Dollars and Sense

about 70 percent of lottery winners go broke within three years.

Almost everything about our culture encourages and rewards the loss of self-control.

We can overcome some of these problems by learning about our behavior, about the challenges we face, and about how our financial environment encourages us to make poor choices.

low prices send us uncomfortable messages about the nature of luxury items. We infer that discounts mean lower quality. We start thinking there’s something wrong

When we can’t evaluate something directly, as is often the case, we associate price with value.

When we know how much we’re spending on what we’re drinking, then the correlation between price and enjoyment is incredibly strong.

We love precision—and the illusion of precision—because it gives us the feeling that we know what we are doing.

when we don’t know how to evaluate items, we are disproportionally affected by features that are easily comparable, even when those features (the torn cover, in this instance) have little to do with the real value of the product in question.

No one ever lies on their deathbed wishing they’d spent more time with their money. But because money is much easier to measure

We should realize that money is just a medium of exchange.

When we move from comparing money to things to comparing things to things directly, it puts our choices into new perspective.

What if we said, “You know what, the bigger house costs me the same as the smaller house plus one yearly vacation, a semester of college for each of my children, and an additional three years of working before retirement. Yes, I can afford it, but maybe it’s not worth exchanging all those things for an extra bathroom and a larger yard.”

When it comes to making financial decisions, what should matter are opportunity costs, the true benefit a purchase provides, and the real pleasure we receive from it compared to other ways we could spend our money.

If we were perfectly rational, language, rituals, and expectations should not influence our spending decisions.

Think about transactions in terms of opportunity costs by considering more explicitly what we’re sacrificing for what we’re getting.

Buying a $60 shirt marked down from $100 isn’t “saving $40”; it is “spending $60.”

The pain helps us pause before purchasing and consider whether or not we really should spend our money then and there—it helps us consider opportunity costs.

we should be skeptical of the latest financial technologies, especially those that are designed to demand less of our time and attention and make it easier for us to part with our money.

From time to time, let’s stop and question our long-term habits.

Renovating is fine, as long as we head down that path recognizing that it might only increase the value of the home to us.