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February 2010

Today’s guest on the Consumerism Commentary Podcast is Gary Belsky, author of the book Why Smart People Make Big Money Mistakes and How to Correct Them: Lessons from the Life-Changing Science of Behavioral Economics and Editor-In-Chief of ESPN the Magazine.

Gary and Tom Dziubek discuss behavioral economics and how understanding how we make decisions involving money can help us make better decisions.

If you like this podcast, please vote for us in the First Annual Plutus Awards for “Best Personal Finance Podcast.” Thanks!

Consumerism Commentary Podcast #45
Production Number: S02E19
Segment Number: 62

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Table of contents

[00:00] Introduction from Flexo
[00:32] Interview with Gary Belsky
[00:47] Gary’s background
[03:44] Behavioral economics
[04:36] “Bonuses” vs. “Rebates”
[06:00] Mental accounting
[09:42] Understanding and combating your weaknesses
[12:12] The sunk cost fallacy
[14:06] Maximizers and satisficers
[16:24] Ignoring the base rate
[17:50] Self-insuring yourself through savings
[18:24] Understanding anchoring
[19:37] Fighting overconfidence in personal finance
[22:10] End

We always welcome feedback from listeners. If you have any comments for this episode or for any other, or if you have suggestions for future episodes, please leave us comments here or email us at podcast at this domain name.


Along with tracking my finances on Consumerism Commentary, I also mention when the situation at my day job changes. For example, two years ago I successfully posted for a higher-level vacancy in my department (as expected). Last year I mentioned when I received a lower annual bonus and raise than I would have liked.

I’ve known the amount of this year’s raise and bonus for a few weeks, and I received the bonus this past Friday. Of course, I am thankful to have a job with good benefits during this period of near 10% unemployment, but I am still disappointed in the low level of compensation. I’m not letting this bother me; knowing that I have more control of my finance regardless of what happens in the office helps me not worry about what happens there.

Are your employers still keeping raises and bonuses low, knowing that employees don’t have many options in this economic environment?

In my photography class today, we worked on panoramas. Thanks to Adobe Photoshop for making the stitching so easy. This isn’t one of mine, but here’s a good example from Flickr.

Here are some articles I’ve enjoyed recently and a reminder about the Plutus Awards.

How U.S. Olympians pay the rent. Not every Olympic athlete, even gold medalists, get multimillion dollar sponsorships. The cost of training, competing, and traveling is tremendous, and not every athlete comes from a wealthy family.

How to get your super-motivated boyfriend to marry you. Interesting article in which Sam, the author, describes five observations of men focused on careers or other goals and how the women who love them might need to adjust their expectations. Let me know what you think of this article. I think there’s an assumption here that the woman must adapt to the man, but in a perfect world the best course would involve some compromise.

Do you have to give up convenience in order to save money? I believe there are several stages to becoming financially secure or independent. There may be a time where it makes sense to save every cent possible. I went through a phase like that several years ago. I had to survive without a car (relying on friends and public transportation), eliminate cable television, and share an apartment with three roommates. Now that I’m earning more than what I need for basic expenses and long-term saving and investing, I don’t have to be as tight. I willingly give up some income in order to buy myself more convenience.

Vote for the 2009 Plutus Awards. Consumerism Commentary is up for a few Pluties. Be sure to vote for your favorite finance products (savings account, brokerage, etc.) and blogs before the ballot closes on March 16.

Photo: Richard0


It’s been a couple of weeks since I shared details of my push to get rid of the credit card debt. I’ve been diligently taking out exactly $100 from the ATM to spend from Saturday morning through Friday night. That’s just for daily, personal purchases that don’t contribute to the house as a whole, though. As I suspected, it hasn’t left me with many opportunities to do something nice for my wife, and this past fortnight has forced me to keep mentally reminding myself of a few things.

It can’t all be tasty

It’s still not second nature for me to think of my weekly $100 as partially being spent on boring and annoying things like gasoline and haircuts, to say nothing of clothing. I tend wrongly to assume on a Wednesday that, “oh, I still have $50 for lunch this week,” when it’s really closer to $20.

I also really want to be the kind of husband who frequently brings home flowers, but it just doesn’t seem practical, yet.

No month is going to be normal

It seems like there’s always something abnormal showing up to make the budget be a little off. Earlier in February I paid another $200 for Level 3 Improv classes, so I had to remember to make a credit card payment of $450 for March 1st instead of $650. (I’m making payments on the higher, newer debt at a rate of $1,300 a month, but doing it twice a month to help bring the interest down more.)

It’s also sort of vacation season. We did a fantastic job this past weekend in San Antonio not going hog wild with the spending, but it’s still a tendency of mine to want to whip out the plastic when confronted with temptation, especially if I’m drinking. There’s another mini-vacation coming up in Austin during SxSW, where we have a tradition of meeting our old-school nerdy blogger friends.

