This is a guest article by Jennifer Calonia, Junior Editor at GoBankingRates. In the article, the author encourages couples in failing relationships to break-up before holidays and their obligatory expenses are imminent.

While it may sound like the antithesis of romance, calling it quits with your other half before the Valentine’s Day can be advantageous to your heart and your checkbook. Gift-giving and travel (if your significant other is across country) on Valentine’s Day is poised to destroy the savings of those who are too apprehensive to raise the white flag of surrender when it comes to their dead-end relationship.

According to a 2010 report by graphic designers Lee Byron and David McCandless, more couples break up toward the end of the calendar year–peaking two weeks before Christmas and the month after Valentine’s Day.

The data were gathered by conducting a year-long search on Facebook statuses which included the words “break up” or “broken up.”

Many argue that data used by Byron and McCandless is drawn from a highly defined sample pool, noting that most Facebook users are younger in their years. Despite that limitation, this study raises significant questions for those in the midst of a turbulent or stagnant relationship.

Break up to save money on gifts and travel

As the saying goes, “breaking up is hard to do,” but it could be a wise financial decision to opt out of your relationship if it’s already hit a brick wall. Instead of waiting for the report’s break-up peak after Valentine’s Day, why not face reality before February lands on your doorstep?

Observances like Valentine’s Day are among the highest-rated gift-giving holidays among couples next to birthdays. According to the National Retail Federation, in 2011, the average expense on Valentine’s Day gifts to a significant other was $68.98 — a figure that is on the rise.

Further, all of the subsequent holidays in the year (i.e. Thanksgiving, Christmas, New Year’s and a sprinkled birthday) present an open door for extra out-of-pocket travel expenses when planning to attend your partner’s family gathering or scheming a romantic getaway.

At the risk of being denounced as cold-hearted or even cheap, severing strained relationships before Valentine’s Day is at minimum, a savvy move for your wallet.

Broken heart: better investment

Seeking out and fostering a relationship with a partner is at its root an effort in finding a spouse. Stringing your significant other along when you don’t see a future ahead is not only by many people’s standards cruel, it’s a fruitless investment. Whether you’re dealing with emotions or finances, keeping long-term goals in sight are an important aspect of achieving success and happiness, overall.

Struggling relationships may not see another opportunity to break up until March, and time is money. There is never a “good time” to break-up, so biding one’s time after the holiday season and into Valentine’s Day is not the most effective approach in the long haul.

Break up with civility before February 14 comes around and open yourself up to a well-rounded year of improvements in 2012.

Editor’s note: I can’t say I’m a fan of making relationship or romantic decisions with finances as a trigger. Personal finance experts tend to see the world in terms of money; if you’re a hammer, everything looks like a nail, or so the saying goes. Obviously finances must be a consideration in major decision-making, and ending a bad relationship earlier rather than later is a better choice than lingering. The worst case scenario is losing a quality relationship over the cost of a bouquet of flowers or a meaningful gift.

The original version of this article, Save Money: Break Up Before Valentine’s Day, is copyrighted by Consumerism Commentary.

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Have you ever had a boyfriend, girlfriend, husband, or wife you want to see again the moment he or she is out of your sight? Has love ever felt like a drug, something you need every minute, and you need more each time? Have you ever failed to understand why you constantly desire a lover who treats you poorly? Perhaps you long for the guy or girl you knew twenty years ago, a fleeting infatuation. Like love, it’s possible for any one person to have a differently relationship with money than the next individual. Love may be a mystery, but money is usually concrete.

What role does money play in your life? I’ve seen everything.

1. Money is the goal itself. Working in the financial industry, this attitude comes as no surprise to me. When the ultimate goal is to accumulate an impressive bank account balance or net worth, the unconditional love of money helps people rationalize their behavior; the end, being wealthy, often justifies the means with this attitude. Never mind the good that can be done with this money; often, those who are obsessed use the wealth they accumulate to buy items that exist primarily to show that wealth off, not items that increase happiness. The philosophy is that displaying wealth to the world increases the chances of attracting more wealth. Even if there is some truth to that, there are other costs, as well.

I may be critical of those who place their faith in money alone, but I’m not anti-wealthy.

2. Money is evil. At the other extreme, you might find people who turn away from wealth at all time. They may have had a bad experience with money in the past. Perhaps they watch the news and take to heart the latest scandals and scams, and assume that money always makes people to awful things to one another. Nations war and people die over money. Bad behavior is often rewarded in the marketplace. How can money be a positive force when it encourages people to make bad decisions? People who think money is evil may not trust the banks to hold onto savings accounts.

This approach is dangerous because it helps those who hold this philosophy to avoid financial freedom, the ability to live mostly on one’s own terms.

3. Money is a tool. This is my camp. Money didn’t exist forever, and happiness itself is a modern concept as well. Money only increases happiness to a point, so why accumulate more money than you need to achieve maximum happiness? There are good reasons. If you set relevant life goals, like helping eliminate hunger in your country, providing all opportunities possible for your children, or encouraging education in the arts, money is one of the strongest tools for reaching your goals. These goals don’t stop at a certain dollar amount. More can always be done.

When I hear someone say their life goal is to have a nest egg of $1 million when they retire, the question I think of is, “Then what?” I understand that decades of hard work can make someone long for retirement and an end to the rate race, but it’s the financial freedom that should be important, not a monetary target. Targets are useful when deciding how to allocate and invest your wealth as it grows, but money is not the purpose intrinsically.

Squirreler shared his thoughts about the role of money in his life, putting money on an equal ground with health and relationships. Health and relationships contribute to happiness. Wealth contributes as well, but only insofar as it fosters health, relationships, and other things like experiences, self-worth, and independence. Therefore, I would not put wealth in a symbiotic equilibrium with anything else. It’s another layer that helps amplify everything else; people who have a positive outlook on life while improve with wealth, while people who take a destructive approach to living will only become more dangerous.

Wealth makes life easier and helps you reach real goals, but money is neither inherently good nor inherently bad.

The original version of this article, Your Relationship With Money, is copyrighted by Consumerism Commentary.

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Selling newsletters offering stock-picking advice is a big business. This is how sites like The Motley Fool survive, and it’s also a big draw for products carrying Jim Cramer’s name. You may remember Jim Cramer from such CNBC entertainment broadcasts as “Mad Money.” This is a fun show where Jim runs around, punches in sound effects, and yells his buy/sell advice at the camera. Every once in a while, he reminds viewers to consider the long term, but the message contained in the remainder of the broadcast is of more use for people who are looking to trade frequently. His picks haven’t always played out to beat random performance; there have been more than a few websites and videos comparing the stock-picking prowess of Cramer and that of a monkey. The monkey is just as likely to outperform the market.

But monkeys don’t sell stock-picking newsletter, so they can’t get in trouble when they lie. In a recent email newsletter from TheStreet.com, Jim Cramer’s company, there was a chart that showed Cramer’s performance compared to the S&P 500, stating that the portfolio is “crushing” the S&P 500. It was a faulty comparison. The chart didn’t include dividends in the S&P 500 return, while Cramer’s number did include dividends. According to Jason Zweig at the Wall Street Journal, Cramer’s 39.2% did barely beat the accurate benchmark rate of 38.3%. Fees and commissions would eat into that portfolio return, however, if a real investor followed Cramer’s advice. Just squeaking by isn’t as compelling an argument than doubling the S&P 500, Cramer’s marketing team’s original claim.

To approximate Mr. Cramer’s return, you would have had to make an average of 774 trades annually over the past three years, Mr. Barton said. Meanwhile, you could have bought and held an S&P 500 index fund and then done utterly nothing except reinvest your dividends. And you, too, would have more than doubled the market’s return — calculated without dividends.

It’s relatively easy to manipulate numbers to use them to your advantage. People trust numbers, so when a trustworthy source claims a number is true, it’s easy to accept without independent research. I’m not immune to this; I am taking the numbers mentioned in Jason Zweig’s article at face value, much like newsletter readers take Cramer’s numbers without a second thought.

Do you trust what you read? Preconceived notions are sticky. If you read something that agrees with your preconceived notions, you’ll generally accept it as fact, but if something you read goes against what you believe to be true, you’ll assume the writer is wrong or has an agenda to pursue.

Photo: Tulane Public Relations
Wall Street Journal

The original version of this article, Beat the Market By Lying, is copyrighted by Consumerism Commentary.

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People who work for the federal government are concerned today. A shutdown of the federal government due to the lack of functional ability within the Congress might result in delayed paychecks for many government workers. Worse, if the furlough affects workers who handle Social Security payments, people relying on the government for income will not receive money when they need it.

Are you prepared if your source of income were to be delayed? A year out of college, I worked for a small non-profit organization that handled large projects, and the threat of there not being enough money in the business to send out the following week’s paychecks was always a concern. There was no overt discussion about the group’s cash flow problems, but there were paycheck delays in the past and all employees were well aware of the company’s financial status. This was particularly troubling for me, as I was living paycheck-to-paycheck at the time, or worse, growing deeper in debt when my only expenses were commuting to work, very low rent, and looking for a different job.

Without any savings, I was not prepared. Thankfully, my paycheck cleared the bank every week. If any one check bounced, I would have been in deeper financial trouble.

Building an emergency fund requires discipline, but it requires money, too. If you’re growing deeper in debt every month and are not spending money on anything non-essential, having enough savings to last a few weeks seems out of the question. Forget about having an emergency fund big enough to last three to six months or one month for every percentage point in the unemployment rate. These are great goals, and so often touted by financial authors and gurus, that it’s easy to forget how difficult it is for a family to reach that point.

No government worker, Social Security pensioner, or anyone else who relies on every dollar of their income to meet their basic expenses can afford to be working without some kind of emergency funding plan. it’s easy to blame the government or the non-profit organization that doesn’t pay you enough for your problems if you need to go a week or two without your income, but if you’re prepared, you don’t have to blame anyone.

Getting to the point of preparation is difficult, and extreme situations call for extreme actions. I’m a big fan of moderation, but that’s a luxury available to those who can afford not to focus intently on saving every possible cent. This is where financial gurus will offer motivational encouragement, like, “You can do it if you really want to and you try hard enough!” and “Just trim 10% off your expenses at first — it’s easy!” In reality, for many people in a paycheck-to-paycheck or worse situation, that’s not going to happen, and motivational speeches are meaningless. The best real motivation is living through the consequences of your financial circumstances — hitting “rock bottom.” For some people, accepting financial failure and seeing the results materialize in your life — being left by a loved one, losing your house, resorting to illegal actions to improve your finances, perhaps even going to jail — is the only trigger. And the truth is that some people will never recover. Changing your life around requires the change in mindset that one sometimes goes through when they live at rock bottom.

Those who have hit rock bottom often use their story to try to help others before it’s too late, but ironically, they often use the same motivational techniques that didn’t work for them initially. There’s not much else that can be done, however.

The original version of this article, Government Shutdowns, Late Paychecks, and Real Motivation, is copyrighted by Consumerism Commentary.

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Matchmaking is a big business, particularly when the matchmaking services are geared towards the wealthy. With these services, women join for free, and men pay hefty fees to be matched with these women. This is a one-sided arrangement, but it is based on the demographics of the clientele; for the most part, the dynamics follow the stereotypical partnership: a wealthy man looking for a younger woman.

The Millionaire’s Club is probably the best-known of these matchmaking services for the wealthy, thanks in part to the reality television show, Millionaire Matchmaker, hosted by matchmaker extraordinaire, Patti Stanger. The basic membership level for men costs $45,000, and this includes unlimited dates and four hours of coaching and counseling sessions. You’ll have to pay extra to receive service from Patti or any of her senior staff.

It helps to look past the reality series, though. I would have to imagine only the wackiest people are selected for the show.

Selective Search, a similar matchmaking service run by Barbie Adler, costs $20,000 for men, and there is no cost for women “affiliates.” Barbie’s experience comes from executive recruiting, and she applies what she knows about finding the right executive for a job to finding the right partner for her clients.

While there are some wealthy women who sign up, I would assume that most women who sign up for free membership are simply looking for a wealthier man. Perhaps they are expecting to find happiness in a relationship where they believe they won’t have to worry about money, but wealthy people do worry about their finances. Perhaps some are just looking for some wealth to transfer to them in the future.

In an article in Sunday’s Time Magazine, Joel Stein went behind the scenes at Selective Search to find out who joins this type of service:

The women don’t pay anything, but they aren’t assured of a date, just like in the real world. To my shock, none of them seemed like gold diggers. They had great jobs, went to impressive colleges and had other priorities — namely, that they would under no circumstance date a man under 6 ft. (180 cm) tall. He could be bald, fat and jobless as long as he was at least one standard deviation above average height…

More shocking than the non-gold-digging women, however, were the men. Who were hot. And socially well adjusted… Basically, they were older guys, often divorced, who were serious about getting married and having kids and hated dating. Ironically, because of all the gold diggers.

Busy people outsource various aspects of their lives. I recently outsourced housecleaning; although I am a single man living in a relatively small space, I find it’s worthwhile to allow professionals to do the job right once every few weeks. Finding people to date can be difficult for busy people, particularly those who aren’t interested in bars and don’t have time for the socializing that comes from being involved in a variety of activities. Do-it-yourself dating websites can be a lot of work, and you need to weed through quite a few less-than-stellar matches and go on more than a few lackluster dates.

It makes sense to leave the dirty work to professional screeners. But how much would you pay to find true love? $20,000? $50,000?

Time Magazine

The original version of this article, How Much is True Love Worth?, is copyrighted by Consumerism Commentary.

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College students, professionals, and married couples are familiar with one of the oldest systems of bartering known to humans: bartering using sex. According to a survey of University of Michigan undergraduate students, 27 percent of unattached men and 14 percent of unattached women offered a service or gift, like laundry or football tickets, in return for sex. Sex is often used as a motivator, the carrot designed to entice someone to take care of something you’d like to be completed.

An older article from the Los Angeles Times indicates how sex can be used in a bartering system.

The exchange of sex for things desired, whether it is good behavior, a new car or takeout dinner of one cuisine over another, is one of the oldest games played out between the sexes. But it is a game in which women have the upper hand–even in relationships where sex is frequent and satisfying, even when women have economic parity with their mates and even when women have their own lusty sex drives… “It works for me because my husband loves sex so much that I usually get what I want,” said a 29-year-old Santa Monica mother of two. She said she has bartered sexual favors to get a sewing machine and a minivan.

A more recent article from CNN describes how a tourist used sex to gain an experience she desired in Brazil:

While she was studying in Brazil during college, the one thing Stephanie Gerson longed to do before leaving was spend time in the thick of the Amazon rain forest. Unfortunately, she couldn’t find a tour that would take her past the forest’s edge. So, when a college-aged busboy at a resort she was visiting began flirting with her, she asked him if he thought a tourist could survive alone in the jungle… Although she wasn’t attracted to the guy, Gerson flirted right back in the hopes that he would be her jungle tour guide. It worked. The busboy wormed his way out of work, and the two headed into the rain forest.

“It was amazing,” Gerson says of her adventure in 2000. “We built our homes out of palm leaves, I saw animals I’d never seen before, he taught me the medicinal properties of all the plants, we picked fruit off the trees, we swam with and ate piranhas. And, of course, we had sex … for almost two weeks.”

When all the money in the world eventually becomes devalued, and when there is no need for commodities once considered valuable like gold and silver, there will still be sex. Sexual satisfaction and its biological impetus, procreation, is a baser need than wealth and shelter. Sex will always have a value that could be placed on an economic scale.

That’s not to say that sex is immune from inflation. Today, there is more access to pornography. Society is increasingly desensitized to sexualization, especially of younger adults. The Internet brings people who have the same sexual interests closer together. These all contribute to the idea that as a community, people need to go further to get the same satisfaction. The same aspects of sex that might have been considered kinky two hundred years ago are commonplace and unexciting today.

Call it crass, sexist or gender stereotyping all you want, but there are thousands of years of biological programming at work here, says Dr. Chris Fariello, director of the Institute for Sex Therapy at the Council for Relationships, a nonprofit relationship-counseling group based in Philadelphia. Plain and simple, a partner who provides more resources — wealth, shelter, home repairs — is seen as more attractive and stands to reap more sexual rewards.

