Learn to control money but do not allow it to control you

Firewalker

Quite remarkable – just finished the accounts for the week. I might be breaking some kind of record here but last week our expenditure on food amounts to the grand total of £7.80. Now, this was not achieved through feats of deprivation but through clever planning, use of reserves and some, albeit limited, ingenuity – all things we are getting quite good at as a family. So we decided to set up the weekly menu by looking at our frozen meat, fish and chicken inventory and our frozen meals (cooked by us, without exception). This way we had to buy only some fruit and yoghurt - already had some salad left from the week before.

Our total expenditure for the week is still £98, though – however this includes our two night of camping, a visit to the cinema and my visit to the osteopath. This MSE business is not going too badly, I think.

Firewalker

soontobemum

Hi Firewalker

Phew just read all your posts you seem to have done really well in a short space of time, keep going strong.

I have been in debt for so long that I am unsure where to be begin and will definately be using your progress as inspiration.

Thank You:T

Firewalker

Hi Soontobemum,

thanks for reading - it is getting a bit long. Getting out of debt is worth it and doesn't have to be a trauma - it can be fun. Good luck and look after the bean.

Firewalker

Firewalker

The other day I mentioned that it feels like the Universe is conspiring to keep me on the matter of reducing expenditure rather than increasing income – probably because like many others I do find the saving bit easier that making money. Need at some point to examine why this is – but according to a book I am reading at the moment, and which I would like to discuss today, it is likely that somewhere in the past a powerful message about making money (possibly linked to negative morality) was imprinted on me. Further thoughts on this one required anyway...

Today I would like to discuss the main notions set out in a book entitled ‘Predictably irrational’ by Dan Ariely. Clever Dan is a behavioural economist – a branch of economics hitting at the core assumption of traditional economics that human behaviour is overall rational. I still haven’t finished the book but there are several things that strike me as useful in terms of critically examining and understanding our spending – remember I started by emphasising the importance of ‘how do we spend’.

a. Our decisions are always based on relative judgements. Whether we know it or not, we make decisions always by comparing things – but through this comparison they become relative. This applies to spending as well as other areas of our lives. For instance, if we are buying a pen for £30 and we learn that in another shop 15 min walk away it sells for £20 we are likely to go for the cheaper option. But if we are buying a suit for £500 and we learn that in a shop 15 min walk away it sells for £490 we are not likely to bother. Well, £10 is £10 and 15 min is 15 min – but in the second case £10 seems like a relatively small amount.
b. Comparison is the basis of wanting more and envy. There are experiments showing that making high salaries public knowledge made people want the same level of salary rather than insisting on reducing the high salaries. It works in a similar manner with things: we have the innate tendency to always want more. So ‘keeping up with the Joneses’ is in effect how we were programmed to work.
c. What we are prepared to pay for things is determined by anchors – some of which can be entirely random. Experiments show that when asked to think about a random number at the beginning of an auction, people who thought of a smaller number bit lower than people who thought of a higher number. Anchors are also imprints – so our first running shoes were £80 so every time we buy them cheaper we feel like we got a bargain. Running shoes cost about 10 pence to make.
d. While the first time we spend on something can be accidental it soon becomes a habit. This is particularly obvious where small, unconscious spending is concerned. Habits are not questioned – and then through comparison spending expands from coffee to cakes etc.

This tells me at least two things: just like most of the people on this forum I am not a freak. Overspending without realising it is on the one hand a product of deep psychological mechanisms, and on the other these mechanisms are known to and used by the marketing industry to affect us. And second, I was intuitively right from the outset – the way to get out of this is by thinking about and questioning your decisions, actions and habits.

Firewalker

thrifty_fifty

Hi Firewalker

Very interesting read. I too have been trying to get behind the reasons why I want things or spend, just trying to question my own thought patterns and behaviour. I would say that a lot of the time if we think the items we are about to purchase are in short supply, then we have to get it before someone else does, and this is particularly applicable to reduced items. The 'Grabbit while you can' part of this forum is a case in point, there is this sense of fulfilment that you are smarter and faster than the next guy.

I suppose we are motivated by a deep ingrained need to stay ahead of the rest of the pack, to win, to get there first. Perhaps this is some sort of twist of mother natures original attempt at 'survival of the fittest' back when we would have been competing with our fellow homo sapiens for food,water and shelter. However this survival instinct has morphed into a need to feel successful through attainment of better wages, more luxurious lifestyle and so on-material things. Add campaigns use strong imaging to compound these feelings and desires to achieve better-materially. From my studies in English Literature , students were drawn to look at the use of setting to create feelings in the viewer or reader-so for example in films and books the audience can be made aware that something bad is about to happen by the use of overcast and thundery skies. Note the use of these in finance adverts-when in debt cloudy skies, rain, a broken lawnmower and a disappointed looking family. When Joe Bloggs finance offer you a solution, the advert suddenly turns to blue skies, a neat lawn, a new car, a smiley happy family and a bouncy barking dog.

