brains work.

One example he gives is to imagine that you are going to a concert with a $20 concert ticket and $20 cash in your wallet.  When you arrive at the concert you realize that you’ve lost the concert ticket.  Do you buy another ticket?  You may not because it will feel like you’ve paid for the concert twice.  If you do, you won’t be happy with your experience unless the concert is twice as good as you expected it to be since you’ve paid twice as much for the ticket.

Now imagine that you’re on your way to see the concert with $40 in your wallet and the intention of purchasing a $20 concert ticket at the gate.  When you arrive at the concert you discover that you’ve lost $20.  Do you go ahead and buy the ticket?  You probably will.  You’re still out $20, just like in the first scenario, but somehow it feels differently to you.  Is that rational?  Not really.

Here are some more scenarios in which many people don’t act rationally.

Discounted Childcare

Imagine (if you’re not) that you’re a single working parent or that you and your spouse have kids and both work.  If I told you I could get you a 20-30% discount on child care if you were willing to spend 15-30 minutes per month doing paperwork from your home (or even on company time!), would you be interested?

What if I told you that you could earn $1,000 to $1,500 for no more than 6 hours work?  I know lots of people that turn down those offers every year!

Bigger Tax Bill

It’s an election year again, and everyone’s favorite candidates will surely be talking about taxes…income taxes, payroll taxes, social security taxes…whether and which Americans should pay more or less, whether the tax code should be overhauled, and how the government should spend those tax dollars.  No one from any party seems happy about taxes and how the government has handled them, and yet I’ve been told by a number of people that they would rather hand over more of their hard-earned dollars to those geniuses in Washington that to do a little record-keeping.  These are our elected officials, surely they’ll do what we want them to do.

Voluntary Pay Cut

Would you ever ask for a meeting with your boss to ask for a 2.5% pay cut with no decrease in your title, job duties, or hours?  What about a 1% pay cut?  Of course not!  But plenty of people don’t take all the compensation available to them.

Okay, you wouldn’t ask for a decrease in your salary, but what about asking for less paid time off?  Or less money in your final paycheck after you resign or get laid off?  Sure, it was part of the benefits and compensation package the company offered you when you agreed to take the job, but you love your job so much, you can’t imagine getting paid to be away from it.  Right?

Take My Money Series

As I wrote this post I realized it was too long to read at one sitting, so it’s now a series of posts that I will publish over the next couple of weeks.  Come back next Monday and the Monday after if you haven’t already figured out what I’m going to write about and decided you just don’t want to hear it.

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