Stephanie Gerson, in the example above, did not feel uncomfortable with her arrangement. Do you or would you use sex as a bartering tool?

Los Angeles Times, CNN
Photo: Andréia

The original version of this article, Getting What You Want: Using Sex as Money, is copyrighted by Consumerism Commentary.

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It’s hard to compare myself with my parents. When they were my age — I’ll be thirty-five years old less than a month from now — they had two children, and the four of us were living in an apartment in upstate New York. I’m not married and I have no children. My father studied to be an environmental engineer, and I studied to be a music teacher. My situation is significantly different and probably shouldn’t be compared without making these points. When you compare yourself with your parents, you might have similar variables that make the comparison uneven.

Most middle class Americans are not better off than their parents today. When you look at average income, unless you’re in the top sliver of wealth, it has stayed roughly stagnant for at least a generation. The bottom 90% of income earners, those with incomes under $380,000 a year, have not seen their real purchasing power increase. Those in the top 1%, on the other hand, have seen their income increase by 33%, after accounting for inflation, in the past 20 years.

Even if incomes haven’t changed for middle class, the standard of living certainly has. I, and much of the middle class, can watch movies in high definition on a big screen in living rooms, while my parents had a 13-inch television. Today’s middle class dines out in restaurants frequently, while the middle class of the previous generation focused much more on cooking in the home. The middle class a generation ago didn’t place the stigma on renting an apartment rather than buying a house that today’s generation does, and it’s been normal for middle class individuals and families to own houses soon after starting a career or a family.

Another income to note is the trend over the past generation is the widening income gap between college-educated individuals and those only with high-school diplomas. The increase in education and holding different types of jobs than your parents might help in creating a feeling that you are better off.

In some cases, this feeling is misleading; a generation ago, workers entering the workforce may have had less lucrative jobs, but they had much less debt. Today’s graduates are tied to their student loan payments and credit card debt. Even for those with much better jobs than their parents, there was a sacrifice to get to that point.

Do you feel better off than your parents?

CNN Money, New York Times

The original version of this article, Are You Better Off Than Your Parents?, is copyrighted by Consumerism Commentary.

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This is an article by The Weakonomist, an anonymous blogger responsible for everything at Weakonomics.com. As a banking insider he’s witnessed the economic implosion from inside the bubble. You can usually find him at the corner of Wall Street and Main Street throwing rocks at traffic.

If I presented a monkey with two choices: a grape or a piece of paper that could be exchanged for a dozen grapes, what will he choose? Before the question is even asked, he will take the single grape. Stupid monkey.

We’re all stupid monkeys. Sure as an individual you’re smart, but as a population we’re terribly stupid. And much of that goes back to our monkey brains. We see value in the single grape but not the paper. And this isn’t a matter of instant gratification. Your senses are playing tricks on you. As a collective people, we place too much value on the things we can see, touch, taste, smell, and hear.

The best examples of sensuous value come from people that come into wealth quickly. Think of celebrities, rappers, and athletes. According to Sports Illustrated, an estimated 60% of former NBA players are broke within 5 years of retirement and 78% of NFL players have similar issues within 2. Now part of that may be due to poor spending habits and not just investments, but the two are really one in the same.

Bad investing and poor spending both focus on the material. You want to take cash and turn it into something you can really own. It might be cars, jewelry, houses, friend’s businesses, vacations, or restaurants. They can all be consumed in some form or another. You can brag about the company you’re invested in, sample Beluga caviar while cruising the Mediterranean, or take a hot date to your restaurant in your Maserati. The only thing that differentiates bad investing with bad spending is the expectation of a return. But if the return was unrealistic, then the only difference really is a tax write-off.

But why do we put our money into such ridiculous things? It’s because we put more value on something that appeases our senses. Our senses are really a low level genetic trait, we know this because just about every type of animal shares the same basic senses. And their lives are spent acting on these senses, because that’s how they survive. But the presence of opposable thumbs isn’t the only differentiator between us and other animals. We can think critically, and we can see value in things that go beyond our senses. Here’s an example:

Apple has assets of about $85 billion. If they used those assets to pay off all their liabilities (like bills, taxes, debt if they had it) they would still have $55 billion in value left over. This is a rough example of Apple’s book value. It’s the value of all the stuff the company owns. And yet, the company is actually worth more than $300 billion. What accounts for the difference is what separates us from other animals.

We can see beyond the simple value of something. We can understand that value can be created (and destroyed). Value doesn’t have to be material. Value can be something you can’t touch. Value can be an idea. Think of all the value in the Internet. There are trillions of dollars of value in the Internet, and yet you can’t touch it, see it, or smell it. All you can do is interact with it.

But even though we understand this value, we often reject it. When we’re worried about inflation, we buy gold. We believe that because it can be seen, touched, and not created that it must carry more value than a currency. Classic monkey thinking.

Thinking like a monkey isn’t necessarily bad. In fact it should be embraced quite frequently (it’s that gut instinct). But when it comes to what you should be doing with your money, you’re better off finding sensible, not sensuous, value.

The original version of this article, Sensuous Value is the Worst Kind, is copyrighted by Consumerism Commentary.

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Some things are beyond our control, and having a happy and fulfilling life requires accepting those things we cannot change. It’s possible, however, to control more than we believe we can.

Right before I first started on my journey of getting my life and finances in shape, I left a low-paying job that depleted my money and increased my debt, I lived in a terrible apartment in a bad area, and the relationship with my girlfriend at the time ended. Most of my life seemed beyond my control for years leading up to that point. These bad things continued happening to me, and there was nothing I could do about it. Of course, a series of bad choices — including, in some cases, not making any choice at all — resulted in these bad situations, but I didn’t want to see it that way.

My boss at this company often talked about how every aspect of our lives is a result of a choice that we make. For example, in his opinion, someone who was late coming to the office due to traffic was primarily at fault for not preparing for delays by leaving home well in advance. Someone who oversleeps, even if the alarm does not wake him, makes a conscious decision that lying in bed is more worthwhile than getting out of bed and living life. At some point, something clued me into attribution theory. I was attributing various outcomes in my life to situations beyond my control, and I had a low opinion of my self-efficacy.

After some introspection, I was able to see that both the good and the bad things that happened in my life were results of the decisions I made, and I began approaching my life differently. The choices I made were making a difference in my life, so I started making better choices. It hasn’t all been perfect since then, and I am constantly trying to improve everything about me, but my mind is in a different space than it was ten years ago.

All of the items below are within our control.

1. You can get the job you want. The rate of unemployment is still high, and the official government numbers might even understate the number of people looking for work. Blaming the lack of gainful employment on a government statistic is a good example of an external locus of control, believing it’s not worth looking for a job, putting in the effort, because there is nothing out there. Even if you feel those who work hard a networking and researching employment options will be successful in this environment, and you believe the individual can transcend the state of the economy to find a job, but you believe that nothing you can do will help you compete with others for the same, limited positions, then you’ll be stuck not taking any actions. That may reflect an internal locus of control but with low self-efficacy.

There are jobs out there now, including the jobs you want, and they are available if you do the research and prepare yourself for competing at a high level.

Perhaps you do have a job right now, but you’d like a promotion. When I left my company in December, it was following a departmental merger and there was a hiring freeze. Yet, before I left, I was offered a position that, while it wasn’t perfect for me, shows that even company policies, often used as an excuse for immobility, can be circumvented in some situations.

2. You can pay off your credit card debt. It’s easy to believe that your debt increases because unexpected expenses keep coming. Your income may be enough to pay for your normal expenses, but every month, someone in your family is sick, an appliance breaks, or a family member needs to borrow money because they’re in a worse situation than you are. This can be a terribly frustrating position. You’re struggling, yet everyone is still leaning on you for support. You can get out of this situation, and it comes down to replacing the use of credit with better planning for expenses and the use of an emergency fund.

Getting started is the hardest part, though, and the spot where most people will be overwhelmed and will give up. Chances are that most people in this situation have not cut back their expenses as much as they can. They might have cut back just enough to remain somewhat comfortable, but extraordinary results require extraordinary actions. Occasionally, you need to take it to the extreme for a short time. Getting rid of cable television isn’t the last move, it’s just the start. Try following this six steps to building a better debt snowball.

3. You can reach your life goals. Few things bug me more when I ask someone what she wants to do with her life, and she tells me she wants to retire with $2 million or some other figure. That doesn’t tell me anything other than the only thing important to her is money. That may be true, but most people have something beyond money — or would benefit from thinking about why they want to retire with $2 million. What is the point of working hard, trading your time and effort and money, only to have a bank account with a high enough number? Money is just a tool for something else, and the “something else” that is most meaningful can be your primary goal or mission.

Sometimes it feels like there are people out there who don’t want us to succeed: so-called friends who would rather compete with you than work as a team to build each other up, insecure bosses who need you to handle the work but don’t want to admit they don’t have the skills they should have, This is just noise that can be relatively easily circumvented. I do this by shutting out negative energy, and when someone approaches me with this type of attitude, if I can get away with it, I rarely dignify it with a response.

I suppose, if this blog were like so many others, this article would be followed by some kind of product that you could buy that tells you how to live your life. I have no such product. I’m not selling anything. These thoughts come from my own, real, authentic experiences and I’m not pretending to be some sort of guru. If you want more, though, you can look at my series on taking control of your finances. Don’t worry, I’m not selling anything there, either. Of course, most importantly, I’d like to hear from readers.

Was there a moment, a turning point, when or where you decided you could control more of your life than you originally thought? What was the catalyst? What was the outcome?

Photo: Jude Doyland

The original version of this article, 3 Aspects of Your Finances You Can Control, is copyrighted by Consumerism Commentary.

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The recession can shape a generation. With many college graduates over the past few years unable to find jobs right away, many opted to move from campus back home with mom and dad. The proliferation of this trend has led to concepts like the Boomerang Generation and Prolonged (or Extended) Adolescence. Both refer to the idea that young adults are not gaining the maturity and independence they’ll need to function well later on in life.

I disagree. College graduates, for the most part, do not want to move back in with their parents, and will only do so as a last resort. I have some personal experience. After college, I lived with my father for a few months before finding a roommate to live with. Several years later, after going broke working for an arts organization, I eventually accepted defeat and moved back in with my father one more time — for four months.

This was the beginning of my financial awakening. I got back on my feet quickly and moved out as soon as I could; at this point, I didn’t want to be a burden to anyone. Those who have fallen victim to the Boomerang Generation probably have the same point of view; this living arrangement is a temporary solution and is not impeding the development of a capable, independent approach to living.

I know I’m much better for this non-traditional living situation. I was lucky both times to have the opportunity to get myself started or restarted. Some people are not as lucky. The New York Times recently featured an article about a young married couple with a young daughter who moved in with the mother’s parents’ house due to unemployment. The living situation is difficult, and it probably illustrates the difference between one family moving in with what is in effect another family and one individual moving in.

In the New York Times example, the parents who opened their house to the second and third generation of their family were having financial struggles of their own — not far-fetched in this economy that is supposedly in recovery but still sports high unemployment. A tough financial situation, tight living quarters, and philosophical differences particularly when raising a young child all contribute to making this situation volatile. This is a colorful example of how this type of living situation can tear a family apart.

I think families should continue to support each other to the best of their abilities. How could parents refuse to help when their children’s other option is a homeless shelter? I’m pretty sure that I could have survived either time if I had to live on my own, but I would have had to rely on credit for meeting my everyday expenses, including rent. Not everyone is as fortunate as I was, and for those who aren’t, a homeless shelter is the only other possibility.

Is it a good idea to move back with your parents? The answer seems to be, like it usually is, that it depends on the situation. From a financial perspective, having an “easy” living situation with minimal expenses could be what someone needs to get a start — or a fresh start — particularly in a difficult economy. On the other hand, personalities can clash and it could ruin relationships.

Would you offer to share your living space with your adult children, and possibly their family, if their financial condition deteriorated? Would you consider moving you or your family in with your parents if your income and savings dried up?

New York Times

The original version of this article, New Trend: Moving In With Your Parents, is copyrighted by Consumerism Commentary.

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I am completely disconnected from the genre of television shows called “reality.” The fascination with people whose celebrity status stemmed from reality television, or most celebrities in general, seems to be built on a foundation of schadenfreude. People love to hear about the failures of famous people.

Heidi Montag and her husband, a couple who met during taping of the reality series “The Hills,” had an estimated net worth of $10 million. She’s now living rent-free with her in-laws. At twenty-four years old, Heidi is a prime example of the boomerang generation, the nickname given to her age group thanks to a tough economy and the tendency for those around that age to move back in with financially stable parents.

When you’re always in the spotlight — and when you pour money into a musical career that never materializes — it’s not so difficult to lose $10 million. Celebrities are under a lot of pressure to maintain their image, because that image is what ensures continued earning power. Maintaining that image can drain your finances, particularly if you’re not smart with the tax bill.

I don’t judge. Would I do handle my finances better than Spencer and Heidi if I became a celebrity and earned my way to $10 million? I like to think I would handle my money differently, and that I’ve learned a little about money management over the past ten years, but you never know how you will react in a situation until you experience it for yourself.

Spencer’s parents are very kind to allow the couple to live in their house after the young newlyweds spent $35,000 a month to rent their former home in Malibu. They’re a perfect example of extended adolescence, two adults not quite ready for living a responsible life. Like many other boomerang kids, they’ll figure it out.

Source: omg! on Yahoo

The original version of this article, Extreme Boomerang: Heidi Montag, is copyrighted by Consumerism Commentary.

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This is a guest article by Sam, the author of the blog Financial Samurai and the founder of the Yakezie Challenge and Network. He writes a column for Consumerism Commentary every other Tuesday.

What a difference a couple weeks makes! Craig has gone from depressed online dater to someone with a ton of self esteem. What happened in those two weeks you ask? First of all, Craig reached his one-month anniversary on his site, so his account was automatically upgraded to “regular member” status. This helps him show up in more search results since many women choose to view men who have been members at least one month to weed out less serious candidates. Second of all, Craig did raise his reported income level from $55,000 to $100,000 thanks to all the advice from readers who said that even though women say they don’t care about money, they really do.

The final major difference Craig employed was to stop feeling sorry for himself and start actively going out and contacting women he finds interesting. The more he contacted, the more responses he got. It’s not like every woman is responding. Far from it. Instead, Craig notes that about one in every five women get back to him. Simple math therefore dictates that if he were to contact 30 women a month, he’d be able to start dialogues with around six of them — and that is exactly what he’s done.

Fabio lives

The key advice Craig tells us during our weekly poker games is that online dating is a numbers game. “Take nothing personally guys! There are so many women out there looking for love, it just takes patience!” “I’ve lined up two dates a week for the past two weeks, and I’m planning on going out with this hot tamale!”

Craig brings up a picture of this one beautiful woman on his iPhone and everybody starts clamoring. She’s incredibly fit with flaming red hair and a body that could very well be in the next Sports Illustrated swimsuit magazine. “Wow, you sure she didn’t respond to you by mistake?” asked one player. “Craig, there’s no way in hell you’re going out with her,” says another.

With each passing of the iPhone, we all take turns busting Craig’s chops, now that he thinks he’s Casanova. All was going according to plan until the phone reached one fella who did a double take. “Wait a minute, I could have sworn I’ve seen her somewhere before.”

“Shut the hell up, Tim. You’ve never seen her before fool!” Craig retorted.

“No, no, I really have seen her before! She was on Craigslist’s Adult Services section before the Feds shut it down,” Tim explained. At this point, we all busted out laughing. All of us, except for Tim. “I’m dead serious guys! Since the Feds shut down Craigslist’s shady section, where do you think all these women suddenly go?”

“Hmmm, good point Tim, but I don’t care. She’s hot and the only thing I’m paying for is sashimi and sake, punk!” Craig says defiantly.

Let’s discuss: he said

I’m sure some of you want to rewind back to Craig’s second initiative, and that is him raising his income level to $100,000. Is it really so bad to fudge a little on income if women fudge on their weight, height, and age? Craig actually went out with one 33 year old woman last week who looked like she was still in her mid twenties from her picture. Surprise, surprise. She looked like she was in her mid twenties because the picture was taken six years ago! Craig couldn’t wait to pay the bill and get out!

