“A Dollar Is a Dollar, Not a Percentage of What You’re Buying”

Author

Whitson Gordon

October 23, 2014

Getting something on sale is a great feeling, but it can mess with your mind. We all know this, but it’s hard to avoid our mind’s internal bias. Here’s a good mantra to repeat to yourself: A dollar is a dollar, not a percentage of what you’re buying.

Japp Weel says it well over on Quora:

A dollar is a dollar, not a percentage of what you’re buying

Remember that saving 5% on a $10000 item is not at all like saving 5% on a $10 item. But in order to process decision problems at different scales, the brain tends to normalize things so the two cases appear similar. Ever since I studied behavioral economics, I started spending less time worrying about saving 20 cents on spaghetti, but I spent a lot of time thinking about what car to buy and making sure I got a good deal on it. You can buy a lot of spaghetti for a $4k discount on a car, and yet I see people who spend lots of time on grocery coupon clipping but never stop to consider whether they could move to a cheaper apartment, drive a cheaper car, etc.

This is very similar to Ramit Sethi’s idea of “big wins”: Sure, you could save money by skipping lattes, or you could go for the big-ticket items you’re already spending on. One will produce much bigger savings, much quicker.

Weel actually has a whole list of great financial advice to live by, so hit the link below to read it all. There’s some good advice there.

What are some lifestyle changes that save money? | Quora

Photo by 401kcalculator.org.

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