We'd all like to have more money. (That stuff is really useful, ain't it?)

Being worried about makin' the bacon can end your marriage, skyrocket your blood pressure, and even cause your brain to malfunction.

From Dollars and Sense: How We Misthink Money and How to Spend Smarter:

Money is the top reason for divorce and the number one cause of stress in Americans. People are demonstrably worse at all kinds of problem solving when they have money problems on their mind.

Thing is, we all make dumb money mistakes, many of which we're not even aware of. And a lot of those are due to quirks of human psychology.

Luckily, Dan Ariely, a professor of behavioral economics at Duke University, has a book out that explains some of the problems we're prone to when it comes to moolah and what we can do about them. The book is Dollars and Sense: How We Misthink Money and How to Spend Smarter.

Let's look at some of what Dan has to say and see how we can save some shekels…

1. "On sale" signs are the devil

More generally, Dan's advice is "ignore relative comparisons." Focus on what the thing costs, not how big a discount you're getting.

Saving 90 percent on a bus pass isn't a great deal if you never take the bus — but we make dumb purchases similar to that one all the time.

From Dollars and Sense: How We Misthink Money and How to Spend Smarter:

It seems that discounts are a potion for stupidity. They simply dumb down our decision-making process. When an item is "on sale," we act more quickly and with even less thought than if the product costs the same but is marked at a regular price.

And we're assaulted by these relative comparisons all the time…

You'd never have paid a few hundred dollars for heated seats — but when you're shelling out tens of thousands of dollars for a car, that extra seems relatively cheap — and so you say, "Ah, what the heck… Sure." You should judge add-ons separately by their value, not by comparison.

Similarly, paying percentages can be dangerous. Five percent might seem small but, again, that can be deceptive. Change the percentage into a dollar amount and objectively ask: "Am I comfortable paying this figure for this service?"

So companies use tricky comparisons and we often fall for it. But what problems with money do we completely create on our own?

2. It's not a "bonus." Money is money.

Your paycheck goes toward bills and serious stuff. But that unexpected check you received in the mail? That money you won at the casino? That gift card aunt Phyllis sent you? Well, it's okay to spend that money on frivolous goodies because that's "different."

No, it's not. Money is money.

From Dollars and Sense: How We Misthink Money and How to Spend Smarter:

Every dollar is the same. It doesn't matter where money comes from… just because in our mind the money belongs to the "bonuses" or "winnings" account — we need to pause, think, and remind ourselves that it's just money. Our money.

Researchers refer to this as "emotional accounting." Rationally, a dollar is a dollar. But as rationality-challenged humans, we feel the source of the money affects how we should use it. Bad idea.

From Dollars and Sense: How We Misthink Money and How to Spend Smarter:

People are likely to spend something like their salary on "responsible" things like paying bills, because it feels like "serious money." On the other hand, money that feels fun — like $300 million in casino winnings — is likely to be spent on fun things, like more gambling.

Studies show that when $200 is called a "rebate" we're inclined to deposit it in the bank. But when that $200 is called a "bonus" we're more likely to buy a treat.

In fact, research shows people would prefer to receive money as a bonus versus additional salary for that very reason. It lets us feel like it's okay to indulge instead of save.

From Dollars and Sense: How We Misthink Money and How to Spend Smarter:

…if we ask people how they would use a $12,000 lump sum versus an additional $1,000 a month, most say they would spend the lump sum on something special to make themselves happier. That's because a lump sum payment would not arrive along with the usual monthly ebbs and flows of income and expenses — putting it outside of our regular account system. If, on the other hand, the money is received monthly, it would be categorized as salary — and most people would use it to pay normal expenses.

Many people treat a tax refund as a "bonus" that they can have fun with. Again, that's tricky emotional accounting. You didn't get a bonus; you gave the government an interest-free loan and they're returning the principal.

How we get money often affects how we spend it. But it shouldn't. Money is money.