What’s the harm in saying you make $45,000 a year more than you really make? Who’s to say Craig can’t make $45,000 more in the next 12 months? Craig certainly can, and until 12 months is over, he’s not lying one bit. So long as Craig treats the woman well, that’s all that matters since he looks exactly like what his pictures show, and enjoys things exactly as his profile describes.

Let’s discuss: she said

Craig is actually incredibly disappointed by this red-haired woman who calls herself AvedaQueen. thanks to Tim’s comments. She is an incredibly attractive hair colorist who hasn’t been responsive, yet she has agreed to go out with him. She’s an eight out of ten in Craig’s mind in terms of attractiveness. Now all Craig thinks about is whether AvedaQueen really is a prostitute and whether she finds Craig interesting.

It doesn’t matter one bit that AvedaQueen colors hair for a living or has a five year old child at 28 years old. He likes her profile and finds her attractive. If she is a part-time prostitute, how does she expect to get paid since most guys will have no idea such a curve ball is coming? Perhaps after a great evening of fine wine, where she’s lulled him in so deeply with her beauty and charm, she can tell him the truth and proposition him? Yes, that must be it because at that point, she’ll have at least eaten a free meal and had a good time.

He won’t know until he tries

Maybe AvedaQueen is not a prostitute, and Tim is just joking around. Or maybe she is, and is using a free online dating site to lure new customers. Whatever the case may be, Tim is still extremely curious and wants to at least take her out and see for himself. Tim’s income exaggeration pales in comparison to AvedaQueen’s deception. A simple role reversion buttresses the point. In the land of online data, nothing is what it seems. As long as you enter the world with your eyes wide open, you’ll be fine!

Readers, is it OK stretch the truth in the online dating world since it is so prevalent? Who is being more deceptive here, Craig or AvedaQueen? Once again, does it really matter how much a guy makes, and if not, does it matter how much Craig says he makes?

The original version of this article, All The Ladies Are Interested Now, is copyrighted by Consumerism Commentary.

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This is a guest article by Sam, the author of the blog Financial Samurai and the founder of the Yakezie Challenge and Network. He writes a column for Consumerism Commentary every other Tuesday.

There are 14 income selections one must choose on a particular online dating site my friend Craig recently joined. Take a look at these choices: Under $20,000, $20,000-$30,000, $30,000-$40,000, $40,000-$50,000, more $10,000 increments up to $100,000, $100,000-$150,000, $150,000-$250,000, $250,000-$500,000, $500,000-$1,000,000, and finally $1,000,000+. Wow. Talk about getting granular! Do people really need to know within the $10,000 or $50,000 range of how much one makes? Guess so, otherwise there wouldn’t be so many choices!

Craig is 32 years old, six feet tall and works as a project manager in construction. He doesn’t make a lot of money, with a salary averaging about $55,000 a year. That said, with dark brown hair, a nice smile, four-pack abs and a cheerful persona, he should be considered a catch by many women. Yet, Craig has an inferiority complex. $55,000 is only the fifth choice out of 14 from the income list! He often wonders to himself, How am I supposed to compete with the thousands of other single guys in San Francisco who undoubtedly make much more than me? Earning $55,000 in San Francisco is like earning only $25,000 in Houston.

Income infatuation is strong

Women love to say that it doesn’t matter what car a guy drives, how much he makes, or how much he’s worth. Instead, the gracious woman emphasizes personality, charisma, drive, and integrity! Yet, if this were really the case, why don’t surveys ask a guy to rate his charisma trait between 0 and 14 like they ask about income? Why isn’t there more emphasis on the various types of personalities and ambition levels instead of just one word, yes-or-no answers? The reason is women aren’t telling men the entire truth! High quality literature (like Cosmopolitan magazine) prove that there’s a lot more than meets the eye!

I believe everything is rational, and the 14 point income question is there because women demand it to be there, otherwise it wouldn’t be there! If enough ice cream shop customers demanded double fudge peanut butter cup ice cream with swirls of caramel, you can bet your bottom dollar that they’d find a way to get the flavor on the menu.

Don’t take it from a guy

It’s really easy to see things from a guy’s point of view. After all, I am a guy, so what am I supposed to do, pretend I’m a woman and psychoanalyze myself from a woman’s point of view? Maybe, but there is a better way. The better way is to simply ask women about this ridiculous 14 selection income field.

So I asked Jennifer, a professional woman with ten years’ experience in corporate America the following questions: Should Craig lie and say his income is $175,000 to make him seem more desirable? It’s not like his potential date can really verify how much he makes, especially if he takes her somewhere fancy. Or, should Craig be honest and go with the “love me for who I am” option? I expected Jennifer to choose the latter, and she did.

“Craig should be himself and disclose everything with honesty,” Jennifer says. “What happens if they get serious and she discovers he doesn’t make the $175,000, then what? She’ll start wondering what other lies Craig is telling.”

That’s all fine and dandy, but what does it matter if Craig can’t get a date in the first place since no woman wants to date a 32 year old man in San Francisco earning only $55,000 a year? Craig can’t even get in the door. Wouldn’t it be a better strategy to make him seem as desirable as possible, and allow him to bedazzle her with his charming personality and chivalry instead?

Jennifer smirked, and simply said, “Men.”

What’s a guy to do?

Craig has been on this dating website for over a month now but isn’t getting much luck. He gets several “winks” and messages, but he hasn’t been able to successfully get a woman to go on a date with him yet. He went with Jennifer’s advice and chose the $50,000-$60,000 level. Frankly, Craig is depressed by his bad luck and wants to just give up online dating together.

Every time Craig thinks about lying about his income, he hesitates because women continue to tell him they don’t care about income. Yet, online dating is so full of lies. The five-foot one-inch girl says she’s five-foot three. The slightly overweight guy takes a picture of himself in a black shirt in an upward looking photograph and chooses the “athletic” body type. The list of embellishments goes on and on; it’s as if one is disadvantaged if one doesn’t cheat a little.

Readers, what should Craig do? And consider the opposite situation: if Craig were to make millions each year, should he reveal the figure or pretend like he makes much less? I assure you that Craig is a good guy!

The original version of this article, Income Infatuation and Online Dating, is copyrighted by Consumerism Commentary.

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As any marketer knows, words have a power beyond their literal meaning. No one knows this more than political marketers, who create campaigns that usurp specific words and ensure their meaning is replaced with some sort of thought the’d like to embed in the public consciousness. This effect isn’t only thrust upon us by marketers; we use words to frame our own actions in ways that minimize any negative aspects.

One specific example of this is the use of the word “invest.” The literal definition of this word is “to put money into (a thing).” There is, however, a connotation or sense that in most cases, “invest” means “to put money into (a thing) with the hope of financial gain.” That’s a more specific, more positive sense, that people who use the word “invest” want to convey.

If you apply for a student loan, you, the lenders, and the schools rationalize going into debt by framing it as an investment in your future earning power. Future income is not the only reason people earn college degrees, but financial people want to express the benefit of an education in financial terms.

When you buy your first house, you will call it, or you likely have called it, an investment, particularly if the purchase costs more than you can handle. With the hope that house prices will rise, considering it an investment convinces others, but more importantly, convinces yourself, that the choice will pay off in the long run.

Car salespeople know this, and will often use the word “invest” when they want to make a sale. There is close to no chance of financial gain when buying a car, but they will use this word because of its positive connotations. If you feel like your making an investment rather than spending money now and committing yourself to spending more money over the next three, five, ten, or more years, you’ll be more likely to part with your money.

It’s more fascinating how we use the word ourselves, though. Rather than buying clothing, one might say “investing in a wardrobe.” There may be some logic to this, if having nicer clothes is a prerequisite to earning more money in your position. In order to advance in your career you should, among other things, dress more like those whose jobs you’d like to have. The idea of “investing in a wardrobe” is used by people who have no such ambitions. For those who do think a set of new suits will be the deciding factor for a promotion, keep in mind spending more than you can afford on clothing is not a guarantee.

There’s always a case for buying quality rather than choosing the most inexpensive option. That’s not the point here; the word “invest” is often used when people spend more than they know they should and want to convince others as well as themselves that they made the right decision from a financial standpoint.

Here are some other items people “invest” in rather than buy when they want to spend more than they should:

• “Good” furniture. Not too long ago (when considering the age of modern civilization), furniture was built to last generations. Families were less mobile and could easily pass well-built furniture to children for several cycles. It is possible to invest in furniture that could last over a hundred years, suiting the needs of future generations, but that’s unlikely. Most furniture built today will be replaced within the initial owner’s lifetime. The concept of “investing in furniture” no longer applies.
• Electronics (computers, home theater systems, etc.) Buying the latest and greatest electronics may be a way to invest in your continued relevance within your social circle; if you want to hold the Superbowl parties, you’ll need the biggest, highest-definition, most-dimensional television. That’s as far as you can take investing when a product’s life cycle is only a few years before becoming hopelessly obsolete.
• Home business scams. Be wary of any product that promises you the ability to earn money on your own — but only if you buy an introductory home business kit, e-book, or some other limited-value item. This will always be framed as an investment but few people earn enough to cover their initial outlay.

See past the marketing and be aware of any self-delusions. Words are powerful, and using the word “invest” instead of “buy” often masks a dangerous financial choice.

Photo: soopahgrover

The original version of this article, Rationalizing an Expense By Changing Your Words, is copyrighted by Consumerism Commentary.

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That title sounds a bit obvious. In college, a time that now seems long in my past, friends wanted me to take sides on a variety of issues. I didn’t see the need to feel passionately about issues which clearly had reasonable arguments on either side. I even took pride in my ability to see a situation from multiple points of view. That also meant I could play roles easily; while I never was on a debating team — I am not a fan of debates — I could easily argue either side of an issue.

This trait also presents itself as a difficulty with decision making. I often refrained from making decisions, particularly difficult decisions that had a lasting effect on my life. One result is I end up staying in sub-optimal situations, such as a job, longer than I really should. I’ve since formed some concrete opinions about certain issues that used to have me on the fence, but I still struggle with major personal decisions.

The Wall Street Journal included an interesting article about ambivalence, a trait long ignored by (ambivalent?) psychologists.

Now, researchers have been investigating how ambivalence, or lack of it, affects people’s lives, and how they might be able to make better decisions. Overall, thinking in shades of gray is a sign of maturity, enabling people to see the world as it really is…

If there isn’t an easy answer, ambivalent people, more than black-and-white thinkers, are likely to procrastinate and avoid making a choice, for instance about whether to take a new job, says Dr. Harreveld. But if after careful consideration an individual still can’t decide, one’s gut reaction may be the way to go…

Ambivalent individuals’ ability to see all sides of an argument and feel mixed emotions appears to have some benefits. They may be better able to empathize with others’ points of view, for one thing. And when people are able to feel mixed emotions, such as hope and sadness, they tend to have healthier coping strategies, such as when a spouse passes away, according to Dr. Larsen. They may also be more creative because the different emotions lead them to consider different ideas that they might otherwise have dismissed.

There are some good tidbits and suggestions from the article.

• Rather than listing all pros and cons, ambivalent people could make decisions easier by paring down the variables to just a few important ones.
• Positive feedback like a raise could motivate someone who is ambivalent about their job to perform better.

Ambivalence may not be a trait as the article suggests. It may just be a state of mind that can change depending on the situation. After all, I do have strong opinions about certain issues — you will never find me in a group labeled “undecided” for an election — even though I can often understand where someone with an opposing view point is coming from.

The Wall Street Journal article was followed by comments from readers who thought the article was based on faulty social science. Do you believe that ambivalence, or perhaps the ability to see the world in shades of grey rather than black and white, can ever be an advantage?

The original version of this article, Decision-Making Difficult for Ambivalent People, is copyrighted by Consumerism Commentary.

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This is a guest article by Neal Frankle. Neal is a Certified Financial Planner and blogs at Wealth Pilgrim. Neal writes about taking action steps to improve clients’ financial situations and finding balance at the same time.

I’ve often wondered if the posts we write about personal finance are getting into the hands of the people who need them most.

You already know the importance of tracking your budget, having enough life insurance and having your financial house in order.

But what if your spouse doesn’t understand these things? Worse, what if he doesn’t even want to hear about it? What do you do then?

Do you want to know the single greatest indicator of a couple’s future financial success? It’s when both partners being on the same page.

When they aren’t, it’s like a time bomb waiting to explode. It doesn’t matter how much money you have or earn. If you don’t generally agree on the importance of saving, investing, budgeting, insurance, etc., you’re facing an uphill climb.

Here are 5 steps you can take to get your spouse on your team:

1. Be clear about your motives.

Let me clarify this by way of example: I’m a CFP with a degree in accounting. I love taking care of the money and my wife is only too happy to assign that task to me.

But I also come from a home where neither of my parents did any long-term planning. They didn’t follow a budget. They didn’t save and they didn’t plan. When they both died while I was in high-school, my life became a nightmare.

I refuse to subject my kids to that same risk. That’s why I want my wife to be able to step in and take over should something take me out.

My motive is fear, fear of what would happen if the unthinkable took place. I’ve discussed this with my wife and she gets it. Before I told her what about my fears, she just thought I was being silly since I had the professional and educational background to take care of the finances. Now she realizes it’s not that simple.

Your motives might be very different than mine. You might want your spouse to get on track because he’s derailing your finances. He might be spending too much or he might not be tracking his spending. What are your fears around that? Are you afraid you’ll never get out of debt? Are you worried about retiring? What is your motive?

Be honest with yourself and your partner. If you have a solid relationship, your spouse will be more willing to get out of his comfort zone and take action. Your honesty will also be an invitation to your spouse to be honest about his own financial motives and behavior. That’s the kind of conversation you’re looking for.

2. Discuss what money means to you.

When you think about money, why is it important to you? What are your dreams? How does money facilitate those dreams? How does your behavior get you closer to or further away from those things you want most in life?

Share your thoughts and get your spouse to share his thoughts too.

3. Fess up.

Admit how your own financial behavior gets in your way sometimes. Admit to your own mistakes. Are you too controlling? Are you living in fear?

When you open up, encourage your spouse to open up too. By calling yourself out first, it should make him feel more comfortable to do the same.

4. Get together.

Work out an action plan with a time table. Break down your goals to bite size, manageable mini-goals. If you need $3000 to pay off the credit card and you want to get it paid off in 10 months, work out a plan to save $300 each month. Write down how you, as a team, are going to get this done.

5. Be accountable.

Of all the steps I’ve listed, having an accountability partner is the most important. Go to someone you both trust and share your plan with that person. Make a commitment to provide progress reports to your accountability partner every month.

What makes this step so powerful is that you take off your hat as the bad guy. Hopefully, you both make commitments to your accountability partner and you each have responsibilities. You’re not the one your spouse has to answer to. This takes a lot of the pressure off and it’s also a powerful motivator to get things done.

If you and your spouse are not on the same page financially, you’re going to struggle in areas and waste energy. I know that it’s not easy to deal with a spouse that doesn’t see things the way you do. But if your spouse agrees to go through this process (and be completely honest each step of the way) I know you’ll be much further down the road to financial success.

Have you used any of these steps? Did it help? What was the eventual outcome?

The original version of this article, How to Get Your Spouse On Your Financial Team, is copyrighted by Consumerism Commentary.

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“Middle class” is a term that has a hundred different meanings if you ask a hundred people for their definition. Unlike my frustrations with people who call a house a liability, or more accurately, those who claim a house is not an asset, the label of middle class leaves a lot to personal interpretation.

While a class system isn’t as important in today’s society as it once was, class mobility, moving from one station in life to a higher status, isn’t as easy as success seminars claim. In fact, downward mobility may be the trend for a while. But how can we know where we stand without a firm definition of class?

Wkipedia, certainly not the ultimate authority but good for a consensus view, offers these factors of the middle class:

• Achievement of tertiary education.
• Holding professional qualifications, including academics, lawyers, engineers, politicians and doctors regardless of their leisure or wealth.
• Belief in bourgeois values, such as high rates of house ownership and jobs which are perceived to be “secure.”
• Cultural identification. Often in the United States, the middle class are the most eager participants in pop culture…

U.S. News has a helpful guide for gauging your middle class status. For example, the middle 50% household incomes of the country ranges between $51,000 to $123,000 for a four-person, two-parent family. The typical home’s value is $231,000 and is about 2,300 square feet.

