Your Mental Approach to Spending

[captZEEbo]

When I'd work at mcdonalds for $6/hr I would hardly buy anything. Going out to eat $12....would I work two hours to for someone to prepare a meal for me? The answer was usually no. mp3 player....would I work 50 hours for this mp3 player? No.

Now that I have more money I still don't spend much because I have to worry about my future kids. I don't want to risk be forced into a $30-40k/yr job I hate just so I can have more toys here and there. I'd prefer to live on $10k/yr my life and not have to work. Most of the things that give me pleasure are relatively free.

[Jdanz]

I think a really interesting one that happened to me when I started playing poker was that I more directly related money and time.

Most people have jobs that earn an annual salary or maybe there is an hourly or commission basis, but for most part they know how much they'll make.

In other jobs there is more variation in how long/hard you work effects your bottom line.

Nothing touches poker though, because the amount you make is so ridiculously closely tied to how much time you put in, plus the amount of time put in is completely up to you. If I can make x dollars an hour playing poker it's difficult to do something for myself if the cost/time < x dollars per hour. This isn't totally the case as I have a hard time really overpaying for things, but it definitely has a noticeable effect. \

I could say a bunch more on the subject re: my personal mental spending accounting which like everyone else's is kinda bizarre, but I'm already procrastinating a paper so I'm going to leave it at this.

[KJS]

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I have found that as i've made more money through the years I've been spending a bit more. Oddly, it's on all the wrong things - food, booze, etc.

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Me too.

But when I compare all the good times I had over food and booze vs. good times I have had watching a TV or driving, I no longer consider these "the wrong things".

KJS

[guids]

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I have found that as i've made more money through the years I've been spending a bit more. Oddly, it's on all the wrong things - food, booze, etc.

[/ QUOTE ]

Me too.

But when I compare all the good times I had over food and booze vs. good times I have had watching a TV or driving, I no longer consider these "the wrong things".

KJS

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I dont consider those the wrong things at all. Imo, a "wrong" purchase is something that you spend a bunch on, but get no real enjoyment or use out of. Ie, I bought a pellet gun, for 50$ a couple years ago. WTF do I need a pellet gun for? I dont think I have even shot it since I bought it. this was a bad purchase. good food/liquor helps you get more out of life, I dont think they are bad purchases.

[adsman]

Money is everywhere. They print more of the stuff every day. I use money as a tool to have experiences that I desire. I always seem to have enough money because I don't really care about it. When I need some more I just find a way to get it. There's always a way. I buy expensive stuff because it generally lasts longer, does the job better and is nicer to have. I hired an interior designer today. I need what she is offering. The money isn't a factor. Without her I can't get what I want. I just make sure that I don't spend more than I make. If I happen to spend more, then I go out and make more.

[NajdorfDefense]

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It's all one big pile of money, 'cept for stuff like 401k and pension you can't actually touch [or w/o large penalty.]

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You find a c-note on the ground. Are you more likely to spend it on a whim than a hundred you earned? I am. Insert "got it because someone died", "won it in a card game", etc.. for "found it on the ground" and you get my approach. Not totally logical I know but understandable I think.
KJS

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Yes, understandable, but no different than saying you eat the Cheerios on the top of the box first because they are 'different' than the bottom of the box. Money is fungible.

You have $900. You find a $100 bill. You now have $1000.

You spend $100 on poker chips. You spent 10% of your net worth on that purchase, it did not come from the 'found' money any more than it came from the $100 you made digging ditches last summer.
Naturally, you can fool yourself with mental accounting and pretend it came out of Pocket A rather than Pocket B, but you own both pockets.

There's no such thing as 'gambling with the house's money.' Once you win it, it's YOUR money. You may choose to lose it back and then some, but it was still your money before you lost it. Any other rationale is illogical and used to justify behavior we are ourselves uncomfortable with [like blowing $2k at the craps table or on lap dances, etc.]

[hmkpoker]

I'm a lot like you; lots of savings with little interest in toys.

My approach to being a financially-disciplined, practical spender is simple: only buy what you set out to buy. If I need something, it ought to be decided in the comfort of my own home, where I'm practical-minded and not in a rush. This kicks basic marketing strategies in the nuts. The whole trick to marketing is to put the consumer on the spot with split second financial decisions, where he is more prone to spend more because he isn't thinking straight and wants to save face. (Think about how salepersons behave: they put a foot in the door with a basic sale, then throw other offers that you don't really need in front of your face, and make you feel like a dolt if you don't take them.)

I still enjoy going out "shopping," although usually what happens is I buy what I set out to buy, then just look at other things without buying them. I take that information and decide what I'm going to do in a more practical setting later. It keeps me from buying dumb crap that I decide shortly afterward that I didn't want in the first place.

[KJS]

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It's all one big pile of money, 'cept for stuff like 401k and pension you can't actually touch [or w/o large penalty.]

[/ QUOTE ]

You find a c-note on the ground. Are you more likely to spend it on a whim than a hundred you earned? I am. Insert "got it because someone died", "won it in a card game", etc.. for "found it on the ground" and you get my approach. Not totally logical I know but understandable I think.
KJS

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Yes, understandable, but no different than saying you eat the Cheerios on the top of the box first because they are 'different' than the bottom of the box. Money is fungible.