Okay, you're getting rid of your arbitrary categories. But how do we actually spend less without having to use any willpower? That's easy. Make spending painful…

3. Use cash more often

Handing someone cash hurts your brain. Seriously. Neuroscience research shows it's indistinguishable from physical pain.

From Dollars and Sense: How We Misthink Money and How to Spend Smarter:

The term "the pain of paying" was based on the feeling of displeasure and distress caused by spending, but more recently, studies using neuroimaging and MRIs have showed that paying indeed stimulates the same brain regions that are involved in processing physical pain.

But we ever-resourceful humans have found a way (many ways, actually) to spend a lot and not feel that pain. The biggest culprit? Credit cards.

From Dollars and Sense: How We Misthink Money and How to Spend Smarter:

Studies have found not only that people are more willing to pay when they use credit cards, but also that they make larger purchases, leave larger tips, are more likely to underestimate or forget how much they spent, and make spending decisions more quickly.

Ever find yourself treating foreign currency like it's Monopoly money? Ever abuse that Amazon one-click button? Anything that makes transactions simpler and quicker or blurs the process of handing over greenbacks reduces the pain of paying — and makes you more likely to spend.

Writing checks doesn't cause the same amount of ouch that forking over cash does, but it's still pretty good because having to write out "five thousand dollars" will give you pause. But credit cards, gift cards, casino chips, and nearly all online shopping is a financial opiate and dramatically reduces the pain that keeps your bank account flush.

There is an exception worthy of mention here. The vast majority of the time, increasing the pain of paying is a great idea. But there are occasions where it's worth it to be pain-free. You don't want to be saying "owwwww" repeatedly on your honeymoon or during other big milestones. You want to just enjoy the moment.

So whip out the plastic and have fun. But make those occasions rare.

So what one word pretty consistently results in dumb financial decisions?

4. "Fair" is a four-letter word

It's pouring outside so you're going to get an Uber. But Uber is surge pricing. "That's unfair! Forget it. I'll walk."

Maybe Uber is taking advantage of you. Maybe they're not. But the real question is: Would you pay the surge price to not arrive home soaking wet? Probably. So you're not punishing them. You're punishing yourself.

"Fair is a four-letter word." That's what my friend, Chris Voss, former lead international hostage negotiator for the FBI, likes to say. And Ariely's research agrees.

The concept of "fair" messes with our heads and causes us to reject deals that still offer plenty of value.

From Dollars and Sense: How We Misthink Money and How to Spend Smarter:

Let's not get caught up in whether something is priced fairly; instead, consider what it's worth to us. We shouldn't pass up great value — access to our home, a salvaged computer, getting a ride in winter weather — just to punish the provider for what we think is unfairness.

The concept of "fairness" runs very deep in the human psyche. Nobody likes to feel exploited. And nobody wants to be known as someone who can be exploited.

But most of the time it doesn't pay to get hung up on the concept of "fair." Think about whether you're getting reasonable value for the money you're paying. Otherwise the person who gets punished will probably be you.

So far we've avoided talking about the thing most lists of ways to save money talk about first: self-control. How do we boost it? Okay, let's discuss epic poems and time travel…

5. Try a "Ulysses Contract"

In Homer's The Odyssey, Ulysses tied himself to the mast of his ship to resist the Sirens' song. (I just use the "block number" feature on my iPhone, but whatever.)

When you're thinking about the future you're pretty rational. But when you're in the moment, face it: You can be an impulsive moron. So do something now that constrains your behavior later.

Metaphorically, tie yourself to the mast of your ship with a Ulysses Contract. (Or "Odyssesus Contract" if you prefer the Greek. Hey, I'm open-minded.)

From Dollars and Sense: How We Misthink Money and How to Spend Smarter:

A Ulysses contract is any arrangement by which we create barriers against future temptation. We give ourselves no choice; we eliminate free will.