The average family takes one week-long vacation, while some select few in the middle class might take two weeks throughout the year. Each year, this family saves $2,600 for retirement and spends $14,200 on necessary household expenses.

These statistics are mostly meaningless on an individual level, however. A household income of $51,000 might qualify you for middle class in Pahrump, Nevada, but you might not be able to afford to rent a modest apartment in New York City on that salary.

After giving the concept of middle class some thought, I’ve settled on one major touchstone that should be accurate regardless of where you work or your education level. If you are not living paycheck-to-paycheck, and instead earn enough money to handle your necessary expenses with enough left over to save for immediate and long-term goals, you are at least in the middle class.

If you are living paycheck-to-paycheck, it would be harder to convince someone you could be labeled middle class.

Labels, like “middle class,” fulfill what seems to be an innate need to classify people and things. I’m fine without labels. How would you define middle class?

The original version of this article, What is the Middle Class?, is copyrighted by Consumerism Commentary.

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This is a guest article by Aaron Pinkston, founder of Clarifinancial. He wasn’t satisfied with the ways people had to get life insurance quotes, so he created something better.

Have you ever noticed you can relax about decisions you made while others around you are still running around frantically? On the other hand, you probably have certain decision obsessions that seem to grab all your energy and focus.

Some people are maximizers and feel compelled to find the single best possible solution available (or find a new one). Other people are satisficers who are comfortable with decisions they make, as long as they are mostly confident the decision they make is reasonably good.

Many people seem to believe being a satisficer is better because they are happier and can make decisions more efficiently than maximizers. However, I believe there is a lot of value in being a maximizer. Like most things, you can probably have both attributes.

I know that I am a maximizer in some parts of my life but a satisficer in others. In fact, I can be more specific than that — I am only a maximizer in areas that matter to me.

Matrimonial mania

People love to give examples of weddings, so I’ll follow suit. When it came to my wedding, I was a satisficer. Both my wife and I thought it was a silly question when people asked what our “colors” were. I had no idea what that question even meant!

Secretly, I think my mom took it too far when she planted the garden with flowers in the color we were forced to choose. The only reason I let her do that was because she plants annuals, which are plants that die after just one year. She even considered the blooming cycles of different plants to maximize the color on our wedding date. But to her, this was an important decision that would help make the whole design more harmonious.

Come wedding day, we moved it inside because of the rain and everybody was happy.

Am I saying my wedding was unimportant to me? Sort of. But only because I maximized my decision for a life partner. Others seem to take the opposite approach.

Happiness and innovation

I agree with the research that shows satisficers are usually happier. I know I’m consistently happy when I don’t have to worry about something, and this includes many things in my life, like what I wear.

But I love a challenge. Sometimes, being exceptionally great just isn’t enough. It’s not until I have found the very best possible answer that I can experience true and lasting satisfaction. Satisficers might typically be happier, but if it weren’t for maximizers, the quality of our lives would stagnate.

Look at all the innovation around you. Better yet, since you’re reading this on a computer, stop to think about all the innovation at your finger tips. I’d be willing to bet that your computer and the network of computers that enable you to read these words wouldn’t rock so hard if folks were okay with the answer they already had. In fact, as good as it is, it’s not good enough for some. What will they create next?

Those people are maximizers in part of their life but are probably satisficers in other areas. We wouldn’t have knives if a chipped rock was good enough. Knives come in handy. I have a few in my kitchen. But I don’t need them to be the best.

Think about it. Are you a maximizer in some areas of your life and a satisficer in other areas? When are you content when others continue searching and when do you keep looking for better answers when others have moved on?

The original version of this article, Are You a Maximizer or a Satisficer?, is copyrighted by Consumerism Commentary.

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I can’t completely fault companies like Amway, Mary Kay, and Lia Sophia. They know that friendship results in two important qualities: trust and guilt. These two qualities are important to companies because they make the process of selling products much easier. I find it relatively easy to politely decline — and hang up on if necessary — a salesperson who calls me uninvited in order to get me to upgrade my phone service or subscribe to a theater. Although I usually don’t have a problem, it can be more difficult to say no to a friend.

In most cases, people join these multi-level marketing (MLM) programs not because they believe in the product but because there is a system designed to allow them to earn significant amounts of money if they play the game right. If you are an influencer in your social circle, you will be able to convince your friends to sell products and host their own parties increasing your income. “Party” is just a code word for “sales pitch.” You can’t achieve success as a multi-level marketer without burning some relationships.

MLM isn’t the only issue. Everyone knows someone who is a social seller. From my observations, the products involved are almost always low quality, too expensive, or both. For example, someone in my office was trying to sell Girl Scout cookies to co-workers the other day for $4 a box. When asked, she had to explain that $4 was the real price and she was not artificially marking the price up. That’s a difficult sell when another co-worker was offering boxes of Girl Scout cookies for $3.50 a piece a few months ago.

I like these cookies, so I usually buy a box each year. Although I’m driven partly by my enjoyment, I’m also driven by guilt. One box of Girl Scout cookies is as far as I’ll go, however.

Dealing with co-workers trying to sell you products you don’t want is easier that dealing with friends who try the same tactics. When a friend is the seller, pressuring you to come to a party (a code word for sales pitch), you have to be strong.

• First, you can consider going to the party. Don’t bring any money and don’t bring your credit cards. If you see something you truly like and is a good deal, it will be available from your friend later.
• Politely decline. If you buy from your friend and there is a problem with the product, your friendship could be ruined. If the seller is a co-worker, you could be making your work environment uncomfortable. There are many stories about friends disappearing or not answering calls once they take their money, and the sale could go bad no matter how close you are with your friend.
• If sales pressure continues, make it clear you are not interested. Sometimes you have to say more than, “No.” Just explain that you’re not interested in the products and you’d prefer to keep the relationship away from business.

Unfortunately, just by denying a friend, you might lose your connection. That may be the fear that prevents people from saying no more often. Saying no is fine, because a good friend won’t use you for their own financial benefit, and a good friend won’t pressure you into something in which you’re not interested.

How do you deal with friends who want to sell you products?

Photo: Pictures from Heather

The original version of this article, When Your Friends Become Social Sellers and Multi-Level Marketers, is copyrighted by Consumerism Commentary.

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Overconfidence leads investors to believe they can make buying and selling decisions that would result in their performance beating the indexes. Most professional fund managers don’t beat the indexes on a consistent basis, so there is little reason to believe that amateur stock-pickers will be able to succeed where professionals have failed.

Are you overconfident? Kiplinger offers a questionnaire to help you determine whether you are more sure of your thoughts than perhaps you should be. Take the quiz here. The questions are not all related to finances, but are designed to measure your level of confidence overall. If you’re like me, the ranges you selected for the answers you didn’t know where too shallow.

Once you’ve had a chance to evaluate your results, take this second quiz and see if you can change your score.

Although overconfidence helps you accomplish your goals in life, it can damage your finances by leading to believe you’re a savvier investor than you are. So here are four ways to settle down and accept reality.

1. Invest mostly in index funds. Professionals can’t beat the indexes consistently, so it’s unlikely you will be able to either. Investing in index funds does not guarantee “average” returns, it will result in your investments performing better than actively-managed funds.

2. Invest regularly in equal amounts. You can’t time the market. I tried this recently, buying shares in Toyota Motors after one announcement of additional recalls. My belief is that Toyota will eventually recover, so I’ll hold on to this for some time. But if my goal were to make money quickly, I would have failed. More bad news propelled the stock price lower.

Dollar-cost averaging into the stock market, purchasing the same amount of an index fund at regular intervals, takes the human tendency to fail at decision making out of the process.

3. Don’t invest in the company you work for. It’s hard to have an objective opinion about your employer. Your too close to the situation. Also, executives will often say what is necessary to boost the confidence of their employees while not addressing potential problems. You are already invested in your company due to the salary and benefits you receive.

You may be required to invest in your company’s stock through a retirement plan, but you should sell these investments and buy index funds as soon as possible. My actions should serve as an example of what not to do. I invest 10% of my salary in company stock at a 15% discount through my company’s stock purchase plan, but I’ve been reluctant to sell while the stock has declined.

4. Eliminate or reduce emotions when making financial decisions. Emotions can’t simply be turned off. They’re essential for our brains to function. Nevertheless, separating emotions from money as much as possible will offer better financial results than reacting to your emotions.

A study in 1986 (McCormick, Walkey and Green) revealed that 80% of the survey respondents consider themselves better drivers than average, so it is not surprising we overestimate our financial abilities as well. No one wants to hear they’re not better than average, however. This overconfidence allows us to break out of our comfort zone but can be damaging to finance if allowed to rule decisions with money.

The original version of this article, You’re Not That Great: 4 Ways to Combat Overconfidence, is copyrighted by Consumerism Commentary.

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This is a guest article by Scott Treadwell, a long-time Consumerism Commentary reader and graduate student at the University of New Hampshire. Scott is studying finance and is conducting a study in behavioral finance. Please look for the survey below and help Scott conduct his study.

We are only a year removed from the greatest financial crisis that has been seen since the Great Depression, and many voices have vowed reform throughout the industry and have assured us that these events would never happen again. The world of academia, however, needs to catch up to reality. As our engine of intellectual innovation, they should be on the cutting edge, but the same flawed precepts that have been taught to our business and finance students over the past twenty years continue to be taught (although the smart instructors will deliver the material with a caveat).

The standard methodology has been the Efficient Market hypothesis. Since news and information is so prevalent, academics assume the massive army of savvy investors that are active in the financial markets will instantly price the stock at the appropriate value. Given that assumption, most variables in the financial markets including human error are factored out and statistics are easily utilized to measure risk.

However, factoring out the human element was a mistake. Humans are the actors who analyze stocks and choose to buy, sell, or hold, thus determining the stock price. This is true whether the investor is an individual trading in her own account or a manager of a large mutual fund or trust. Based on recent events, it became clear that these three key assumptions surrounding efficient markets were incorrect:

1. Prices DO NOT reflect all available information. Not all information that is acted upon is available to the public. Frequent and chronic insider trading nullifies this effect. The problem is not just Wall Street; corporate executives and employees with a shareholder interest in their own company can, and do, cash out before unfavorable information becomes public, although few get caught.
2. Public information IS NOT always interpreted correctly. For example, many companies’ exposure to Mortgage Backed Securities was clearly stated in their financials, however that was determined to not be a problem until default rates skyrocketed. Some in the financial community warned that the level of risk was being underestimated for years, but inertia trumped their few voices and valuations remained unchanged, and wrong.
3. Human Beings are NOT rational actors. Many precepts of economics are based on the assumption that the average human will optimize his economic interest at any given time by making the optimal decision. If this were the case, impulse consumer buying, groupthink, and stock market booms and busts would never happen. This is like saying that when there is a fire in a crowded theater, people will calmly line up in the reverse order of their seating arrangement and orderly file out of the building because they know this behavior is in their best interest. The concept sounds ludicrous in that context, so why is it applied to financial markets? People panic due to fear, they over-extend themselves due to greed, and they make foolish decisions. In other words, they behave like humans, not robots.

Enter the field of behavioral economics and finance, one that has been on the fringes of academia for many years. Once viewed as a disparate group of contrarians who analyzed strange aberrations in the market, their work was discounted by mainstream. However, in light of recent events, academics and investors are paying new attention to this field and the body of research conducted over the past several decades.

So what is behavioral economics? Essentially, it is study of trading behavior that is not rational. The trading behavior of humans is analyzed to gain insight about financial markets and to account for deviation from normal behavior. Here are some examples of these unique trading patterns:

• emotional or vested attachment to stocks
• panic selling and impulse buying
• recency effect (you are more quick to sell a stock you just bought rather than one you have owned for awhile)
• disposition effect (people are more willing to sell stocks that increase in value and hold the stocks that decrease losers)

Now the next question is, why do you care? Accepting where we went wrong is the first step, however everyone from finance professors to Wall Street professionals need to understand how the forces in play that can shape the investment environment now and in the future. If non-rational human behavior is truly a large factor in the market, we need to be aware of it and consider it as we formulate our individual investment strategies.

In order to gain some more insight about individual behavior, I have a quick survey about your trading habits. It’s quick, easy, and totally anonymous. The goal is to gain as much input as possible. Five minutes of your time will yield great results which I will be happy to share with Consumerism Commentary readers once the data and reports are available.

Please complete this anonymous survey.

Editor’s note: I completed the survey in under two minutes. Please take a moment to complete the short questionnaire and help Scott, a graduate student, complete his research study and earn his Master’s degree. ~ Flexo

The original version of this article, Quick Survey: What Drives Your Trading Decisions?, is copyrighted by Consumerism Commentary.

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Investors make better decisions when they separate emotions from the thought process, but it’s practically impossible to achieve the goal in perfection. Regardless of how hard one tries, emotions will always be present. The best an investor, or anyone who makes decisions about finances, can achieve is awareness of the ways psychology prevents optimal decision making.

I took Kiplinger’s new investor psychology quiz, which focuses on the ways investors’ brains work against us as we try to make solid investment decisions. I answered seven of the eight questions correctly. The quiz was a good reminder of the brain’s subtle ways of changing perception and understanding of a situation.

Here are some interesting aspects of psychology that hinder the best decision-making.

Recency effect

We tend to remember better events that happened most recently. While at the peak of a bubble, like we’ve seen in real estate and stocks, several years of increases hide the reality that bubbles burst when high prices are not supported with fundamental value. Likewise, if you are asked to review your experiences at a restaurant, even if you have visit that restaurant for decades, your most recent experience at that venue will have the most weight.

Here’s how this can damage you: In the midst of a recession, it seems like the stock market keeps getting lower. All we see is bad news like financial scandals and corruption. We forget that over the long term, the stock market has been the best way to grow your money. So we abandon the stock market and miss out on those gains when the economy rebounds.

Confirmation bias

There are certain things we want to believe. Several years ago, a friend told me that “real estate always goes up.” There’s the recency effect again. Also, to believe that any investment can’t fail, we must ignore information that does not fit in with that philosophy. We seek out the studies or opinions that match our own as we look for confirmation.

Here’s how this can damage you: If you are looking to buy a house, it would be smart to look for reasons that the purchase will be financially sound over the long term. You will cite the usual positive aspects of home purchasing, including the fact that it’s an asset likely to appreciate and you receive a small tax break on mortgage interest, but you’ll likely ignore the fact that you’re likely to move out of the house before buying gains its advantage over renting.

Losing money is painful

The brain reacts to losing money the same way it reacts to pain. As pain is something we are built to avoid, we also try to avoid any potential for losing money. On the surface, this sounds like it would be a good thing, producing decisions that are more likely to side with gaining rather than losing. What really happens is that if we are presented with a situation where we have an even chance of winning $150 or losing $100, we won’t take the chance.

Here’s how this can damage you: The fear of losing money and experiencing the associated pain will keep us from taking risks. For people invested in the stock market, the pain experienced when reading those quarterly statements with negative returns causes many to sell at the wrong moment. They’ll miss out on the market’s rebound. While the stock market has a great track record over long periods of time, if you’re only invested when the market is decreasing, your performance will never match the stock market.

Want more? Here’s a list of cognitive biases. Just about everything pertains to financial decisions in some manner.

Photo credit: Martin Pettitt

The original version of this article, Investor Psychology: Why We Fail to Make Good Financial Decisions, is copyrighted by Consumerism Commentary.

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This is a guest article by Well-Heeled, creator of the blog Well-Heeled, With a Mission. If you enjoy this article, subscribe to her blog using her RSS feed.

Last week, boyfriend picked me up at my apartment. I dressed up in a red dress and put on sparkly earrings. We went to one of my favorite restaurants and ate by candlelight. It was a lovely night and romantic night, but is it wrong to say that boyfriend paying definitely upped the romance factor?

Maybe I’ve been “socialized,” (oh society and its expectations about the financial aspect of love and dating) but there’s something inherently more romantic when the man pays for dinner than when the couple goes splits on the bill. At first, I felt slightly guilty about that. After all, why should the man paying be more romantic?

I’ve been raised to be a financially independent woman. I read a lot of history and nonfiction books that discuss the intersection of love, money, and power. Maybe that’s why when I was in high school, I was always uncomfortable with guys — even friends — treating me to dinner. As I’ve grown older, though, I’ve realized that sometimes, I should just stop analyzing everything.

