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Posted
Jul 14 2008, 05:59 AM
by
Karen Datko
This post comes from J.D. Roth at partner blog Get Rich Slowly. Our financial decisions are often based more on psychology and emotion than on pure numbers. Nearly everyone understands intellectually that credit card debt is bad, for example, but for millions of people, this understanding isn't enough. A newish group of researchers dubbed behavioral economists has been exploring the gulf between financially optimal behavior and the things people actually do. One reason for the gap, explained economist Dan Ariely in a recent issue of the London Guardian, is sheer habit. The article states:
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Posted
Jul 07 2008, 04:49 AM
by
Karen Datko
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This post comes from J.D. Roth at partner blog Get Rich Slowly. While sorting through reader e-mail recently, I began to detect a subtle recurring theme. People were writing to me because they had a goal in mind, but their present circumstances seemed to be far from their intended destination. These two points were so far apart, in fact, that my correspondents were afraid to begin moving. Because the distance seemed overwhelming, they were paralyzed. The importance of action I used to feel this way, too.
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Posted
Jun 30 2008, 04:50 AM
by
Karen Datko
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This post comes from J.D. Roth at partner blog Get Rich Slowly. Since last August, I've been on a quest to reduce the clutter in my life. Back when I was a spendthrift, I bought a lot of stuff. Stuff comforted me. When I was buying things (even on credit), I felt wealthy. Stuff doesn't make me feel wealthy anymore -- it makes me feel cramped. With time, stuff simply becomes clutter. Slowly but surely, I'm banishing excess belongings from my household. I still sometimes buy more than I ought to, but mostly I've been guarding the borders of my life against the invasion of stuff. Here are some of the defenses I've been employing:
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Posted
Jun 23 2008, 05:44 AM
by
Karen Datko
This post comes from J.D. Roth at partner blog Get Rich Slowly. Financial news can be dangerous to the health of your investment portfolio. I spent some time recently reading articles about the stock market. What I found was mostly hysterical hype ("Gasp! Dow Jones Industrials tumble 400 points!"). All the financial stories seemed to be written as if our investment horizons were days, not years. No wonder people panic when the stock market hits a rocky patch. But do daily market movements -- even 400-point drops -- really matter? How important is up-to-date financial news to the average investor?
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Posted
Jun 16 2008, 06:10 AM
by
Karen Datko
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This post comes from J.D. Roth at partner blog Get Rich Slowly. My wife has always maintained a sizable savings account, but having extra cash is new to me. Until recently, I had always lived paycheck to paycheck, often treading close to a zero dollar balance in my checkbook for months at a time. Now, though, I've not only established an emergency fund, but set up a couple of targeted accounts as well. (One is for vacations, and the other is for a new car.) My method works for me, but others have different approaches. In her book "Debt-Proof Living," author Mary Hunt suggests a sort of emergency fund plus. Often, when people struggle with money, she says, the predictable monthly bills aren't the problem. People cannot cope with the unexpected things -- not just emergencies (like a severe illness), but irregular expenses like auto maintenance, wedding and birthday gifts, or a new pair of shoes.
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Posted
Jun 08 2008, 10:22 PM
by
Karen Datko
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This post comes from J.D. Roth at partner blog Get Rich Slowly. Consumers underestimate the power of comparison shopping, says a five-year-old report from the Consumer Literacy Consortium. "Consumers often do not realize that, for most products, a wide range of prices are available and, therefore, consumers often pay too much for the items they buy." (The study) results show that most consumers need a far lower price savings to persuade them to comparison shop than can actually be obtained from shopping around. These findings are particularly significant, since the available consumer behavior research indicates that, on the average, only about 50% of people shop around. An important reason as to why consumers do not shop around is the perception that it is not worth the effort. They rationalize that the savings potential will not be greater than the desired 10% savings needed to motivate action.
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Posted
Jun 02 2008, 05:37 AM
by
Karen Datko
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This post comes from J.D. Roth at partner blog Get Rich Slowly. I pulled out my camera gear last night. It's been two years since I used it regularly. Before I started Get Rich Slowly, I seriously considered trying to become a professional photographer. But for a long time now, my camera stuff has been gathering dust in the corner of my office. I can't even remember the last time I used it. It's fun to look at all my equipment again. It's fun to handle it, to imagine the possibilities. I'm eager to get outside and make some images. As I sorted through my bodies and lenses, though, I had to shake my head.
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Posted
May 26 2008, 06:45 AM
by
Karen Datko
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This post comes from J.D. Roth at partner blog Get Rich Slowly. I recently gave my first-ever presentation about personal finance. I spoke to a group of about 70 graduating seniors from a nearby university. I was the fourth and final speaker of the evening. Before I talked about personal finance, the audience listened to three outstanding descriptions of life after college. Brian Reick The first speaker was Brian Reick, who described his experience of moving from job to job. He began knocking on doors right out of school and eventually found work. But the job wasn't perfect, and neither was he. He was fired after only two years. This experience taught him a couple things:
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Posted
May 18 2008, 08:45 PM
by
Karen Datko
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This post comes from J.D. Roth at partner blog Get Rich Slowly. Recent research at the Stanford Graduate School of Business suggests that shopping can lead to more shopping. When such savvy marketing researchers as Uzma Khan of Stanford, Ravi Dhar of Yale, and Joel Huber of Duke noticed that shopping sometimes proceeded unchecked even in their own private domains, they decided to get to the bottom of things. Setting up a series of tests of purchasing behavior, they found that for most people buying that fateful first -- and often innocent -- item seems to open the purchasing floodgates. This realization, they say, has important implications for how stores are laid out as well as for understanding individual behavior. These researchers indicate that shopping is a two-stage process.
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Posted
May 05 2008, 04:08 AM
by
Karen Datko
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This post comes from J.D. Roth at partner blog Get Rich Slowly. "Saving is the key to wealth," I wrote recently while trumpeting the extraordinary power of compound interest. "If you do not spend less than you earn, and if you do not save the difference, you cannot build the wealth you desire." The younger you are when you begin saving, the more time compounding has to work in your favor, and the wealthier you can become. "The next best thing to starting early," I wrote, "is starting now." Other options A few readers noted that while the mathematics of compounding makes sense, it's not motivational for those too old to take advantage of its full force. "This is pretty depressing for those of us who spent our 20s with practically no income thanks to universities," wrote one reader. Her sentiments were echoed by several others.
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