You have $900. You find a $100 bill. You now have $1000.

You spend $100 on poker chips. You spent 10% of your net worth on that purchase, it did not come from the 'found' money any more than it came from the $100 you made digging ditches last summer.
Naturally, you can fool yourself with mental accounting and pretend it came out of Pocket A rather than Pocket B, but you own both pockets.

There's no such thing as 'gambling with the house's money.' Once you win it, it's YOUR money. You may choose to lose it back and then some, but it was still your money before you lost it. Any other rationale is illogical and used to justify behavior we are ourselves uncomfortable with [like blowing $2k at the craps table or on lap dances, etc.]

[/ QUOTE ]

The bold is the interesting part for me. I find that I use this mental accounting to spend on things that I am totally comfortable with as things but I am just not totally comfortable with spending money. I have no problem buying weed, for instance. Do it all the time. Don't care where the money came from. But the idea of buying a $10,000 motorcyle scares me, even though I have the $ and would derive tons of pleasure from upgrading my bike. So I will probably not get a nicer bike until my mental accounting and my money are in sync. For instance, until I get an inheritance, a big bonus at work, etc..

The reason for my post was just a gut check. I have been toying with some ideas that involve spending some sums that I am not comfortable with out of lack of experience with such sums of money. And I was finding myself doing a lot of mental accounting along with revisiting my core belief that every purchasing decision should rely on a formula involving the value and price of the object, the utility I will get from it and my ability to pay. I was fudging a lot on the ability to pay part, I can see now, via mental accounting. But I also always find ways to talk myself out of things I can afford, which I think decreases my utility. If I want a Ducati, have the money and will love that bike more than anything I own, shouldn't I get it. But the price is just so big I balk. We won't even talk about the possibility of financing something. I haven't had consumer debt for nearly 7 years and cannot get my head around that anymore.

KJS

[KJS]

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I'm a lot like you; lots of savings with little interest in toys.

My approach to being a financially-disciplined, practical spender is simple: only buy what you set out to buy. If I need something, it ought to be decided in the comfort of my own home, where I'm practical-minded and not in a rush. This kicks basic marketing strategies in the nuts. The whole trick to marketing is to put the consumer on the spot with split second financial decisions, where he is more prone to spend more because he isn't thinking straight and wants to save face. (Think about how salepersons behave: they put a foot in the door with a basic sale, then throw other offers that you don't really need in front of your face, and make you feel like a dolt if you don't take them.)

I still enjoy going out "shopping," although usually what happens is I buy what I set out to buy, then just look at other things without buying them. I take that information and decide what I'm going to do in a more practical setting later. It keeps me from buying dumb crap that I decide shortly afterward that I didn't want in the first place.

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Great approach. I think I will print this out and give it to my wife!

Also, I learned while poor that you cannot fret buying things you absolutely need. Just go get it and be done with it. That used to be food, rent and bills (god I hate writing this check for electricity, poor me would say). Now it is other things. But the idea remains. Also, I find that if I can justify everything I buy in at the time of purchase I feel less stress when I look at my total outgoing expenses over time. I used to think "dammit I spent $400 this week, that bums me out". I hardly do that anymore because I am more cognizant that the whole sum is justified by the individual good decisions that I made. Some weeks more stuff just comes up than others.

KJS

[Rick Nebiolo]

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I find this interesting as I progress from being poor to middle class. KJS

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Unfortunately, I'm progressing from being middle class to poor. So I'm carefull regarding spending but I'll spend where I think I get value.

For instance, much of my time at home is spent in front of the computer. Comfort means a lot so spending $900 on an Aeron chair provided tremendous value for me. I don't ever feel the chair and I never have back pain (and I'm 52). I hope to make the money back with fewer visits to the Doctor.

I love music so I have a top notch sound card and speakers with my entire CD collection on my computer (mostly using the freeware Exact Audio Copy and the LAME mp3 encoder). The value there is obviously tremendous.

Most of my meals are comped at card clubs but I do cook at home at times. Lately I'm trying to eat healthier. I don't have a lot of time so I like to prepare things that are simple and food that stores a while and reheat easily. One thing I'm working on is chicken soup. It finally hit me, why can't chicken soup be a complete meal filled with large chunks of quality white meat? So my last two soups have come from five pounds of fresh breasts on sale ($10), veggies ($2), and extra broth ($1) (no noodles since I low carb). Bottom line is I spend about $15 to make chicken soup but it's soup that's almost ten meals and much better than any I have out.

I'll never spend more than $10 on a bottle of wine and drink high value Black Box brand boxed wine for the occasional glass. The people spending $40 on up on a bottle of wine are out of their minds IMO. OTOH, I can see spending $40 for a bottle of high end whiskey (the stuff reviewed in the El D thread). A bottle of whiskey is going to last me a long time; it's still cheap compared to even low priced wine.

Other than wedding related rings, I've never even looked at jewelry of any kind for myself; jewelry simply has no value to me and I never wear it (and wouldn't even if I were rich).


~ Rick