Boyfriend and I take turns paying for things or we split it down the middle. I think it all evens out at the end. But last evening was a real, old-fashioned date. And, according to real, old-fashioned romance protocol, he opened the door, pulled out my chair, and paid for the dinner.

Most of my girlfriends agree with me: The first date, the guy pays. The dates after that, couples will take turns paying or split the check. Or perhaps, one party will pick up the check for the dinner and the other will pay for the movie tickets. Whatever the arrangement, I’ve discovered that the most important thing is that neither side feels like they’re mooching or taken advantage of. And if boyfriend paying for a special dinner makes the night seem more special, well, I suppose I don’t have to beat myself up for it.

I’m not giving up my “independent woman” card. I can support myself, yes, but I hope I’m never so independent that I can’t let a little romance in my life.

The original version of this article, Men Paying for Dinner: Is It More Romantic?, is copyrighted by Consumerism Commentary.

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This is a guest article by The Weakonomist, an anonymous blogger responsible for everything at Weakonomics.com. As a banking insider he’s witnessed the economic implosion from inside the bubble. You can usually find him at the corner of Wall Street and Main Street throwing rocks at traffic.

My retirement accounts have dropped as hard as any index, I’ve watched friends and loved ones lose jobs (and fear for my own), you can’t go through 30 minutes of news without a sad story about someone losing their home. You can’t trust your government, you can’t trust Wall Street, some can’t even trust their own families with money anymore. We have no money, no way to make more money, and no end in sight to this vicious cycle. All of this is a result of the worst recession since the Great Depression, but none of the above is the worst thing we’ve lost.

As much as I pretend to be an amateur economist, I’m just as much an amateur psychologist. I’m a student of behavioral economics. And our economy has taken its worst blow in the form of self-esteem. More powerful than the loss of trillions in wealth and more devastating than losing your home is the long term effect these events have on your state of mind. It’s important not to get caught in this trap as it can hinder you from getting back on your feet. Let’s look at three examples of how you might get damaged:

The Terrified – Knowing the rules for retirement saving, our friend here diligently saved 15% of his income for retirement. After 10 years of saving he is basically no better off than before because the markets are so down. Distraught, he loses faith in the market’s ability to fund his retirement. He won’t put any more money into stocks and mutual funds because he’s afraid of losing it.

The Failure – This guy has worked hard his entire life. He never made a ton of money but was able to finally buy a house in 2004. He lost his job and then lost his house. Saddled with the guilt of letting his entire family down, he has lost the will to pursue the American Dream.

The Worthless – School never came easy to this guy, but he worked hard and got all the way through college. Having been told all his life that a college degree will help in his career, he graduated only to find there are no jobs to be had. He feels there is something wrong with him. Despite his desire to contribute positively to society, he instead sees a world that doesn’t want him.

These three guys have the same thing in common, they followed the rules, they played the game, and they lost. Due to factors they couldn’t control their self-esteem and faith in the system is tarnished. If you’ve seen the effects of depression first-hand you know exactly how bad this can be.

But all hope is not lost for these folks. They need to get back on their feet and find ways to get over this slump. It will do no good for them to try and convince themselves it’s not their fault and they couldn’t have stopped it, the human mind is too stubborn to accept that. Instead they must trick their own consciousness into feeling good again.

Our Terrified friend must forget about the past. Rule number one of the investment rules he learned was that past performance is no indicator of the future. That goes for the good years and the bad years. Don’t pull out of the market, because if the month of March has taught us anything it’s that the best returns come right after the worst ones.

The Failure has forgotten what the American Dream is all about. Half of the dream of success is failure. You can’t completely win at something until you’ve lost. It’s true some people hit a stroke of luck and it makes it look easier, but if you give up on a dream because of a setback then you aren’t working hard enough for it. The only way not to feel like a failure after a loss is to turn that loss into a lesson and then create success.

Finally, Worthless can look into new methods of adding value to this world. If you’re out of work or hate your job, volunteer. Making your resources available to a cause without an expectation of being compensated is perhaps the greatest value offered to the world. It fills whitespace on a resume, makes you a few friends, and most importantly makes you feel needed.

Just as a recession can be a vicious cycle of layoffs, deflation, and negative market returns, your mental health in this environment can be a downward spiral of pessimism, depression, and fear. However identifying these feelings is the first step towards recovery, just like an economist identifies the weakest points in the world of commerce. Be proactive; help yourself and help others stem these emotions and we’ll all work faster towards recovery.

The original version of this article, The Greatest Loss of This Recession, is copyrighted by Consumerism Commentary.

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About the author: This is a guest article by Dr. Bonnie Eaker Weil. Dr. Bonnie was named by New York Magazine as one of the city’s top therapists. Her most recent book, Financial Infidelity, was released in paperback edition on March 31.

Whether or not you’re specifically struggling with money in your relationship, one thing can’t be denied: it’s a hot-button issue, and one that most people can use a bit of help with. One of the best and biggest things I believe a couple can do is construct what I call a “Money Gram” — or a money family tree. This helps couples to understand each other’s attitudes, fears, beliefs and patterns in both families’ money histories. It’ll help give you a heads-up on what could produce potential conflict, or explain why you’ve been having trouble in certain areas.

You need to ask yourselves such important questions as:

• “How was money handled in my family?”
• “Was I aware of any financial troubles as a kid?”
• “How did this affect my view of money?”
• “Was money used as punishment or reward?”
• “How has this influences my finances as an adult?”

These are some topics to get you started — I discuss many more in Financial Infidelity -– and you should have no trouble coming up with more on your own, once you get started! You may know the answers to these questions for yourself, but knowing your partner’s answers as well is almost equally as important if you’re going to move on from a power struggle that often exists around love and finances.

Then, integrate this with what I call “the money love language” — which I teach in Make Up, Don’t Breakup — i.e. giving each other a safe place to be honest about your fears (both financial and otherwise) and using a communication style that affirms where each person is coming from. By doing this, you can slowly begin to erode the stigma that money often creates. It’s absolutely crucial that this stigma be done away with in an intimate relationship, if that relationship wants to move forward. Often couples mistake a lack of communication about finances for a lack of compatibility, but integrating a few of these tasks and dialogues can prove that’s not true!

Another important tip in the compatibility of a relationship is to make sure you fight fair. Have a ten minute heart-to-heart weekly with a figurative emotional “bullet proof vest” to protect from hurt, anger and defensiveness, as you listen and echo back what you heard. It is essential to walk in your partner’s shoes rather than trying to be right. Instead of shame and blame you should give three solutions, and your partner has to pick at least one. Fighting fairly creates the tension that gives you passion and makes you feel safe.

If you enjoyed this article, please visit Dr. Bonnie Eaker Weil’s blog. You can also subscribe to the blog’s RSS feed. We would appreciate your comments and reactions, so if you would like to contribute to the discussion, add your comment below.

The original version of this article, Knowing Your Financial History is Crucial to Your Future, is copyrighted by Consumerism Commentary.

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About the author: This is a guest article by Matt Wallaert, a behavioral psychologist and the Lead Scientist at Thrive, a free financial advisory website that helps people organize their finances and plan for the future with personalized feedback from its behavioral advisory engine.

I’m an owner. While I rent an apartment in New York City (the average apartment in Manhattan is worth $1.5 million; I won’t be buying soon), I’ve never leased a car or rented my furnishings because, generally speaking, I simply prefer to own than to buy.

But with the mortgage meltdown and the recent issues surrounding overconsumption, home ownership is becoming an active question, rather than the default standard. Rebecca Tuhus-Dubrow wrote a piece for The Boston Globe recently summarizing the debate and the angle was clear: homeownership needs rethinking, and is probably dramatically less good than we think it is.

I liked the article and a number of interesting academics weighed in to contribute, but the focus was on the social impacts of owning, rather than the personal ones, and I think that misses a key part of the equation. How we feel about owning versus renting, and how it changes our behavior, is worth exploring, particularly as owning wins in some unusual ways.

I should be clear that I’m not trying to argue that owning a home is intrinsically better than renting an apartment. As Tuhus-Dubrow points out, many of the disadvantages of a home rental are due to inadequate legal protections, rather than the actual rental procedure itself. Instead, my concern is with the psychological consequences of owning versus renting in general, whether it is an apartment, or a car, or a computer. I’m going to talk about apartments, just because they make a handy example, but feel free to insert “leased car” if it makes you happy.

Consider the typical renting New Yorker in their mid-20s. Few would argue that looking for an apartment is pleasant, and most would label it down around the 5th or 6th circle of hell. You have to find a place you can afford, that you like, that accommodates your lifestyle, that is in the right location, and is decently hard to do, given the actual raw number of rentals available in any given area.

Assuming you manage to actually find a place you like, you then have to actually get it, which can be harder than it sounds when people are going on and off the market at lightning speed. Renters live in a constant state of indecision: should I put a deposit down on this place now? If I take two minutes to talk myself into believing that it is the perfect place for me, will it be snatched away, leaving me with only the certainty that it was the best of all worlds and now I can never have it? Few people enjoy the process and fewer still come out feeling “happy,” and it is no wonder: a home is supposed to make you feel permanent, not dissatisfied.

And yet renters go through the process again and again, year after year. For many, it isn’t a choice: as Tuhus-Dubrow points out, renters don’t enjoy all that many legal protections and many of them get priced out or forced out of their housing, throwing them back onto the market. But even for those that could stay, many of them don’t because of the torture of knowing that you could have something different. Because you can move, you want to – knowing that other options are out there, it is part of our personal psyche and our national culture to want to explore them.

The problem is that psychologists have shown fairly conclusively that this type of comparison is almost certain to make you unhappy. The more options there are to consider, the more time you spend thinking about them, the more difficult the decision, and the more regret you feel when you actually pick one. And renting means always having options: there is always another apartment you could easily take, another car you could easily drive.

Owning alleviates this problem. While you can still compare your home to others (and many people do move several times over the course of their lives), increasing your attachment an object makes it harder to let go of and increases its value in your mind. Psychologists call it the endowment effect and it breaks down simply: there is value to feeling like something is “yours.” And while we can certainly think of our apartments as part of our domain in a psychological way, there are plenty of reminders in daily life that we don’t own them and never will.

And it isn’t just mental. The psychological value of owning translates to real value in your interactions, as almost anyone that has ever rented something intrinsically knows. You scratch the floor and don’t feel particularly bad or try to get it fixed (unless motivated by worry about your damage deposit). You beat the hell out of a computer until the lease runs out and you get a new one. No one puts premium gas in a rental car.

A home is a decision you don’t have to make again, or at least not for awhile. And there is value, sometimes, in less: less comparison, fewer decisions, less movement. Even as renting and leasing allow us to maintain our flexibility, they demand that we give up any number of psychological benefits. Sometimes it is a good trade, but more often than not, our instinct towards ownership is probably a decent one. Especially when it lets us save our time and energy for the decisions that matter; less “where will I live tomorrow?” and more “what will I do today?”.

If you enjoyed this article, please visit Thrive and Thrive’s blog, Good to Grow. You can also subscribe to the blog’s RSS feed. We would appreciate your comments and reactions, so if you would like to contribute to the discussion, add your comment below.

The original version of this article, A Home of My Own: Why We Buy, is copyrighted by Consumerism Commentary.

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Human beings aren’t logical, and it doesn’t take a scientist from Vulcan to prove that fact. A corollary to this statement is that human beings do not make logical decisions when it comes to their personal finances. Consider some things that could happen if people thought about the financial consequences of every choice:

• People would save a greater portion of their income, creating havoc for retailers.
• Consumers would buy only what they need, destroying the market for luxury items.
• The Joneses wouldn’t have anyone following them and might die of loneliness.
• Families would not have children, savings hundreds of thousands of dollars.
• Environmentally conscious options more expensive than the alternatives will not be pursued, causing the planet to eventually perish (sooner than otherwise).

Thankfully, people do not base all decisions on financial rationality alone, and thus our economy, species and planet continue to survive and thrive, although the economy has been taking a beating recently. Emotions and money are linked, but there are some instances when an individual will be better off by separating the two as much as possible.

Investing during a highly-volatile market. Your asset allocation should relate to your time horizon, not react to the current hype in the news. If you had decided that you could withstand short-term market plunges with the goal of a long-term gain through stock market investing, don’t let fear and panic dictate changes when the market dives.

Evaluating products and services. Advertising and marketing are important. This is how a company gets information about its products and services to the public. Every year, the advertising industry advances further, using scientific research that explains how emotions are tied to everyday decision making.

The commercials that you see on television are developed specifically to influence shopping decisions. Even non-profit organizations use your emotions to their advantage; how many times do you see commercials for charities using videos of children who appear to be malnourished and obviously in need of help?

Chances are we’re being marketed to in ways we are unaware. Product placement in television programs in passé, now even presidential candidates are advertising in video games. This is a game the consumer can usually not win. Thankfully there are resources that help us see through the marketing noise, such as Consumer Reports, Charity Navigator, and GuideStar.

Getting out of debt. If you’re in debt, there’s a chance that your emotions led you there. While it’s true that many people are in insurmountable debt due to circumstances beyond control like a medical emergency or a natural disaster, a good portion of people are in debt because they enjoy spending money without thinking about or understanding the financial circumstances.

Some authors and radio show hosts want to have these people get out of credit card debt by playing to their emotions, the cause of debt in the first place. This only solves a short-term symptom, the debt, rather tan the underlying problem, spending decisions based on emotion. It is likely that someone who lets their emotions control their spending as well as their path to reduce their debt will fall back into debt later on. This is why I suggest the “Debt Avalanche” method of getting out of debt. It helps separate emotions from your decisions, a pattern than will help keep you out of debt once you reach that point.

Purchasing a house. I wrote recently about ten tips for buying a house in any market. Ron from The Wisdom Journal wrote in with this comment: “One thing I would add, and it’s very difficult to do, but try to take emotion out of the buying process and especially the negotiation process. Emotions can cause you to pay too much and make a decision that you’ll later regret.”

You want to live in a house that you will like, preferably for a long time. That has to be a part of your decision making process. If you plan in spending a lot of time with this major purchase, it should very well be with a product that makes you happy. The danger comes in the belief that that particular house may be the only one for you. You might fall in love at first sight with your soul mate, but a house is just a house. Don’t get so caught up that you feel you must have the house at any cost and be willing to pay any price to get it.

A better understanding of how your emotions are involved with money is a key to overcoming the influence for certain important decisions as much as possible. Here are a few articles that could help.

When It Comes to Money, Emotions Run High, Psychology Today. “Despite our best efforts, economic decisions can be influenced by emotion. Researchers offer a neurological explanation: The part of the brain that controls negative thinking can often override logical thought…”

The Psychology of Money (series), PsyBlog. “Until recently social scientists didn’t know much about the psychology of money. That has changed with an explosion of fascinating findings on how it affects our emotions, our personalities, our sexual behaviour, our risk-taking and society at large…”

How to Treat a “Money Disorder”, Sarah Kershaw, The New York Times. “Among the problem financial behaviors identified by psychologists in recent years are: overspending, underspending (aka Depression mentality), serial borrowing, financial infidelity (“cheating” on a spouse by spending and lying about it), workaholism, financial incest (lording money over relatives to control them), financial enabling (throwing large sums at, say, adult children who then are not motivated to support themselves), hoarding, and plenty of guilt and shame around poverty and wealth…”

Emotions are intricately linked with the financial decision making process, and are in fact necessary to make the correct choices in many situations. Even a small effort to put feelings aside in certain circumstances and think rationally could go a long way towards improving the quality of those decisions.

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I don’t want to belittle the condition of the economy currently. Someone who is close to retirement may have just lost a significant portion of their intended source of income if invested solely in stocks. If you listen to the media and politicians, you might get the impression that the American public is “freaking out” about their money right now and experiencing the downstream effects of high anxiety.

The Today Show’s Dr. Gail Saltz, a psychiatrist, recently appeared on this show and claimed that stress due to money has increased “hundredfold.” The video clip also describes people’s current attitudes as a “state of panic” and “intense fear.”

Dr. Saltz admits that “watching the media constantly is a terrible idea, like being stuck with needles.” That’s a great comment to hear on a popular television show. She also says that more people now will be seeking professional help for their anxiety due to the economic downturn.

