Three Questions About Money and Ethics

Lady Kemma recently wrote with a question about money and ethics:

Last week I went out with my work department. After feeding 30 people, all with individual checks, I left the harried waitress a generous tip. My colleague said, "You're leaving too much tip." I said, "The poor lady earned it." I left the money on the cash tray and got up to leave. My colleague proceeded to take some of the money off my cash tray and put it in her pocket. Since I only have to deal with this lady once a year, I let it go. Thoughts?

Dilemmas like this fascinate me. There are so many things going on at once, it's difficult to make a smart decision on the spot. I like to think I would have challenged my colleague — I've waited tables, and if I leave a tip for someone, nobody had better touch it. On the other hand, I'm often afraid to make a scene, so maybe I would have kept my mouth shut. I don't know. Just two hours after Lady Kemma sent her question, Kris and I faced a similar situation, but in reverse. Continue reading...

More about...Psychology

Getting to now: How to beat the procrastination habit

I am a procrastinator. I always have been. It's a character flaw, and I admit it. I've tried all sorts of things to beat the habit — Getting Things Done, e-mail reminders, dozens of list systems — but the only thing that seems to work is to:

Do it now.

This is blindingly obvious, I know, but many people lose sight of this fundamental skill. It's not that we don't know that we should do things now; it's that we've forgotten how. Here are some techniques I've been using to try to force myself to get to now:

    • Set aside blocks of time to do things. When I was talking with my wellness coach earlier this year, she asked me why I didn't exercise more often. "I don't have the time," I said. "Something always comes up." She wasn't impressed. "J.D.," she said. "You have to make time. Make an appointment with yourself to run or to go for a bike ride." The same principle applies to other things you might procrastinate. Kris and I used to schedule a block of time on Saturday morning specifically to clean the house. Each week we'd tackle a different room. If we didn't do this, I'd just put it off for weeks (or months). Pick an hour a day to get things done.
    • If it comes to mind, then do it. Often I'll be sitting on the back porch reading a book, and it will occur to me that some chore needs to be done — pruning the laurel hedge, for example. "I need to write that down so I can remember it," I tell myself. Wrong! What usually happens is that I forget to write it down, and even if I do, I just look at the list and procrastinate for weeks on end. The best move is to actually do the chore when I think of it. (Assuming, of course, that I have the time at that moment. Which I usually do.)
    • Use a timer to bring you back to reality. Part of the reason I procrastinate is that I have a rich mental life. This is just a flowery way of saying that I'm a daydreamer. I'm always lost in thought. One way to keep on track is to use a timer. I use the Ultrak Jumbo Countdown Timer, but not as often as I should. I set it for 48 minutes. When it goes off, it serves as an instant reality check: Am I doing what I'm supposed to be doing?
    • Do not multitask. Oh, how I love multitasking. "I'm great at doing many things at once," I told Kris once. She gave me one of those looks. "No, you're not," she said. "You're great at starting many things at once, but you never actually do any of them." Ouch! But she's right. In order for me to get something done, I need to focus my attention on it. Trying to do several things at once is a sure way to be sure they'll all be unfinished tomorrow.
    • Modify your environment to eliminate distractions. Distractions feed procrastination. How many of these have you told yourself:
      • "I'll just check e-mail one more time before I start."
      • "I'll go for a walk after I finish reading this magazine."
      • "I can paint the house next weekend. I want to watch the Seahawks game today."

      Whenever possible, eliminate distractions. Remove clutter and snack items from your workspace. When working on your computer, only keep the programs you need open. (Ha! I feel like a hypocrite for advising this — I can't even make myself close my e-mail client for five minutes.) Keep your office tidy. Don't turn on the television unless there's something specific you intend to watch.

  • Compare your actions with your personal values. Last week I wrote that it doesn't matter what we say is important to us — the things that are priorities in our lives are the things we actually do. How does what you do mesh with what you believe? If you say that getting out of debt is important to you, are you actually doing the things that will lead you to get out of debt? If one of your goals is to fit into your old Levi's, how is watching another episode of The Office going to help you achieve that? Go for a walk!
  • Take back your brain! I've mentioned this website before in the context of marketing. Its premise is simple: Instead of letting advertisers persuade you, use marketing techniques to advertise to yourself. While this is a great way to fight consumer culture, it's also a smart way to combat procrastination. Create some in-home (or in-office) advertising to remind you to stop putting things off, to encourage you to do it now.

Beating procrastination isn't rocket science, but it is psychology. For many of us, that's just as difficult. It's scary how well this Psychology Today article describes me. If only it gave some tips on how to move beyond this. Instead it offers one small slice of solace:

Continue reading...
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What if the Stock Market Makes You Nervous?

A couple of readers have mentioned that they're nervous about the stock market's recent volatility. I've read similar concerns on other blogs and financial news sites. People are worried that the stock market's performance over the last month portends an impending bear market, and they don't know what to do.

Reading these concerns reminded me of Why Smart People Make Big Money Mistakes, which I reviewed last week. In the book, the authors discuss panic selling as a common financial pitfall. When people suffer from loss aversion, short-term losses cause them to sell investments prematurely, which can lead to greater pain:

One of the most obvious and important areas in which loss aversion skews judgment is in investing. In the short term, being especially sensitive to losses contributes to the panic selling that accompanies stock market crashes. The Dow Jones Industrial Average tumbles (along with stock prices and mutual fund shares in general), and the pain of these losses makes many investors overreact: the injured want to stop the bleeding. The problem, of course, is that pulling your money out of the stock market on such a willy-nilly basis leaves you vulnerable to a different sort of pain — the pangs you'll feel when stock prices rise while you're licking your wounds. Continue reading...