Stop cheating!

Okay, so even though I used my debit card recently at Starbucks, it was because it was after the time I was supposed to go to the ATM, but I hadn’t made it there, yet. When I did find an ATM, I managed to find one that would give me $90 instead of $100.

But here are the things that got added to the newer card since February 13:

  • MyFax – $10 – I almost never use this online fax service, but it seems like a really handy thing to have. I’ll make a to-do to decide one way or the other
  • – $9.95
  • Toll roads – $40
  • Web hosting – $22.89 – this number fluctuates a lot, primarily because I have more domains than I know what to do with, and I can’t ever bring myself to cancel them.
  • FedEx Kinkos – $8.29 – this was actually for work, so I should get it reimbursed. I almost never pay for things on behalf of my employer, so I’m not even sure what form to use, if form there be. New to-do.
  • Cinematic Titanic – The Alien Factor – $9.99 – there it is. I spent $10 that I shouldn’t have on a goofy, fun movie. I’ll have to remember to find the $90 ATM again tomorrow.
  • iTunes – $1.09 – Ack, I did it again! I couldn’t resist buying the Metallica song “Wherever I May Roam.”
  • Mobile phone bill – $95.36 – this is $10 more than usual because of the Haiti thing.

So, I had two moments of weakness, but I have a way to make it up to myself. The particularly annoying thing about this past fortnight is that I had to get another haircut after just 10 days, because the first time I sought out a proper manly barber, he did a terrible job, and two days ago my head looked like a dirty blond helmet. I don’t know, I think his eyesight is going, because the straight razor performance was abysmal, too.

What about the legacy debt?

For paying down the legacy credit card, I’ve only been using “extra” money: the cash that comes in from jobs like writing here. This year I switched payments from my name to our little corporation, and the corporation just got paid for the first time. What I’m supposed to do now is have the corporation pay me a “reasonable salary” and then use that money to pay down the credit card.

Does anybody have advice for figuring out what a “reasonable salary” looks like?

Credit Card Debt Totals Change
Legacy Debt $944.95 +10.28
Newer Debt $4,657.71 -247.61

You can cheer me on and/or witness my money minutiae on Twitter if you want to.


This article is presented by Kelly Whalen, Consumerism Commentary staff writer.

It’s fairly straightforward to figure out the difference between a need and a want. Needs are basic: food, shelter, clothing, water, warmth. We can also add to that our emotional needs: love, friendship, and care.

Wants seem easy to define. Wants are all the extras, the things that are not necessities. No one “needs” the latest gadget, the most expensive pair of running shoes in the store, or the biggest house on the block.

When it comes to actual purchases though the waters seem to get murky. Is a new pair of shoes a necessity or a want? The answer to this question depends on many factors. You would probably want to know what kind of shoes are being considered, how many pairs of shoes the person already has, whether they’re replacing another pair of shoes, and the answers to a dozen more questions. This evaluation of needs versus wants takes time.

We may go through days without having to make spending decisions, but throughout our lives we make tens of thousands of these decisions. Whether they are small purchases like a pack of gum or large ones such as our homes, we are faced over and over again with the question, “Do I really need this?”

If you are asking that question, you are already practicing smart spending habits. “Do I really need that?,” is only the tip of the iceberg though. We can build on that question to make a checklist that will help keep more money in your pocket.

shopping cartsThe situation where this often becomes useful is when you are shopping for something, perhaps groceries or a birthday gift, and you see a widget you have been thinking about buying. You look at the widget in passing or may even stop and pick up the widget off the shelf while you make a decision. Here are the questions you need to ask yourself before you put that widget in your shopping cart.

  • Is this widget on my list? If it isn’t, put it down and write it on your list for future purchases. If you aren’t shopping with a list, start! Lists are a great way to keep track of all the things you need and want. If it’s on your list you can continue.
  • Do I need this widget? No justifications here. Is it an absolute have-to-have-it item? If you said yes, buy it. If you said no, continue to the next question.
  • Can I afford this widget? If you answered no, put the credit card back in your wallet and back slowly away. If you answered yes, continue to the next question.
  • Do I want to spend my money on this widget? Are there better things you could be spending your money on? Is there a goal you have in mind? For me the idea of being debt-free is much more appealing than the widget I am considering. You may have a goal in mind such as a new home or a vacation with your family, so while the question might be easy to answer, it will depend on what your individual goals are.

Taking a few moments to evaluate our purchases while making them is crucial to maintaining a healthy balance of spending and saving. Using this checklist will only take a few seconds, but it could be the difference between a decent net worth and a fantastic one.

As a mom, I am faced with purchasing decisions not just for myself but for my family and household as well. Using this checklist has stopped me from overbuying, overspending, and buying things I don’t need.

How do you keep yourself in check when you are spending money? Do you use a checklist or evaluation process?

Photo: robholland


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