I haven’t seen much evidence of panic in my daily interactions, other than what I hear on the radio from politicians. Long term prospects are likely to still be good. I can imagine that panic might set in when someone has their entire portfolio investments tied up in companies that failed or someone set to retire and rely on investment income, but that should serve as a reminder to have an asset allocation appropriate for your needs and reduce exposure to risky investments like stocks when you are relying on the money being available.

Are you panicking or anxious about money right now? Is your financial situation affecting other aspects of your life? Also, do you think the media are accurately portraying people’s attitudes? Share your thoughts, anonymously if you like.

If you want to watch the Today Show clip, it’s available inside this article. RSS readers, please view this article on Consumerism Commentary to view the video.

Again, today’s questions: Are you panicking or anxious about money right now? Is your financial situation affecting other aspects of your life? Also, do you think the media are accurately portraying people’s attitudes?

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One of my favorite musical “acts” is Blue Man Group. The Blue Man Group explores, with primitively modern musical instruments, society, detachment, and collectivism. You may remember them from Intel’s old Pentium commercials. You may also remember them from the television show Arrested Development, in which the character Tobias, played by David Cross, auditioned for the show and failed, later declaring, “I blue myself.” Blue Man Group has shows in New York City, Boston, Las Vegas, and a few other cities, as well as a touring rock show, with each show similar but not identical to the others.

I recently picked up the latest Blue Man Group CD and DVD combination package, How to Be a Megastar! and watched the program. It includes fantastic music and visual performances as I expected, but I am equally intrigued by the special features, including a documentary-style interview with the creators of Blue Man Group, Phil Stanton, Chris Wink, and Matt Goldman.

When originally devising the concept of the Blue Man, the creators struggled at first. These three percussionists, who were working day-jobs as caterers in New York City, were ready to abandon their vision. At the right time, they received a sign. While watching television, they came across an interview with an expert on religion and philosophy. In this interview, the expert was asked to summarize the prevailing philosophical thought across the world, to which he answered: “Follow your bliss.”

Stanton, Wink and Goldman then knew that despite their difficulties, they must continue to create their vision through completion, even if success would never come. Thankfully for them, success did come, and Blue Man Group is now a cultural phenomenon. But the interview made me think about this particular philosophical idea.

First of all, what is “bliss?” Wordnet defines the word’s most common sense: a state of extreme happiness. The true path is the path that leads you towards a state of extreme happiness. In fact, in the interview, the creators of Blue Man Group went on to say that the journey is more important than the destination.

Am I following my bliss? I’m not sure. There was a time when I thought I had my life planned out, but year by year, I allowed this path to change. I’m now quite far from what I thought I would be doing with my life by this point, the age of 32. My job is fine, but it’s not intellectually, emotionally, or artistically stimulating. I like writing for Consumerism Commentary, but I’m not a particularly good writer. I enjoy building online communities, and that may be my personal strength for the moment, but is it my “bliss?”

Who should follow this advice, to follow one’s bliss? Perhaps not everyone has the luxury of doing so. The world needs janitors, truck drivers, bus boys, and others who perform thankless jobs — the jobs children often don’t think of when they are asked what they’d like to be when they grow up. But then again, are we sure that these individuals are not following their bliss? Perhaps their “extreme happiness” is satisfied simply by providing for their family in any manner possible.

In the case of the creators of the Blue Man Group, they needed to complete their project before they could be satisfied. With success, it seems their project may never be complete; shows are revised, new tours are initiated, and new audiences are born constantly.

After leaving the arts world, I thought my goal would be to volunteer for causes about which I feel strongly or become a to philanthropist as much as my budget allows. It seems I may be too picky to do so at the level at which I would be making a difference, and in some cases, to do so at all. Even though the organization closest to meeting my requirements is strongly involved in the activity I wish to support, having been close to that organization with intimate knowledge of its administration, I’d prefer not to do business with them. Unfortunately, no other organization is similar.

Do you follow your bliss?

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When I first read The Millionaire Next Door by Thomas Stanley and William Danko, it didn’t inspire me. It’s not that I disagreed with the authors, but I found the book uninteresting. It was one of the first financial books I read after beginning Consumerism Commentary, and it came highly recommended from readers here and participants in The Motley Fool‘s community.

Without getting too much into my problems with the book, I will say that the idea that a “millionaire” is more likely to be your local business owner rather than someone born into a family of money was new to me.

Recently, PNC Wealth Management conducted a survey of people with more than $500,000 free to invest as they like, a fair definition of “wealthy,” and possibly “millionaire” once you begin including home equity and other assets. Only 6% of those surveyed earned their money from inheritance alone. 69% earned their wealth mostly by trading time and effort for money, or by “working.”

Here are some interesting statistics I pulled from an article discussing the survey results.

• 36% of earners and 27% of heirs are concerned about an economic recession.
• 77% of earners and 67% of heirs believe they have a lot of control of their financial future.
• 39% of earners and 21% of heirs are moderate or risky investors.
• 75% of earners and 50% of heirs have less stress thanks to their wealth.
• 51% of earners and 33% of heirs believe their wealth has led to increases of happiness.
• Heirs are twice as likely to believe that their wealth causes more problems that it solves.
• 37% of earners and 25% of heirs believe that luck played a major role in their financial success.

For me, the choice is clear. There is only one option if I want to find myself with $500,000 of investible assets: earn rather than inherit.

[Yahoo Finance, MarketWatch: Earnings Growth]

The original version of this article, Most Wealthy Individuals Earned, Not Inherited, Their Wealth, is copyrighted by Consumerism Commentary.

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Recently, I wrote about Jung Typology and Finance, looking at the first of four dimensions used by psychologists and career coaches for categorizing personality preferences. Introverts and Extraverts draw their energy from individual or group activity, and that difference can have an interesting effect on opinions and behavior with regard to money.

The second dimension in the Myers-Briggs version of this personality typology pertains to information gathering. People who take the test are categorized along a dimension whose extremes are “Sensing” (S) or “Intuition” (N). Wikipedia provides a good layman’s definition of this aspect:

Individuals with a preference for sensing prefer to trust information that is in the present, tangible and concrete: that is, information that can be understood by the five senses. They tend to distrust hunches that seem to come out of nowhere. They prefer to look for detail and facts. For them, the meaning is in the data. On the other hand, those with a preference for intuition tend to trust information that is more abstract or theoretical, that can be associated with other information (either remembered or discovered by seeking a wider context or pattern). They may be more interested in future possibilities. They tend to trust those flashes of insight that seem to bubble up from the unconscious mind. The meaning is in how the data relates to the pattern or theory.

The first thing that pops into my mind is stock analysis. While everyone who analyzes stocks looks for facts, I think those on opposite sides of this spectrum will have a different approach. The Sensing individuals might look at a company’s underlying strengths and weaknesses, identifiable in annual reports, for example. On the other hand, those who gather information via Intuition might be more prone to looking for patterns inherent in performance. Both approaches are highly technical.

Perhaps you’ve heard of the Elliott wave principle. This is a method of predicting market trends based on patterns on historical up-and-down movement. The tricks with this principle is that it’s hard to know where you are in any particular “wave.” Someone with an Intuitive personality might be drawn to this type of analysis.

If you’ve read personal finance books, you’ve probably noticed how authors try to reach both types of personality. Often, a particular lesson begins with a story, illustrating a positive or negative approach. The story is usually light on details, but Intuitive people might be able to relate to the story and understand the point the author is attempting to make. If the author is smart, he or she will continue by supporting the story with details and facts that support the conclusion.

When either approach is missing, either half the audience will be bored or the other half will be mistrusting. It’s possible that Robert Kiyosaki’s “Rich Dad” series falls into this category. The books are strong on story and emotion, perhaps drawing in the Intuitive audience. Yet, the books are short on actionable details, frustrating those, perhaps Sensing individuals, who look for facts and hard data.

Who would be better at managing their own finances, the Sensing or Intuitive individual? I think the Sensing individual should be trusted with managing the family’s finances above the Intuitive individual. The type of analysis required, including net worth, expense reports, and budgets, involve the hard data favorable to Sensing individuals.

The original version of this article, Jung Typology and Finance: Sensing vs. Intuition, is copyrighted by Consumerism Commentary.

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One of the most popular personality measurement systems is the “Jung Typology” test, also known as the Myers-Briggs Type Indicator (MTBI) test. These are popular in Psychology 101 college courses and corporate management seminars. The object of this test is to quantify an individual’s personality along four separate dimensions. Each dimension has two options on either end of the spectrum, and most tests provide a measurement of strength in either direction. This results in 16 separate personality types, with additional nuances due to the strength in the pull of either direction.

If you’re interested in determining your personality type, there is a free test at HumanMetrics.com. The test involves a series of questions designed to determine the root of your motivation. The results are best when the questions are answered quickly at face value, without thinking about choosing the “correct” response.

The first of the four personality aspects measures introversion vs. extraversion. Don’t think of this as whether you’re a loner or a social butterfly; the category has more to do with how you draw your energy. This is from the Wikipedia entry:

People with a preference for Extraversion draw energy from action: they tend to act, then reflect, then act further. If they are inactive, their level of energy and motivation tends to decline. Conversely, those whose preference is Introversion become less energized as they act: they prefer to reflect, then act, then reflect again. People with Introversion preferences need time out to reflect in order to rebuild energy. The Introvert’s flow is directed inward toward concepts and ideas and the Extravert’s is directed outward towards people and objects. There are several contrasting characteristics between Extraverts and Introverts: Extraverts desire breadth and are action-oriented, while introverts seek depth and are self-oriented.

Taking a financial viewpoint, which side of this spectrum is better for personal finance? Here are some thoughts.

Introverts may be more inclined to create budgets and analyze progress over time. The “reflect-act-reflect” method can be interpreted as “budget-spend-evaluate.” Introversion can manifest itself in the way an individual sets goals. Do the goals use internal metrics, like a competition with oneself, or do they focus more on parity with the surrounding culture or community? The latter may be the approach taken by an Extravert.

Extraverts thrive on the energy they derive from being around other people, and as a result, may have a more finely honed ability to use “small talk” and network with other people in larger settings. That could lead to better job opportunities and more money in the workplace. However, 40% of CEOs are Introverts or “closet Introverts.” They’ve learned how to act like Extraverts when necessary while retaining their own personality features.

In The Psychology of Money, the author, Adrian Furnham, cites a 1984 study.

[The study] found that extraverts tended to be more extravagant and less stingy than introverts. People with strong feelings of control over their money reported less general anxiety and tended to be more extroverted.

Managing personal money is a skill that is best tended by the introspective nature of an Introvert. While Extraverts can certainly handle the responsibilities just as well, if defined by their personality type, Extraverts will find introspection draining. Does this mean that Introverts tend to be better money managers?

Not all successful CEOs are extroverts [USA Today]

The original version of this article, Jung Typology and Finance: Introversion vs. Extraversion, is copyrighted by Consumerism Commentary.

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I found this in my spam e-mail box today. It’s not spam, it’s marketing from Charles Schwab. The message is interesting enough for me to post because it brings up a nuanced topic: personality categorization. When the media invokes the term “Generation X,” they’re referring to a certain age group in which everyone has enough in common with everyone else to justify generalizations.

According to Wikipedia’s entry on Generation X, this particular group of individuals invoke the descriptions of “apathetic, cynical, disaffected, streetwise loners and slackers.” The entry goes on: “Generation X was generally marked early on by its lack of optimism for the future, nihilism, cynicism, skepticism, alienation and distrust in traditional values and institutions.” The outlook doesn’t seem very positive.

The Charles Schwab study doesn’t attempt to group all of Generation X into one category. They managed to find six separate groups pertaining to attitudes towards life and money. Here’s what they found. I left out some of supporting statistics, but they are interesting

Money Mindset One: Paycheck to Paychecks. By far the largest group representing 25 percent of Gen Xers, members of this predominately female group are extremely stressed about their personal and professional lives. They are less confident than any other group about having a bright future, and are twice as likely to be unsettled and pessimistic about their financial situations.

Money Mindset Two: Spend Now, Pay Laters. Seventeen percent of Gen Xers fall into this category of predominately city dwellers that tend to be optimistic, yet somewhat unrealistic about their futures. Overwhelmingly male (77 percent), this group is incurring significant debt, and believes that Social Security will be there for them when they retire.

Money Mindset Three: Confident and Risk-Tolerants. Representing 15 percent of the overall Gen X population, members of this group have high incomes, active lifestyles and high levels of engagement in their financial future. They are more likely to be married, and believe that by taking risks they can reach lofty financial and lifestyle goals.

Money Mindset Four: No Money, No Worries. This group represents 15 percent of the Gen X population. They are at the bottom of the earnings spectrum yet are very optimistic about life. They are more likely to be single, consider investing risky, and have the fewest number of credit cards. This group also has very little trust in financial firms or advisors.

Money Mindset Five: Cautious Savers. Approximately 14 percent of the Gen X population, this group tends to be financially conservative and concerned about money, highly educated and financially secure, yet is late to adopt new products. They are also more likely focused on home and family than they are on having active social lives.

Money Mindset Six: Overwhelmed but Optimistics. Predominately female, these Gen Xers have significant debt, adjustable rate mortgages, and high rates of financially-induced irritability or anxiety. Despite this, they manage to stay positive about their futures. This group represents 13 percent of the Gen X population.

Six categories are better than one. I think they’ve managed to capture all attitudes, but it would be more interesting to compare the findings with categorizations of different age groups. Is Generation Y different?

Image credit: aaronmerrell
Supremely Confident to Super Stressed: Landmark Gen X Study From Schwab Uncovers Six Distinct Financial Mindsets [Charles Schwab]

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If you earn more than $100,000 a year, you are more likely to apologize for your own errors than you would be if you earn less. According to Fortune Magazine’s report of a Zogby survey:

More than nine out of ten (92%) of $100,000+ earners apologize when they believe they’re to blame, compared to 89% of people earning between $75,000 and $100,000, 84% of those who make $50,000 to $75,000, 72% of those earning between $35,000 and $50,000, and 76% of people earning between $25,000 and $35,000. Among survey respondents who make $25,000 or less, just 52% say they usually apologize when they know they’re at fault.

Should you practice apologizing if your goal is to earn a six-figure income? Well, correlation doesn’t imply causation, but some of the reasons one might be more willing to apologize may be the same reasons one is inclined towards a higher salary.

Why do you think those with higher income apologize more than others? I think the ability to admit fault is a strong management and interpersonal relationship trait, one that helps lead an individual to a position of responsibility in the workplace. Perhaps there are other reasons as well.

By the way, those earning over $100,000 are also more likely to say they’re sorry even when they know they are not at fault, as well.

Want a Higher Paycheck? Say You’re Sorry [Fortune Magazine]

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The California Institute of Technology is undertaking a study in neuroeconomics, and it has to be one of the most interesting things I’ve come across in the realm of finance in the past few years.

The researchers are undertaking experiments in which they measure reactions in the brains of individuals [WSJ] who must decide to distribute food to starving children equally, or allow some children to receive more food for the benefit of the entire community.

Of course, no children are actually affected by these experiments, but the subjects don’t know that.

To trigger the brain behavior, the 26 volunteers had to believe their decisions really would affect orphans being denied their seat at a groaning board of plenty where others feasted. So, the experimenters made them all study a 10-page brochure with pictures of 60 orphans. In 36 rounds of testing, each subject had 10 seconds to choose the lesser of two evils: Allow some children to keep more than their fair share of meals or take away their food to eliminate inequity.

I never really looked into the field of neuroeconomics before, but I’ve been finding it fascinating.

In the New York Times last year, an article focused on research to determine why investors do what they do. These researchers discovered that people are more likely to take a foolish financial risk when their brains are in a “positive arousal state.”

But when people think about costs, they use different brain modules and become more anxious. They play it too safe, at least in the laboratory. Furthermore, people are especially afraid of ambiguous risks with unknown odds. This may help explain why so many investors are reluctant to seek out foreign stock markets, even when they could diversify their portfolios at low cost.

Marketers must already understand this to an extent. People are more likely to buy a product when they are thinking about the potential benefits of the purchase and when their minds are immersend in positive thought. The costs, like fees, are in the fine print or otherwise hidden for view, and the hooks are set in large type and are shouted from the front of the seminar floor.