Very interesting. Not saying it always stops you from spending by knowing these things, but it certainly makes you think twice about what you really need and what you just want for the sake of wanting.

Best wishes

Thrifty

Firewalker

Good evening. Tonight I would like us to do an experiment.

If you are offered a free coupon for £10 or asked to pay £7 for a coupon of £20 which one would you go for?

Today OH and I did the shopping, cleaned the house and did the garden. On top of that I had a meeting with a friend I am writing something with and we made strawberry sorbet. Is it any wonder that I am feeling rather tired? And there was me thinking that I am getting old.

Couple of nights ago I mentioned that there are three main ways to generate income – social security and insurance, selling your labour and creating assets. Tonight I would like to discuss ‘selling one’s labour’ a bit more. This is exactly what most of us do – we sell our labour. And most of us don’t have much else to sell but our labour.

We sell our labour for anything from minimum wage to a lot – but the difference is one in degree rather than kind. Irrespective of what one earns per hour us, the ones who sell our labour, share the following:

a. We need to put in the time. There are relatively strict laws about this one and the working week stands at 37.5 hours. Most of us work longer – it has become desirable and necessary to keep our jobs and move forward. However, research shows that working over 40 hours a week gets us ill.
b. We cannot sell our labour twice. One can do only one job at any given time. This has the unfortunate implication that to increase one’s income one ought to increase the time one works. This gets us ill.
c. Whatever the cost of our labour our earnings are limited. Our time is limited – hence our earning capacity is limited. It is just that the limit is different depending on one’s earning capacity.
d. Whatever the cost of our labour our earnings are uncertain. Anyone who sells their labour can lose the opportunity to do so at any time. Eighteen months ago people who sold their labour to private companies experienced this; now it is people working for the public sector.
e. We believe that what determines the cost of our labour is the level of our qualifications. Most of us think that getting higher qualifications will get us higher level of earning – so we go to university, do Masters, PhDs, attend courses etc. Being educated is commendable but recently surveys show that the ‘graduate premium’ is diminishing.
f. What in fact determines the cost of our labour is how valuable and scarce our skills and competencies are. This is why doing a degree in management is pretty pointless – there are too many people with these degrees and the competencies these develop are not that valuable. Research also shows that when over a certain number of doctors are trained the level of their salary decreases. There are many unemployed teachers at the moment.

Altogether, selling one’s labour looks restrictive and uncertain to me. Even when one earns serious salary, one is only a ‘working rich’. Selling one’s labour inevitably means that one is a salary away from destitution – irrespective of how much one brings in every week/month. The ‘normal’ cost of one’s labour also has certain implications for one’s choices of additional work. The higher the hourly cost of one’s labour the more difficult it is to increase one’s income by doing low cost activities.

Firewalker

Firewalker

Today was a good cooking day. I made lentil soup using an American recipe – absolutely delicious; had it for lunch today and put three meals worth of it in the freezer. Apart from that we made strawberry sorbet (another doze) and the vanilla ice-cream is just churning in the ice-cream maker.

Also I suddenly realised that I have started doing too much cooking – a year ago I wouldn’t even be seen in the kitchen and now I am doing all this fancy cooking and being very organised in the kitchen.

‘I am having a mid-life crisis’ – I thought.

But again, instead of doing something really mental I am cooking. That is me then, even my mid-life crisis is safe and convenient. People start living dangerously, do pilgrimages, fall in love, jump out of airplanes (OK with a parachute) and run around the world, but me oh no; let live dangerously and discover some pots and pans. And Jamie Oliver!

At least my men are happy.

Spain just won the World cup – well done Spain.

And the thought for the days is:

“All I ask is the chance to prove that money can’t make me happy.” – Spike Milligan

Firewalker

ninky_2

Firewalker wrote: »

What in fact determines the cost of our labour is how valuable and scarce our skills and competencies are. This is why doing a degree in management is pretty pointless – there are too many people with these degrees and the competencies these develop are not that valuable. Research also shows that when over a certain number of doctors are trained the level of their salary decreases. There are many unemployed teachers at the moment.

i have to disagree with this. i see many less competent people earning more than more competent people often based on networks and connections. many people are on the payroll at a higher level than they deserve simply because they know the right people or grew up in the right crowd. perhaps being connected in this fashion counts as a rare competency? i don't know. it is less important to do well at school if your father knows people to ask to give you a job as a favour.

Firewalker

Ninky, thanks for this - I always relish your posts because you spot the holes brilliantly; and ask wonderful questions. Shall think about this one and let you know but I would have included what you mention in capital - it is social capital. What I was talking is more immediate labour market exchange and the personal perception of it.

Back to my day job now - tonight will do more on this one.

Firewalker

ninky_2

another point - some very financially successful people do effectively sell their time more than once by having multiple 'consultant' roles. therefore they increase their earning power without necessarily increasing their actual workload.