More about...Investing, Psychology

Why Smart People Make Big Money Mistakes (and How to Correct Them)

Money is more about mind than it is about math — that’s one of the key tenets of this site. People make financial decisions based not on mathematical ideals, but on emotion. There’s actually a branch of economics called behavioral finance devoted exclusively to this phenomenon, exploring the interplay between economic theory and psychological reality.

On a recent train ride across Ireland, I read a book on behavioral economics called Why Smart People Make Big Money Mistakes (and How to Fix Them), which was published in 1999 by Gary Belsky, a former writer at Money magazine, and Thomas Gilovich, a psychology professor at Cornell University. In this short book, Belsky and Gilovich catalog a menagerie of mental mistakes that cause people to spend more than they should. What might have been a boring topic becomes fascinating thanks to an engaging style and plenty of anecdotes and examples. This book covers a couple dozen psychological barriers to wealth. I’m going to highlight just a few.

For example, do you treat “found money” — gifts from grandparents, tax refunds — differently than you do the money you earn from working? If so, you’re guilty of mental accounting, and it’s probably costing you. If you’re tempted to take money out of stocks when the overall market drops, you suffer from loss aversion, and overcoming it will allow you to earn more from your investments.

One money mist

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More about...Books, Psychology

The Tyranny of Stuff

"Did you learn anything in England and Ireland?" a friend asked the other day. I brushed the question aside; I didn't have a good answer. But I've been thinking about it. Maybe I did learn something: being gone for three weeks taught me that I have too much Stuff.

I've always been a packrat. When I was a boy, I had a closet that my parents called my "rat's nest". I stashed anything I could find in there. As I grew older and began to earn money, my urge to possess things became a compulsion: I bought tapes and records and books and clothes and comics. I would buy anything that seemed like a bargain. (I often bought on credit, of course.) I used to have a stack of Costco clothes in my closet that I'd never worn. I once brought home six boxes of free books from a bookstore's "going out of business" sale. These books may not have cost me any money, but I now realize that they weren't exactly "free".

How does this relate to my trip to Europe?

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You Are Your Own Worst Enemy

My friend Gillian called the other day — she's been having money trouble and was looking for help. "I'm not really a financial advisor," I told her. "I write about money, and I try to help people at my web site, but I'm not qualified to coach you one-on-one." Still, she's a friend, so I resolved to at least give her some advice. I asked her to explain the situation.

"Tom and I are working all the time, but we're always broke. He just wrecked his car, but we don't have money to get it repaired. We'll have to use the credit cards again. We don't have any other choice. There's never anything left at the end of the month," she said. "I need some help budgeting so that we don't keep having this problem."

"Well, let's see what we can do. I guess the best place to start is with your monthly income and your monthly expenses. How much do you and Tom bring home each month?" I asked. Continue reading...

More about...Budgeting, Debt, Psychology

The power of yes: A simple way to get more out of life

For much of my adult life I've been shackled by fear. I've been afraid to try new things, afraid to meet new people, afraid of doing anything that might lead to failure. This fear confined me to a narrow comfort zone. Recently, however, I made a single small change that has helped me to overcome my fear, and allowed me to get more out of life.

Last fall somebody at Ask Metafilter posted a question looking for books about self-confidence. One person recommended Impro by Keith Johnstone. Intrigued, I borrowed it from the public library. It blew my mind. Though it's a book about stage-acting, several of the techniques it describes are applicable to everyday life.

I was particularly struck by the need for improvisational actors to accept whatever is offered to them on stage. In order for a scene to flow, an actor must take whatever situation arises and just go with it. (Watch old episodes of Whose Line is It Anyway to see this principle in action.) Johnstone writes:

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The problem with the bank of mom and dad

An anonymous poster at AskMetafilter wonders should parents finance grad school?

Should parents help their children pay for grad school if they can afford it? My parents are divorced, but both are in households considered in the top 1% of the US in terms of income and net worth. After limited financial assistance from them during undergrad, I am getting no help at all for grad school. Am I out of line to expect that I should?

The discussion at AskMetafilter features some outstanding comments, most of which note that "no, you shouldn't expect your parents to help". But what do the financial experts say?

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There is no secret: The myth of the Law of Attraction

This review was written several weeks ago, but I shelved it for fear of making anyone cranky. Things have changed. The Law of Attraction cultists are out in force, and they're gunking up my site with comment spam. Now I'm having my say — I'm fighting back.

The Secret is a best-selling motivational book (and DVD) published last fall. I didn't hear about it for a long time because I live in an intentional media vacuum. After a couple people recommended it, I read it. Twice. Not because I liked it, but because I can't believe that people still fall for this crap.

What is the "Secret" of The Secret?

The "secret" is the Law of Attraction, which is not actually a law of anything. The Law of Attraction states that your life is a result of the things you think about. From a psychological perspective, this notion has some merit, and if the book explored the existing literature and research on the subject, I might not be writing this review. Continue reading...

More about...Books, Psychology

The Perfect is the Enemy of the Good (Walking example)

"I'm going for a walk," I announced to Kris at about 10:30 Saturday morning. Though it was cool and rainy, I needed some exercise. It's been a while since I made my three-mile stroll through the neighborhood. But before I could get out the door, I decided to change into warmer clothes.

I went upstairs and rummaged around to find the perfect pair of pants. I sorted through my sweatshirts, looking for my favorite. When I couldn't find it, I had to settle for second best. I put it on. Then I decided that the wind would be too cold on the back of my neck (I just had a haircut), so I pulled off my sweatshirt, put on a turtleneck, and then put on the sweatshirt again.

Now that I was dressed, I had to find my shoes. My lawn-mowing sneakers were by the front door, but I couldn't find my walking shoes. I eventually found them in my office. I put them on. I grabbed my iPod from the kitchen table. My gloves were there, too, and I paused for a moment to debate whether I needed them. I decided against them.

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