Tag: saving

The thinking man's ape

Savings Aren’t Savings Unless They’re Actually Saved

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).
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How To Help Your Wallet By Saying “No” To Fun Stuff?

Part of making, and sticking to, a budget that actually works is having to occasionally decline invitations. Often times our friends, family members, and especially our significant others will make requests upon us, which demand the allocation of our resources.

Have you ever thought, “that sounds like a lot of fun, BUT deep down is it worth the cost?”

Surely this decision crosses our minds multiple times a day.  And most of the time, we’re forced to decide upon one of various potential outcomes using the best of our judgement.  The extent to which we allocate resources to the chosen outcome (i.e., how much money it may cost) often influences our decision, one way or another; however, depending upon the significance of the request, our ability to comply may be limited.

For example, my  brother who lives out of town recently was in-town because he was invited to go to a wedding (and apparently his frequent flyer miles were expiring soon).  His ability to decline the invitation (from an ol’ college friend) was somewhat limited; however, the cost of complying with such an out-of-state wedding invitation was probably sufficient enough to warrant a pass this time around.   Read more

A Stitch In (Free) Time Saves Nine

What if it were possible for anyone to save $1,000,000?  Would you want to know how?  Maybe that sounds a little far fetched.  How about the notion that anybody can save $100,000?  Are you interested now?  Perhaps, perhaps not.  What if I said that it’s possible for both you and I to save $10,000?  Now I bet your ears perked up.  And finally, let’s both agree that it’s possible for almost anyone to save a cool $1k?  Uh-huh.  You’re totally on board with it?  Cool.  Because what most people don’t realize is that the process for saving either $1k or $1M is essentially identical.

It’s just a matter of the degree to which we’re saving money that determines how much we’re able to bank.  Let’s look at it another way:  Imagine that suddenly it were possible for human beings to forgo the need to sleep ever again.  Drink a magic elixir, and you’re devoid of needing any resting period longer than one hour per day.  That means the extra eight hours of daytime (or night-time rather)  could be put to use towards more productive means.  You might work an extra six hours each day, and put the other two hours towards practicing an instrument, for example. Read more

Personal Finance Friday

I’m starting a new series on Rideshare Love that will devote one Friday a month to discussing the personal finance world.  Dealing with finances for a rideshare driver is an inevitable.  Saving money is something that’s naturally difficult to do, and even harder when you have lingering debt to payoff.  Most people justify spending money on purchases, both great and small, and ignore their spending behaviors with credit cards.  I know we all could use a bit more saved up.  But where to even start?  Well, let’s start with the basics.

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