The logical part of your brain is so much smaller than the emotional side that it’s like a child riding a wild elephant. That’s why very smart people sometimes do very stupid things with their money. We let greed, fear or get-rich fantasies run wild and we get thrown off. Here are some tips to tame that wild elephant.
Thinking “On Sale” means “Good Deal”
Don’t be fooled by “anchoring”: the tendency to judge the value of something based on the nearest number we see. Just because the tag has $400 crossed out and replaced by $300, that doesn’t mean that $400 was a meaningful price. An MIT experiment showed that students who wrote down the last two digits of their Social Security numbers based their estimates of a wine bottle’s worth on those two random numbers. The higher their numbers, the more the students were willing to bid for the wine.
Bailing out/Indulging Children
This is a touchy subject because we all want to help our kids, but there’s a thin line between good intentions and financial enabling. Sometimes helping is actually hurting. When there is no plan – just an open checkbook or spare room – you risk turning your child into a dependent who can’t take care of himself. If you do feel like your intervention is necessary, make sure it’s clear how much help is necessary, how long it will be required, how it will help the child get back on his or her feet, and when (or whether) the child will have to pay you back.
Leasing a Car
Lately some experts have tried to polish the idea of leasing, but don’t believe it. When you lease, you own nothing: the dealer keeps both your note and ownership of the car. On your credit report, the “lease” shows up as a payment arrangement on a monthly basis, and a specific term and balance, all hallmarks of a traditional “loan” – this is important. Leases also come with fuzzy provisions, complex terms and, when it’s all said and done, leave you with nothing.
Ignoring Financial Problems
Pretending your financial problems aren’t there will only make them worse and exacerbate the pain you’re feeling. Take a deep breath, utter a prayer and face those problems head on.
Hanging on to it
“You will be enriched in every way so that you can be generous on every occasion…” – 2 Corinthians 9:11. God calls us to be conduits of his blessings, not cul-de-sacs. When we are given opportunities to be generous (i.e. every day), we should take it, glorifying God and experiencing the great joy that comes from it.
Have your own stupid mistake to share? Comment!