If you like research, here are several of the studies taking place at The Center for the Study of Neuroeconomics at George Mason University:

Call Auction Experiments. In a call auction participants indicate their willingness to buy or sell units of a good by placing an order to buy or sell some number of units at their buying or selling price…

How People Trade. We take the view that the ability to trade is an evolutionary adaptation to social environments. Using language, theory of mind, and reciprocity, people succeed in forming trading partners with little institutional support.

At the Stanford Neuroeconomics Lab:

* Neural basis of financial decision making
* Reward dynamics
* Neural basis of experienced reward
* Neuroeconomics of giving

For another interesting take on neuroeconomics, read Mind Games, an article from The New Yorker.

Image credit: Gaetan Lee

The original version of this article, Fairness and The Brain (and Other Neuroeconomic Studies), is copyrighted by Consumerism Commentary.

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Yesterday, I received a question from a reader, Lindsey. I’m not much of a fan of giving advice; there are professionals out there whose job is to provide sound financial advice. All I can offer is my opinion. Here is Lindsey’s question.

What should you do if you and your partner decide to combine finances (checking accounts, credit cards, leases, etc.), but you, in the past, have had very different personal finance personalities? I meticulously keep track of all my expenditures and income in a budget spreadsheet, I save all my receipts to check against my statements, at any given moment I can probably tell you how much money is in my different accounts and how much money I have left to spend in a certain area each month (or for the year for more irregular expenditures). I have an emergency savings fund, a Roth IRA, and a 401(k) through my employer. He basically lives paycheck to paycheck, has no savings, does not keep track of where his money is going, and has very little credit (which can be worse than bad credit!).

What do you recommend? Is there a way to responsibly consolidate, or perhaps a happy medium?

First of all, I don’t think it has to be a problem for two people in a committed relationship to have two opposing personalities when it comes to money management. What’s really important is the goal. If two people agree on some basic principles, there is room for differences in habits. In a partnership, there are ways each individual keeps the other in check and offers compromises.

In fact, when it comes to money management, a relationship in which one is meticulous about record keeping and the other has differing interests can be just as strong as a relationship in which both individuals think exactly alike; in fact, the varied relationship can prove to be more interesting. You’ve obviously decided that this is the right relationship for you despite some disagreements about money, but finances can still be successfully combined.

Don’t go into the fusing of your finances with the intent on changing his philosophy. It’s true that he will have to be willing to compromise on some issues, but most likely, you will be leading the charge. In compromising, you may also have to be willing to loosen your grip, but just a little bit.

He’s living paycheck to paycheck, and you’re not. In his situation, will he be contributing to your combined accounts? As you merge your finances, if you also combine your bills, you might find that the two of you are able to contribute more evenly to savings or bill payments. However, you should consider contributing only as your means allow rather than aiming for equity. For a simplified example, rather than both of you contributing $500 to the mortgage each month, contribute 10% of your respective salaries towards that bill.

You partner may find that the ease on his financial obligations will allow him to contribute to savings and a 401(k). From what you mentioned about his philosophy about money, you may have to inspire him to find an interest in long-term saving.

His bad credit is another issue. You may find it difficult to purchase a house together, if that is one of your plans for the future. You will have to decide, assuming this is an option for you, if you want to save money by keeping a mortgage solely in your name. The other option is to share ownership but possibly qualify only for a higher-interest mortgage due to this credit. You’ll have to run the numbers — as the financially astute half of the couple, this will be your job — and once you’ve run the numbers, you’ll have to decide whether the decision should be based solely on those numbers or if there are other variables that come into play.

The broad answer is that consolidating your finances can be accomplished, but varying philosophies and major differences in income can make the transition difficult. The two of you have already decided to combine finances, so at least you are on the same page in that respect. Whether to combine your finances or not is not the issue; you are past that point. Here are some thoughts.

What are your goals? Are you looking towards retirement with each other? If so, then saving for retirement must be a priority for both of you. Do you plan on having children? The two of you may not be able to contribute equally towards these goals. Your investment actions, including asset allocation and risk tolerance, should support your goals.

Which accounts should be combined? Any accounts you pay bills from can be combined, with each contributing the amount or percentage of their income that you decide is fair together. Any savings accounts for future couple-related goals, like purchasing a house, can be combined. Do you want to keep separate accounts for some fun money? Some couples do this and use their fun money to “surprise” the other with gifts or spend on singular indulgences.

Who will manage the money? This seems pretty obvious in your case, as you are the one with the interest and the skill in money management. I’ve heard that it’s best when only one individual in the couple tends to the details, so this is one aspect where your differing philosophies may work in your favor. The money manager should keep the other periodically (and briefly) informed of the financial state of the union. Even with one money manager, major financial decisions should be discussed together.

Be prepared for sacrifices and compromises. That probably goes without saying, as any relationship requires this. Money tends to amplify the issue. How will you handle disagreements?

What are your obligations? Mortgages or rent, phone bills, cable, and insurance are only the start. Will you be expected to take care of an aging relative? Does your partner have outstanding student loan debt, or will you be supporting him through medical school?

Personally, the most combining I’ve done is a combined savings account with my girlfriend that hardly receives contributions and is used to pay for vacations or other experiences we share. For example, when we sold our old college textbooks on Amazon.com, all the proceeds went to this joint account. We used several hundred dollars from the account to pay for our recent vacation to Boston. This is the limit of my personal experience.

Readers: do you have any suggestions for Lindsey? She and her partner have already decided to combine their finances. How can they do so with the difference in situations and philosophies?

The original version of this article, Shared Money: Combining Finances With Your Partner, is copyrighted by Consumerism Commentary.

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Marshall Goldsmith is an executive coach who works mainly with entrepreneurs. He has identified five annoying habits that the best entrepreneurs share. The same personality that helps individual succeed also hinders the same individuals in certain social situations.

I’m not a fan of broad generalizations, so I wouldn’t say that all entrepreneurs act a certain way. Also, I wouldn’t say that these traits are only exhibited by successful entrepreneurs. Goldsmith made these observations, and maybe you know someone who fits some of these characteristics.

1. The competitive drive. Entrepreneurs constantly need to prove they are better than their competitors. Successful entrepreneurs are able to “toot their own horn without blowing it.” Competition is healty when it is a source of motivation, but there are some situations when it’s not socially acceptable.

Say you’ve had a hard day at work; you come home and your partner says, “I had a hard day today.” You say, “You had a hard day! You had a hard day! You wouldn’t believe the kind of day I had.” They’re so competitive that they have to prove they’re more miserable than the person they live with.

2. Shutting down others’ thoughts. Goldsmith explains this by describing how entrepreneurs will start sentences with “but,” “no,” or “however.” This basically is communicating, “You’re wrong and what I have to say is correct.”

“No,” “but,” or “however” means disregard everything that came before this word. Basically what you’re telling the person is shut up.

3. Adding too much value. An entrepreneur in a management position knows her business well — so well, that when suggestions are brought to this entrepreneur, she will improve it, making it her own. This has some consequences. From Goldsmith’s point of view:

The quality of the idea may go up 5 percent, but my commitment to its execution may go down 50 percent, because now it’s your idea, not mine. It’s hard for an entrepreneur to realize that the effectiveness of execution is a function of the quality of the idea times this human being’s commitment to make it work.

4. Playing favorites. This sounds like an overgeneralization, but Goldsmith says that entrepreneurs claim they don’t like suck-ups, yet they unknowingly or knowingly favor those who fit that description, and this allows the sucking-up to continue.

To avoid playing favorites, ask yourself four questions. First, how much do your employees actually like you? You don’t know how much they like you – it doesn’t matter. It’s how much you think they like you. Second, ask how much are they like me? Owners who are engineers are often guilty of this. They’ll say, “The employee may be a jerk, but that’s okay, because he’s one of us, he’s an engineer. “How much do they remind me of that ever so wonderful me? Third, how much do they contribute to our company, and fourth, how much personal recognition do I give them?

5. Obsession with goals. Goal setting, mapping out a path, and getting things done to achieve that goal is exactly what makes successful entrepreneurs successful. You pay for that obsession in personal relationships.

I worked with a guy on Wall Street who was clocking 80 hours a week, and he said he was doing it because he needed to make a lot of money. When I asked him why, he said that he’d been married three times, and “Do you know how much alimony I pay?” Then I asked, “Why have you been married three times?” He replied, “None of my wives understood how hard I had to work…” Entrepreneurs kill themselves, literally. They work themselves to death, they don’t get physical exams, their health goes straight to hell. For what? You have to find balance.

Looking back to You Call the Shots, by Cameron Johnson [my review], I see these traits in this example of a successful entrepreneur. I can see these traits in other successful individuals, regardless of whether they are entrepreneurs. There is social feedback at play.

Are there other traits that might be helpful to those wishing to succeed as entrepreneurs but detrimental when exhibited in social situations?

The original version of this article, 5 Annoying Habits of Entrepreneurs, is copyrighted by Consumerism Commentary.

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A recent study entitled The Psychological Consequences of Money shows that people with money on their mind are less likely to help others. Here’s the abstract:

Money has been said to change people’s motivation (mainly for the better) and their behavior toward others (mainly for the worse). The results of nine experiments suggest that money brings about a self-sufficient orientation in which people prefer to be free of dependency and dependents. Reminders of money, relative to nonmoney reminders, led to reduced requests for help and reduced helpfulness toward others. Relative to participants primed with neutral concepts, participants primed with money preferred to play alone, work alone, and put more physical distance between themselves and a new acquaintance.

An article on MSN Money describes how the study was performed at the University of Minnesota, Florida State University and the University of British Columbia.

Students and non-students involved in the study were split into two groups. The control group received neutral preconditioning while the experimental group participated in money-related activities. The two groups then participated in scenarios and the experimenters monitored their behavior.

In the final three experiments, money-prime participants placed more physical distance between themselves and a participant partner, preferred solitary to group leisure activities and more frequently chose to work alone rather than with a peer compared to the control participants.

If you’re reading this website, chances are you have money on the mind. Perhaps you think about money-related issues more than most people, especially if you are interested of taking control of your personal finances, like I am. If the study is accurate, that means you are less likely to work with other people, less likely to ask for help when needed, and less likely to help others in need when performing activities.

The original version of this article, Study: Money Makes People Mean, is copyrighted by Consumerism Commentary.

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Here are four more smart year-end money moves, according to Money Magazine. I only conditionally agreed with the first four, so let’s see how the magazine did with the remaining tips.

5. Set your sights clearly. They suggest deciding well in advance the destiny of any year-end bonuses. This will prevent splurging to some extent. In my company, we don’t receive our bonuses until February or March. The delay prevents me from using the money for holiday gifts. In the past, my bonus has gone to pay for regular expenses at my regular income’s shortcoming, but that probably won’t be the case this year.

6. Make some adjustments. Consult an accountant who can help you speed up or slow down tax payments or self employment income, or adjust your withholding for next year so you won’t have to later. Speaking of adjustments, it might also be a good time to take a look at your investment asset allocation. If one part of your investments performed very well or poorly, your allocation may be out of whack with your goals.

7. Play catch-up. The maximum 401(k) contribution for most people in 2007 is $15,500. I won’t hit that mark without a significant raise, but for people like us, Money suggests increasing contributions by a percentage point. I plan to hold my contribution steady at 12% of my income.

8. Have the talk. “In your life, there’s probably a difficult financial conversation that you’ve been meaning to have with a family member but haven’t gotten around to. Maybe it’s talking with your parents about their retirement finances or discussing long-term financial goals with your spouse.” Money believes the holidays are a good time to have this talk. I talked with my mom about her retirement over Thanksgiving, and that’s a topic for another day.

In general, these are good reminders from Money Magazine. A few tweaks here and there would help the set of tips apply to my life.

The original version of this article, Money Magazine: 8 Smart Year-End Moves, Part 2, is copyrighted by Consumerism Commentary.

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Before reading on, if you haven’t participated in this week’s giveaway, open up this article in a new window or tab and add your comments about asset allocation. You can win two interesting books just by leaving a comment.

Thanks to everyone who contributed to the discussion about who is to blame for poor money management skills that lead individuals, especially younger people, into debt and other financial problems. Do we blame the individual solely? The parents, school system, or government? Or does the fault reside with the “evil” credit card companies who use clever marketing?

Here are some of the thoughts presented by commenters. Broadway says:

I believe that any blame must be assigned equally to all parties. Attempting to point a finger at one entity and assigning all or most of the blame to it is what is wrong with society. There are no quick fixes or easy solutions. Society is complex… One solution that I believe will attack the cause(s) is to teach critical thinking skills early (and often) in our educational system.

S/100/30 says:

There’s a lot of discussion about how parents don’t teach their children “about money,” but I think the problem goes far beyond whether parents fail to explicitly discuss compounding interest with their children — the astounding number of parents who actively encourage their children to spend money foolishly on image.

MillionDollarCountdown takes responsibility:

From my point of view its personal responsibility. No one forces me to buy anything. Yes, I know there are advertisements and the peer pressure. But all said and done its me who pulled out the credit card.

Others say:

* “There is ONLY ONE THING TO BLAME (if you must call it that) and it is GREED!”
* “Maybe there really is nobody to blame. CC companies operate within the law… I think it’s the responsibility of parents and our educational system to do a better job of teaching people how to manage their finances.”
* “Yes, the CC companies are taking advantage of people that simply are not educated on the issue of personal finance. But is it really their responsibility to ensure that their customers do not abuse the credit they have?… I attended a top notch private college preparatory school… it is inexcusable that they never touched on the issue of personal finance. I think it should be mandatory.”
* “[U]nless we do something to change the sort of thinking that says new clothes are more important than a $0 balance, the debtors are going to outweigh the rest of us.”

Finally, here are my thoughts.

First of all, I loaded the discussion question by asking who is to blame, as if one entity could be the cause of everything that is wrong with society. Of course, that is not the case; there is a lot of stupidity out there. That’s a little harsh. Stupidity isn’t really the issue. Here is what I do see in my unscientific observations:

Step 1. Parents model behavior and attitudes towards materialism. Before kids are exposed to media and are able to comprehend messages from marketers, they watch their parents. They see their parents acquiring things before the children are old enough to understand the concept of money exchange. The message they learn: “Things make people happy, things are good.”

Step 2. Children develop the concept of desire based on what they see in their parents and in older siblings, playmates, etc. They see people having desire for things, and experiencing happiness when those things are received. They don’t always see that sometimes desire must go unfulfilled. Desire leads to acquiring things, which leads to pleasure.

Step 3. Thanks to the child’s environment, children attach the feeling of desire to the objects that appear to be the most desirable by others. Johnny has a T.M.X. Elmo, the toy is fun and Johnny is happy, therefore I want a T.M.X. Elmo so I can be happy (and attract the attention and envy of the social group and move up the ladder).

Step 4. Here’s Spongebob (and any children’s show designed to sell its own merchandise and sell ad space). Children, instead of playing with their friends, get pleasure from watching television. Most of television is designed to sell. Commercials depict kids expressing desire, receiving things, and being happy. Kids immediately relate to the characters in the commercials and know they will also be happy with the things being sold.

Interlude. At this stage, the parents can exert influence, if they choose to do so. It’s hard to compete with social groups and television, but if the parents model moderate materialism and delayed gratification, children may be more prone not to express frustration if they cannot have what they want. In the same vein, excessive spoling and catering to the children’s perceived desires may also damage the situation in the long run.

Let’s fast-forward a little bit.

Step 5. As children mature, they begin to understand the concept of earning and spending money. If they’re not taught by their parents, they will learn elsewhere. Any lack of knowledge creates a void that will be filled in by whoever manages their first exposure. This is why it might be a good idea for some children to get a job during high school. I wouldn’t say that’s a good idea for everyone, but some children may need this hands-on experience before tackling the ideas in a more conceptual manner. Working at a job, with monitoring by parents, can be better for financial education than a class in school, which brings me to the next point.

Step 6. Schools, especially those in the government-controlled public school system, will generally not teach money management classes. Why not? Schools are all ready under pressure to expand their offerings to include humanities, philosophy, arts, music, foreign languages, physical education, and extracurricular activites aside from the science, social studies, mathematics, history, and English core curriculum. There is too much competition for time, not enough teachers, and far too little money. Is money management more important than the other subjects above? Some may say yes, but that doesn’t mean it’s the job of the public school system.

