While recovering from my cardio-thoracic surgery, it’s been a lot of laying low. And not driving, which means not working (as I’m a rideshare-app driver in NYC). BUT it does mean lots of extra time for combing through finances, and I noticed an interesting new slant on things recently. Since the beginning of this year (actually a few months prior to, but I somehow lost track of a few months’ data) I’ve been tracking my net-worth. The process initially began with simply logging into personal capital at the beginning of each month. Then I’d record the figure that’s spit-out at the top. As all of my bank accounts are linked to personal capital, this seemed to be a reliable method.
When I started making a full-time income through rideshare driving, I realized that it only made sense to continue if I’m bringin in more than goes out each month. Therefore, I got into the habit of tracking where every dollar went. And become obsessed with ensuring that I was on the road enough to “hit weekly income targets.”
Little did I realize how much wasted effort went into scrutinizing every purchase; and much unnecessary self-pressure was applied, as I forwent opportunities to be leisurely on the weekends. After learning about the principles of behavior economics, and finally getting my credit cards to zero balances, did I ease up on being the spending police. Now only one thing matters to my financial picture (in regards to income vs. expenses), and that’s how much my net worth increases by each month. Read more
During a jog this week, something happened that many joggers have experienced before. I found money on the ground. A small windfall like this sparked an interesting response, which was to put it in my wallet. Where else does this money belong after all? Certainly not on the jogging track at my local park. So why was saving this money an unusual response? Because according to behavioral economics, individuals are more likely to spend money they find on the ground on something frivolous². According to “mental accounting,” a concept coined by nobel prize-winning economist Richard Thaler, people treat money differently depending on extraneous factors like it’s origin and it’s intended use. The theory hinges upon the determinant that money has fungibility – that is, it has properties like being interchangeable, and doesn’t have labels.² For example, $200 found on the ground is considered “free money” that can be spent without reservation (e.g., on a nice restaurant dinner). Even though it’s worth the same $200 that we earn from working our day jobs (or night jobs).