Dollars and Sense
How We Misthink Money and How to Spend Smarter
Editorial Review
We think of money as numbers, values, and amounts, but when it comes down to it, when we actually use our money, we engage our hearts more than our heads. Emotions play a powerful role in shaping our financial behavior, often making us our own worst enemies as we try to save, access value, and spend responsibly. In Dollars and Sense, bestselling author and behavioral economist Dan Ariely teams up with financial comedian and writer Jeff Kreisler to challenge many of our most basic assumptions about the precarious relationship between our brains and our money. In doing so, they undermine many of personal finance’s most sacred beliefs and explain how we can override some of our own instincts to make better financial choices.
Book Reviews
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Wisdom to Share
Since it is so hard for us to assess the real value of things, when something is on sale, we take the easy way and make our decision based upon the sale price.
People are likely to spend their salary on “respectable” things like paying bills, because it feels like “serious money.” On the other hand, money that feels like fun —like $300 million in casino winnings— is likely to be spent on fun things, like more gambling.
Using credit cards, e-wallets, and automatic bill-pay is the equivalent to putting little “financial helmets.” Like bad doctors, we treat the symptom (the pain) but not the underlying disease (the paying).
Because credit cards allow us to pay for things in the future, they make our financial horizons less clear and our opportunity costs more blurry, and they lessen our current pain of paying.
When we’ve made a particular financial decision in the past, we tend to assume we made the best decision possible. We look for data that supports our opinion, feeling even better about the quality of our decision. As a consequence, our previous decisions are reinforced and we simply follow suit in the present and future.
We feel the pain of losses more strongly than we do the same magnitude of pleasure. In other words, we feel the pain of losing $10 about twice as strongly as we do the pleasure of winning $10.
When language supports an experience, or anticipation of an experience, it changes and enhances that experience and how we value it.
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