Psychology

The Other Choice

Whenever you make the choice to spend money on something, you’re actually making other choices as well. I choose to “dress for success” by buying this expensive suit. I also choose to have large credit card bills. I choose to eat out for dinner every night. I also choose to be stuck in a high-paying …

Categories: Frugality, Psychology

The Psychological and Emotional Attachment to What We Have and What We Want

Recently, I’ve been reading the excellent book The Price of Privilege by Dr. Madeline Levine, which discussed the prevalence of depression and social problems among affluent teens. For the most part, the book lays the blame for this problem squarely on the parents: in their race to affluence, they failed to give adequate time, attention, …

Categories: Psychology

The Aldi Question: Does One Bad Experience Spoil the Soup?

Whenever I mention the grocery stores where I tend to shop, someone always asks me about Aldi. I tend to usually avoid that question because the answer makes me uncomfortable, but after several emails following my post yesterday about personal finance recommendations, I realized that it was actually a subject worth digging into. I don’t …

Categories: Psychology, Shopping

The Inspiration and the Motivation

Virtually every time I accomplish something significant in my life, it’s been guided by two separate forces, one pushing from behind and one pulling me ahead. The inspiration and the motivation. The inspiration is the big vision you see in front of you. What is it that fills your heart with passion? What is that …

Categories: Psychology

How to Avoid the Trap of Splurging as a Reward for “Being Good”

Before I got control over my spending, I used to splurge all the time on small things that I wanted. I’d buy a new book (or three) every Friday in order to “reward” myself for getting through another work week. I’d often buy a new CD or DVD whenever I received a paycheck. Whenever I’d …

The Retirement Perspective: Today’s Dollars Are Far More Valuable Than Tomorrow’s

Lola had an interesting question about retirement: I asked if, by calculating our monthly expenses, we could multiply that by 200, and if that would be enough to retire. So, if one’s expenses were about $24,000 a year, if having $480,000 would be enough. And you said – rightly so – that this figure doesn’t …

How I Deal With My Financial Fears

Even though I write a lot about personal finance on here and elsewhere, I still have a lot of my own hang-ups about personal finance. One of the big reasons I started The Simple Dollar was to learn how to deal with those fears, and once I dealt with that new batch, a fresh batch …

The Status Quo Bias and Switching Jobs or Careers

After my article a few weeks ago on how the status quo bias costs you money, a reader I’ll call Jeff made a very astute observation: the status quo bias often keeps people from making the best career decisions. Let’s back up a second, though. What is the status quo bias? From the earlier article: …

Categories: Careers, Psychology

Overcoming a Habit of Lying to Yourself About Money

After my recent article about how to deal with a partner that hides and lies about money problems, several readers made the astute point that many of these situations are often the result of people lying to themselves about money, whether directly (by actually telling yourself false conclusions about the facts you already know) or …

Nine Ways the Status Quo Bias Is Costing You Money – And How to Turn That Ship Around

Most people are familiar with the status quo bias. In simpler terms, it simply means that people prefer things to stay relatively the same. We talk to the same people, follow the same path to work, go through the same daily routine, and so forth. We enjoy little changes – like reading a different book, …

Categories: Psychology

Is An Emergency Fund a Psychological Negative?

I was recently reading How to Get Out of Debt, Stay Out of Debt and Live Prosperously by Jerrod Mundis, an interesting book that sorely needs an updated edition (it was originally published in 1988 – I’d happily review an updated edition), but has at least a good handful of interesting concepts inside. One comment …

Categories: Psychology

The Total Experience of a Purchase

My brother recently got a new job with much higher pay than he was previously making. After getting the job, he bought himself a motorcycle, something he’s wanted for a while, and he’s incredibly happy with it and proud of it, even driving it to work to save on fuel costs and saving on motorcycle …

The Methods You Use to Deal with Ordinary Life Will Fail You As an Investor

The more I dabble in investing, the more I realize that it’s something of an “opposite world” compared to the principles I use in day to day life. Things that make intuitive sense in the real world are actually failures when it comes to investing. Here are ten great examples of that phenomenon. Be the …

Categories: Investing, Psychology

The Battle Between the Stuff I Want and the Guilt I’m Left With

Last month, I was sorely tempted to pick up Mario Kart Wii. Mario Kart has been my favorite video game series of all – I played it for hours and hours with my friends in high school on the Super Nintendo, then burnt countless hours in the college dorms playing it on an N64. Even …

Categories: Psychology

Left Brain and Right Brain Financial Needs

Not long ago, I was talking about retirement planning with a friend of mine who was trying to decide what exactly to do to prepare for retirement – he’s 25, but has gotten the memo that he needs to plan now. I ran through a few options, but almost immediately his eyes glazed over – …

Categories: Psychology

Reflections on Money: 20 Valuable Questions to Ask Yourself

I recently read a very, very good personal finance book called Money Drunk, Money Sober (which I’ll review this Friday… oooh… the anticipation) where the authors made a brief suggestion of doing a personal inventory of your relationship with your money. At first, I was expecting it to be a rather boring listing of accounts …

Loss Aversion and Motivation: Using Your Natural Instincts To Get Ahead

Yesterday on my way to work, I was tuned into NPR’s Morning Edition and I overheard a story about two researchers using our natural instinct to avoid losses as a motivation to lose weight. The concept is called loss aversion and is summarized by Wikipedia as such: [L]oss aversion refers to the tendency for people …

Categories: Psychology

Nine Techniques for Developing Patience

The single greatest challenge I’ve faced since learning how to turn my financial life around is patience. I want to be debt free now. I don’t want to face the long journey from near-bankruptcy to financial independence. I practice frugality every day and I’m working hard to create more income, but the path from where …

Defeating Superman Syndrome: How to Progress Beyond the “Need” to Be the Financial Hero

When I was freshly out of college with my first high-paying job, I would constantly insist on paying for everything. Meals out with friends, lattes at the coffee shop, even sometimes shopping purchases – I felt this deep need to step in, bust out my plastic, and say, “I’ll take care of it!” This burning …