Saturday, February 26, 2011

Steps to spend your money wisely

Step #2: Ask your spouse a simple question – “What are some of your favorite memories?”
Our Experiences with Stuff Dulls Over Time

In the book Your Money and Your Brain author Jason Zweig writes:

“We get used to almost anything we are frequently exposed to. That’s why the money we spend on big purchases gives us such a perishable pleasure.” (bold added. pg 236)

Zweig goes on to use the example of a new car. Remember that new car? It “glistens like a gigantic jewel”. However, the cycle of auto life requires that within months (or even days) there will be dings and scratches in your fine automobile. After just a few short months, we are disillusioned because the car is not bringing as much satisfaction as we intended. So before you know it you are on the market for another new car. Regarding this tendency Zweig writes:

“Unfortunately, the vision pales by comparison when it collides with reality. … Instead of realizing that big spending will probably never make you happy, you conclude that you simply spent your bundle on the wrong thing.” (pg. 236-237)

Our Experiences with Memories Sharpen Over Time

Spending that brings satisfaction is spending that creates memories. While some spending is pragmatic and functional (i.e. fridge and stove) we must ultimately remember their function. I think about great time saving appliances like the dishwasher and the microwave. That time void has not been filled with activities that create memories; instead it is filled with more activity. Things like vacations actually leave a sweeter taste (assuming you pay cash!) as the days go by.

“The vacation in your photo album is more pleasant than the one you actually had, and that may skew your memory. … Your memories, then, are not just recollections. They are also reconstructions” (Jason Zweig, 238).

Why not plan your spending in such a way that you spend a larger percentage of your money on things that are rewarding (like giving) and steer away from spending money on stuff that dulls over time?

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