Tag Archives: kids

Relative Happiness and Budgets

To the small voice inside us telling us we should be thinking about the future,

Are we willing to sacrifice something we value for more happiness? Is this a simple question to answer? Whatever your initial response was, let us ponder the issue further.

Let me draw on the class material examples to help explain this. Consider the following examples:

Scenario 1a: You are buying a pen for $15 when someone says that you could get the same pen for $7 at the store 3 blocks away. Which pen to you purchase?

Scenario 1b: You are buying a camera for $1015 when someone says that you could get the same camera for $1007 at the store 3 blocks away? Which camera do you buy?

Discussion: Most people tend to choose the $7 pen and the $1015 camera even though the savings would be the same. As Dan Ariely said in his lecture on this, “Your checking account does not care where you saved $8,” but it likes when you save in general! So the relative difference in these scenarios can determine how we feel about the savings.

Scenario 2a: You are buying a $40,000 car and the salesperson says to you that you can get leather seats for an extra $2000. Do you do that?

Scenario 2b: You are a buying a $500 office chair and the salesperson says to you that you could get a leather chair for an extra $2000. Do you do that?

Discussion: This is not a perfect example, so let’s overlook its flaws to uncover its usefulness. We assume leather has some benefit and we assume you would be sitting in the office chair more. With these assumptions, it might seem somewhat irrational if you WOULD get the leather seats for your car but you WOULD NOT get the leather for the chair. The takeaway is that the price is the same, but when we are operating with large amounts of money, we tend to see add-on costs relatively as well.

Now consider this situation, which involved happiness as well…

Scenario 3: At which of the following companies would you prefer to work?

a) Highest paid employee makes $100K per year, mid-level workers are paid $95K and you are paid $90K.

b) You are paid $85K per year, mid-level workers are paid $75K, and lowest paid workers are paid $65K.

Discussion: According to studies on this scenario, most people would pick to work at the first company where you are making $5K more per year. In this same study, the participants were then asked in which company they would be happiest. This time, most said at the second option. Dan asked us, “are we willing to pay (i.e. sacrifice money) for an increase in happiness?” He answered for us with a depressing, “Usually not!”

What are the implications that come to mind when you muse on these situations? Are you surprised by anything here? I was shocked and horrified to some degree! I see the common person making so many bad decisions with their money these days, and I know many people who are playing with their own happiness in such a way as well.

My generation, however you want to describe it (I am 29), is not a very happy or financially well-prepared for the future. I include myself in this classification. I have been spending my money as it comes in, only occasional having to forego something because I wanted something else. But I am still living too much above my means! Thanks to this class I am using a budget more rigorously which includes saving money monthly. I am already worried about the month of April! I highly recommend the envelope method of budgeting, so you have a very tangible amount available for different categories.

Financial planning aside, I am very concerned about how I, and others, make decisions about happiness. I recently went through a break-up and have been trying to accept what happened and also understand it. Both of us were experiencing our own forms of unhappiness, and we had to each decide whether we wanted to persist with the relationship and try to address the issues we were having (believing that our relationship would ultimately bring us more happiness in the future) OR cut our losses, make no sacrifices, face no additional challenges (believing that our singleness or a future relationship would better serve our happiness). My decision was I wanted to work out our problems and his was to cut our losses. hence we are apart. Will we ever know if we made the right choice? Could it be possible that we both did? I believe that I will find happiness again, but I still believe we BOTH would have benefited from working on our relationship…but I think at this point in his life, he is perhaps not willing to make the sacrifice of his personal time/pursuits for his long-term goals of having a relationship. If I may suggest, he is, in fact, not investing in his future, preferring rather to spend his time on what he wants NOW!

To carry the metaphor perhaps too far… I am still in the process of freeing up my Investments in order to reinvest in something with a better return!


Another mathematically-minded, metaphor-making Mind

Thanks to my behavioral economics class for the inspiration for this post: Dan Ariely’s A Beginner’s Guide to Irrational Behavior

Kid Snippets “Proposal”

Wonderful video concept!

Published on Jan 21, 2013
New Kid Snippets videos every MONDAY. If movies were written by our children… We asked a couple kids to play out a marriage proposal. This is what they came up with.

Produced by Bored Shorts TV
Filmed and Edited by Houston Holbrook
Additional editing by Ryan Haldeman
Richard Sharrah
Kelly Hennessey
Editing Consultants:
John Roberts
Production Assistant:
Randy Roberts

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