Interlude. There’s the popular belief that the public school system exists to create good, loyal consumers, without much independent thinking. I wouldn’t say that’s the case everywhere, but if it is true, it runs counter to the idea that money management classes should be offered.

By the way, personal finance classes have been shown to do more harm than good for teenagers in at least one study.

Step 7. Before you know it, your children are off to get a full-time job or enroll in a public or private college. Money management courses are generally not found here, either. If the college student is like most, this is the first significant time away from the constant influence of parents. If you haven’t done a good job as a parent by this point, you may just have to pray that they are able to figure things out on their own. It starts with college orientation: these days, you’ll find booths and tables set up with representatives giving away free things (remeber “things” from the earlier stages above?) like t-shirts and Frisbees. The light goes on… all that’s needed for the pathway to endless instant gratification is to fill out an application. The kids are used to applications at this point, having applied to a bunch of schools: one or two they’d never get into, a few safe schools, and several realistic choices.

This is the moment of truth. Perhaps the student is prepared to handle a credit card wisely. However, remember that if there is a void of knowledge, the void will be filled by the first reasonable association. That might be a free t-shirt and the promise that anything can be bought — even necessary things, like food — without any supporting funds. Is it the credit card company’s fault that no one has fully educated some of these children? Of course not, but the credit card companies make a lot of money catering to the empty-headed students, and the companies do not put any effort into fully educating the prospective customers.

At this age, some children (yes, they are children in some ways, even at 18 years old) are not ready to handle the responsibility that is being dangled in front of them like a carrot, even after the best modeling and teaching by parents in earlier years. I’m not saying that there should be a required age before credit is issued, like a driver’s license, but different people develop mentally at different speeds, regardless of the effort parents put into modeling and teaching.

So no one’s fully to blame, but my observations lead me to believe most of the damage is done earlier rather than later, and the point at which parents can have the most influence is also earlier rather than later. The trick is that many kids don’t have the cognitive ability to understand the intricacies (or even the basics) of money management at the time they are most susceptible to their parents. This is what makes development so difficult and creates a “blank slate” that credit companies are eager to fill with nonsense.

On the other hand, parents cannot be quick to fully dismiss societal habits that allow children to move upwards in the social ladder. There is much more that goes into teaching kids how to function in society besides moderating materialistic intentions. Most of the times I speak to parents — I am not a parent myself — who have well-functioning older children, they attribute the situation to luck.

Feel free to share any comments, including your own experiences even (and especially) if they contradict anything I’ve written.

The original version of this article, The Blame Game: Poor Money Management, Part 2, is copyrighted by Consumerism Commentary.

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There’s a discussion at StopBuyingCrap about credit card companies’ evil tacticts. In fact, Cap comes clean with this humble admission:

No body forced me to buy the mountains of Japanese comic books, computer hardware, and automotive parts. Sure, the credit card made it easier for me to spend money I didn’t have — but the reason why I spent frivolously was because I was a complete moron.

An anonymous commenter responded to Cap’s post:

Yes, personal responsibility is important. Many young people, however, have never been taught thing one about managing money. They simply don’t understand how it works. The companies take advantage of that. There are thousands of people who sit in their offices all day thinking up new ways to take advantage of that.

I tried to respond with my thoughts, but it was 3:45 am, so it didn’t come out completely the way I intended. So I’ll expand on this a bit.

This is an age-old debate. Whose fault is it that people go deeper into debt? Is it the young adult who lacks the basic math skills to understand the effects of compound interest? Perhaps it is the credit card companies whose marketing efforts, especially on college campuses, may be excessive? Can we turn to the primary and secondary school administrators who feel that money management cannot be shoved into an already-packed schedule? And then there are the parents, who perhaps fail to model appropriate behavior (implicit teaching) or explicitly teach their kids about handling money.

Obvisouly someone should be blamed when college students graduate with thousands of dollars in credit card debt, debt they have little to show for as it the money probably went to clothes that don’t last, food, entertainment, and status symbols that become old quickly.

I’ll pose this question to my readers before going any further. Who deserves all of the blame? If not all, who deserves most of it? Are the credit card companies and marketers evil when they prey on young “minds?” I touched this topic a while ago when I asked the question of the day, but now I want to know exactly what is wrong with society, where it fails, so we can fix the problem and move on.

Please share your opinion, and in a follow-up post, I’ll write a bit about what I believe, hopefully more coherently than how I commented on StopBuyingCrap.

The original version of this article, The Blame Game: Poor Money Management, Part 1, is copyrighted by Consumerism Commentary.

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I linked to this article, but I wanted to focus on it when I had a chance. That chance is now. An article from Inc.com, a resource for entrepreneurs, says that drinking alcohol can help your career. Sounds too good to be true? Here’s how.

Regular drinkers make 10% to 14% more money than those who do not drink, according to the study… The study also concluded that men who drink socially — defined as visiting a bar at least once a month — earn an additional 7% more than those who do not.

Socialization and networking are the reasons why these data appear, not specifically due to the alcohol itself. Business often takes place outside the office. In a small company, socializing with the CEO is a good way to relax the constraints in the office that stop people from acting naturally. The atmosphere, and perhaps the alcohol, can help to break down a social wall.

At SmartPak, [a small company,] managers are encouraged to take their employees horseback riding, bowling, or out for the occasional happy hour.

Here’s a question for discussion: Is this unfair to non-drinkers? Also, does your company encourage socialization at locations where alcohol could be involved implicitly, explicitly, or not at all? How big is your company? Share some stories.

One commenter will be selected to receive a book unrelated to alcohol but related to investing and personal finance, The Big Money: Seven Steps to Picking Great Stocks and Finding Financial Security, by Fred Kobrick and Elliott Wave Principle: Key to Market Behavior, by A.J. Frost (both hardcovers).

The original version of this article, Enhance Your Career By Consuming Alcohol (With a Giveaway!), is copyrighted by Consumerism Commentary.

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The truth is people are selfish. A person makes decisions on what actions to take based on what they believe will benefit him or her. Is there such a thing as true selflessness? Even when someone helps another individual “out of the kindness of his heart,” isn’t she really acting in order to get that pleasing feeling of having done something “for” someone else?

Liz Pulliam Weston is asking whether you can trust your financial advisor or whether he is looking out for his own well being instead of yours, his customer.

She suggests looking at the advisor’s professional title. According to her chart, an attorney is looking out for your best interest, as is a certified public accountant. A financial planner, even a CFP, may be looking out for your best interest. Registered representatives and stock brokers are looking out for their own best interest.

The author provides three questions to ask your advisor to determine if your advisor is really on your side:

* Are you legally obligated to act in my best interests at all times? If so, are you willing to put that in writing?
* Will you disclose all potential conflicts of interest?
* In what ways are you compensated?

Perhaps I’m cynical or overly philosophical, but sometimes I feel there is only one motivator in anyone’s decision making process: What will be more beneficial for me? That may be selling products with high commissions for the short term monetary gain. That may be building trust through an advisor relationship in order to assure repeat and consistent business. That may be building a trustworthy reputation also to ensure future business.

Do people become [doctors|lawyers|advisors|psychologists|mentors|...] because they want to help people? Or do they because they want to feel good about their ability to help people?

The original version of this article, Can You Trust Your Financial Advisor? Or Anyone?, is copyrighted by Consumerism Commentary.

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Jonathan Clements from the Wall Street Journal decided to don his psychologist hat and evaluate the muddled minds of investors. He discovered four mindsets that hinder people from investing intelligently.

Let’s face it, amassing a decent-size nest egg isn’t exactly rocket science. All we have to do is save regularly, buy a few low-cost mutual funds and patiently await our reward. Yet most of us scorn such humble simplicity. Instead, we are too confident and too clever.

* People buy the investments they wish they bought at some other time. As the price as an investment rises, investors should “grow leery” of the value. Instead, people jump on the bandwagon for last year’s hot stock or commodity. If it works out in the short term, the investor feels like a genius and gains confidence to make more unsafe moves.

* People want to get even. If Jack’s identically-housed neighbor sold her dwelling last year for $1 million, Jack will have a hard time settling for $800,000. “[This is] about avoiding regret. If we sell for less than we paid or less than the neighbors got, we have to admit we made a mistake, with all the associated pangs of regret.”

* People shy away from their falling investments. In some cases, falling prices represent deteriorating “underlying fundamentals.” Clements uses the example of Treasury Inflation-Protected Securities (TIPS), and he believes the lower prices make them a better investment, with no damage to the fundamentals.

* People have no self-control. With the negative savings rate in the United States, we would rather spend now than put away our money and invest for the future. We convince ourselves that everything will be okay in the end. Jonathan Clements believes this may be our biggest mistake.

I can only speak for myself and say I believe I’ll be fine in the end. I’m working hard, saving money, making money in places I never thought I would be if you asked me a few years ago, finishing a master’s degree and contemplating my next steps in career and education, and always learning about investing. If I were to live like I was in 1999, spending more money on the commute alone than I was making, I would not be able to say the same.

Thanks to Jim Mahar for sharing the link.

The original version of this article, Four Mental Mistakes in Investing, is copyrighted by Consumerism Commentary.

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Money Magazine is profiling Michael and Brittany Abbate. Here is their situation.

The couple used to have a total annual income of $135,000 to support them as well as their daughter, but thanks to a move from Chicago to Phoenix and a pregnancy, they now make less than half that amount. Due to the pay cut, they’ve used $11,000 of their $15,000 emergency savings just for regular expenses.

Without giving too many of the details within the article, he’s a spender and she’s a saver. The article gives five tips for communicating with your partner when money issues arise.

I’m not an expert when it comes to relationships; in fact, every relationship I’ve had until now has ultimately failed, usually because of issues having nothing to do with money. I don’t think that the only way to have a successful relationship is to have the same spending philosophy as your partner. Although sharing the attitude does help to get both individuals are quickly on the same page when it comes to spending and saving, openness, communication, and willingness to compromise are much more important in my opinion.

* Think big picture. Decide on important goals and make decisions that are in line with those goals.

* Give each other financial space. Combine most of the income into joint accounts, but keep a small portion separate. The individuals should have the freedom to use an agreed-upon amount however they see fit without consulting the other. This is great for suprise gifts.

* Swap roles. Usually only one within the relationship will be the one maintaining the books. Let the pilot hand over the controls to the co-pilot for a while to increase understanding of the financial situation.

* Schedule money dates. The article’s author says it’s better to plan ahead and choose a time to speak about money-related issues than to bring them up at an inconvenient time. You can use the meeting time to review progress, to plan ahead, and to address any issues.

* Get help if you need it. Sometimes disagreements about money aren’t really about money, they’re about control. Consider seeking a financial planner, a marriage counselor, or a combination, if compromise continues to fail.

The original version of this article, Spending Philosophies: Five Tips for a Better Relationship, is copyrighted by Consumerism Commentary.

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According to a biannual report by Prudential Financial, women are now more involved in financial decisions then they were five years ago, but their financial knowledge and money management confidence is relatively low.

Two-thirds of the respondents gave themselves a grade of “C” or lower, while just 1% assigned themselves an “A.” These women have clear financial priorities, such as saving for their children’s college educations, having enough money for retirement, or not being a burden to others in their old age. Yet many lack confidence that they’ll be able to achieve these goals.

* In the past 24 months, only 11% of the sample invested in stocks or bonds.
* 84% of the sample say they understand insurance but “few” have acquired enough to help their family.

The survey’s main conclusion is that women’s lives are a balancing act. This pursuit for balance often results in inaction when it comes to financial decision making. While some strides have been made, there is clearly room for improvement.

Read the study here (PDF, 24 pages). The report includes lovely, colorful charts depicting the survey results and lots of analysis.

The original version of this article, Women Don’t Do Enough (According to Report), is copyrighted by Consumerism Commentary.

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Stephen Hawking, author of A Brief History of Time, says that humans should consider colonizing the moon, Mars, and eventually another star system, in order to ensure our species’ survival. Here on earth, our risk of being wiped out by a natural or man-made disaster is increasing. The scientist cites “sudden global warming, nuclear war, a genetically engineered virus or other dangers we have not yet thought of” as causes for alarm.

Regardless of how high the risks are, even one who is less of an alarmist will agree that the risks are increasing. However, space travel introduces new risks, so we rely on intelligent analytical people to study the risks and determine what is best for society.

Looking beyond the problem of not yet knowing how to migrate a community and colonize a location above the Earth’s atmosphere, there are still a few questions. Even if we can begin colonizing the moon in 20 years as Hawking predicts, who will be able to go?

Lunar real estate and space travel are bound to prohibitively expensive for all but the wealthiest millionaires (and entertainers). Those who can afford to escape the pollution and crime on Earth will be able to leave terrestrialism behind and create a better life for their families.

Is this the normal course of historical colonization? Societies leave a secure location for only a few reasons that come to mind: lack or resources or immediate danger. It takes money and strength to travel; migration has never been for the weak unless the less fortunate happened to be enslaved by other societies.

It would be interesting to live to see colonization on the moon or other planets. Although I imagine the first colonization attemps might not be successful, I’m curious to see if the option is only available to those who can afford private space travel at a ridiculous price. This is speculation in its purest form. Feel free to share your thoughts. Who will go to the moon?

The original version of this article, You Will Go To The Moon, is copyrighted by Consumerism Commentary.

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I saw this interesting tidbit on Everybody Loves Your Money. According to Ben Bernanke, the chairman of the Federal Reserve, most American households are doing just fine managing their finances. Here is some of what he said:

On average, debt burdens appear to be at manageable levels and delinquency rates on consumer loans and home mortgages have been low.

He does note that lower income families have more problems without bank accounts or an emergency cash cushion. How about teaching financial savvy and money management in public schools? Bernanke says the curriculum is already overcrowded (and I agree).

I am surprised that Bernanke has said that most households manage money well. It may be true for middle and high income families, but it is not the message that the government generally tries to push. It’s beneficial to push the opposite message — that Americans are poor at managing their finances — for several reasons. This message, opposing Bernanke’s:

* Validates the existence and importance of asset managers, financial advisors, and brokers
* Encourages people to think about the management of their own finances
* Makes people feel good about being “above average”

Do you think households are generally capable money managers?

The original version of this article, Most Families Manage Money Well?, is copyrighted by Consumerism Commentary.

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I love when companies conduct and publicize studies or surveys which do little more than rationalize their existence. Fidelity, a brokerage specializing in retirement, conducted on such a study recently. Here’s what they found:

* 83% of workers feel they’re not saving enough for retirement, up from 78% a year ago.
* Workers are saving at a pace to replace 57% of their earnings (including Social Security) when the company estimates 85% would be a better target.
* Just over half of all workers studies have taken some action in the last six months to improve their “retirement readiness.”

I would hardly expect a survey from a company that earns lots of money from people saving for retirement to say that Americans are saving enough (or too much), and should cut back, and use the money they earn to enjoy life. These companies would never tell you life spans aren’t guaranteed (unless they’re selling life insurance), and that there’s a good chance you won’t be able to use all of the money you save.

It would shock me to see a brokerage where investing for retirement is the main business model to have the slogan: “carpe diem.” This study, on the other hand, comes as no shock at all.

I’m not trying to say I disagree with the study; let’s just leave these surveys to independent organizations so companies can focus their energy on “market research” instead. Companies don’t need to rationalize their existence to the public.

The original version of this article, Fidelity Study Says People Need Their Service, is copyrighted by Consumerism Commentary.

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Earlier this month, Personal Finance Advice and others reported on a study by Salary.com saying that a stay-at-home mom’s job is equivalent to an amalgamation of many vocations that would together provide an annual salary of $134,121.

Carl Bialik, the “Numbers Guy” at the Wall Street Journal calls foul.

The Wall Street Journal likely emailed this story to hundreds of bloggers, so I’m sure you’ll hear more about it, while other bloggers will ignore it a piece of mass-email (or spam). I wanted to share the link because I enjoy when individuals dispute studies that quickly become widely accepted.

The original version of this article, The Worth Of The Job Of Mom: Faulty Study?, is copyrighted by Consumerism Commentary.

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