You probably already use a financial Ulysses Contract and don't even realize it — you call it a 401(k). You made the decision in advance to save for retirement and now your hands are tied.

So go into your online banking account and set up a recurring automatic transfer for every time you get a paycheck. When your salary gets deposited, X amount is immediately shuttled into savings. Research shows this will help you save — a lot.

From Dollars and Sense: How We Misthink Money and How to Spend Smarter:

A study by Nava Ashraf, Dean Karlan, and Wesley Yin found that one group of participants who had their bank accounts restricted — that is, they chose to have money automatically deposited in a savings account — increased their savings by 81 percent within a year.

And Ulysses Contracts aren't just good for finances; they work for almost any future temptation. Hand your keys to a friend before you go drinking. Have a pal change your passwords on social media accounts when you absolutely need to focus.

What's another irrationality that screws up many financial decisions, from salary negotiation to buying socks?

6. Drop anchor

"Anchoring" is a potentially devastating cognitive bias where the first number mentioned in a given scenario unconsciously influences your future choices.

Well-designed menus often have a very high-priced item at the top. It doesn't make you more likely to buy the filet mignon but it does insidiously make everything else look like a bargain.

Few people pay the manufacturer suggested retail price for a car. But that number is always big and visible when you look at the specs. Whether you realize it or not, it's affecting the offer you end up making.

So how do you resist an anchor? By having a different anchor in advance. Do your research and know what most people end up paying for that car and the MSRP will have less influence.

From Dollars and Sense: How We Misthink Money and How to Spend Smarter:

This finding — that anchoring has a weaker effect when we have some rough idea of value versus when we have no idea — is important to keep in mind. When we start with an established value and price range in our minds, it's harder for outsiders to use anchors to influence our valuations.

The most ironic version of anchoring is when we do it to ourselves — when your previous bad decisions influence your future choices.

You have consistently overpaid for lattes and oil changes in the past so you mindlessly keep doing it. Stupidity as default.

Look at your regular purchases and ask if they really make sense and whether there are cheaper alternatives. Personally, I have not updated my phone plan in two decades and am still paying $9 a minute for calls.

Okay, we're no longer money morons. Let's round everything up and find out what happens when we all get rich…

Sum up

Here's the easy way to save money:

  • "On Sale" signs are the devil: "Relative comparisons" mess with your head. Focus on the end price, not how good a "deal" it is.
  • It's not a "bonus." Money is money: How you got the cash should not affect how you spend it. Saying that "bonus" money doesn't count feels good but being broke feels very very bad.
  • Use cash more often: Make spending painful and you'll spend less. (Using cash is simpler than having a friend punch you in the face whenever you whip out your credit card.)
  • "Fair" is a four-letter word: Focus on value. The plight of moral justice in the economic universe can wait until after the electrician gets your lights back on.
  • Try a "Ulysses Contract": Send me the deed to your house. If you don't have more money in your savings account two months from now, I keep the deed. See? Saving is easy.
  • Drop anchor: The only way to not be influenced by prices is to influence yourself ahead of time with other prices.

You're going to be rich one day, right? I'll roll with that. You're a future zillionaire. Cool.

So then you won't need to worry about these silly psychology quirks that affect your spending, right?

Wrong.

From Dollars and Sense: How We Misthink Money and How to Spend Smarter:

About 16 percent of NFL players file for bankruptcy within twelve years of retirement, despite average career earnings of about $3.2 million. Some studies say the number of NFL players "under financial stress" is much higher — as high as 78 percent — within a few years of retirement. Similarly, about 60 percent of NBA basketball players are in financial trouble within five years of leaving the game. There are similar stories about lottery winners losing it all. Despite their big paydays, about 70 percent of lottery winners go broke within three years.

The more you earn, the bigger your mistakes will be. So review the common problems your grey matter has with money and learn to make smarter choices. This way you can keep your millions.

Money isn't the most important thing in life. But when you don't have to worry about moolah, it's far easier to focus on what does matter most.

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