How to Spend Smarter Than You Are
Comedian and co-author of Small Change: Money Mishaps and How to Avoid Them, Jeff Kreisler, shares his tips for how to spend smarter and avoid the money traps we all fall into.
When I first learned improv – a fun creative exercise that’s also been an unfortunate blight upon corporate team building programs around the world - my instructor, the criminally underappreciated Jim Cranna, told us to “play smarter than you are.” If a fellow improviser said, “Doctor, can you remove this tumor from Mars?” well, by gum, you were Earth’s foremost expert in alien cancer treatment! You got your radioactive scalpel and your zero-gravity forceps and you excised that thing. You played the role as best as you could. You acted smarter than you were.
The same imperative applies when we play the role of financial decision maker.
We’ve got to spend smarter than we are.
Who we really are is a bunch of irrational, emotional, flawed humans who have trouble making wise financial decisions because it’s hard to figure out the true value of our choices, assess opportunity costs, weigh all our options… all the things we “should” do, according to strict economic theory. Instead, we are victims of our own biases, we follow irrelevant value cues and we fall for marketing gimmicks because all that’s easier than figuring out value.
That’s just the way it is. Even the most informed of us are irrational when it comes to money. That’s who we are. We can’t change that. We can’t change human nature.
BUT we can play smarter than we are. We can spend and save and invest better than human nature would have us. How? By admitting that we’re not smart. By understanding our biases to money mistakes. By recognizing our shortcomings. By knowing why we do things like spend more when we use credit cards, fall for sales prices, overvalue things we own, believe fancy descriptive language, can’t save for retirement, or lack self control. Once we understand what’s going on, we can create systems and habits to make better choices. We can use our awareness of our flaws to overcome our flaws. We can act smarter than we really are.
When an improv scene partner asks us to do an intergalactic biopsy, we know we’re ignorant of alien anatomy, but we use whatever knowledge we have to pretend to be an expert and move the scene forward.
When we’re asked to buy a home, a car or a vacation, we can accept that we can’t really value those things, and understand why we might make mistakes and fall for financial traps trying to do so. Then we can act like an expert who doesn’t fall for those traps, and we can move our financial lives forward, too.
Understanding our mental shortcomings allows us to use them to our advantage, whether in a car dealership, real estate office or outer space operating room. That’s playing smarter than we are.
In Small Change, world renowned economist Dan Ariely and Jeff Kreisler explore a wide range of everyday topics – from credit card debt and household budgeting to holiday sales – and demonstrate how our ideas about money are often wrong and cost us more than we know.
Mixing case studies and anecdotes with tangible advice and lessons, Dan and Jeff cut through the unconscious fears and desires driving our worst financial instincts and teach us how to improve our money habits - a sound investment for 2018.