Quick link: the psychology of money and happiness

Read another interesting article today about the relationship between spending money and happiness.

“Just because money doesn’t buy happiness doesn’t mean money cannot buy happiness,” says Elizabeth Dunn, a social psychologist and assistant professor at the University of British Columbia. “People just might be using it wrong.”

Dunn and others are beginning to offer an intriguing explanation for the poor wealth-to-happiness exchange rate: The problem isn’t money, it’s us. For deep-seated psychological reasons, when it comes to spending money, we tend to value goods over experiences, ourselves over others, things over people. When it comes to happiness, none of these decisions are right: The spending that make us happy, it turns out, is often spending where the money vanishes and leaves something ineffable in its place.

Yet again, the bullet point summary is:

• spending on other people is more rewarding than spending on yourself
• spending on experiences is more rewarding than spending on things
• more money does bring more happiness, but only up to a point.

All of which things ring true in my experience. And it accords with the article I blogged about a couple of weeks ago.

Contrasting views on cheapness

We’ve maintained from the start that there is more to frugality than merely being cheap. Frugality is about deploying your resources wisely, to maximise your long-term happiness.

One thing that makes me happy is being satisfied about the ethical or moral consequences of my spending, so it’s worrying to read accounts of what happens behind the scenes to bring us truly cheap goods:

… in her lively and terrifying book “Cheap: The High Cost of Discount Culture,” Ellen Ruppel Shell pulls back the shimmery, seductive curtain of low-priced goods to reveal their insidious hidden costs. Those all-you-can-eat Red Lobster shrimps may very well have come from massive shrimp-farming spreads in Thailand, where they’ve been plumped up with antibiotics and possibly tended by maltreated migrant workers from Burma, Cambodia and Vietnam. The made-in-China toy train you bought your kid a few Christmases ago may have been sprayed with lead paint — and the spraying itself may have been done by a child laborer, without the benefit of a protective mask.

from a review at Salon.

The book is also reviewed at Boingboing, with some really interesting debate in the comments.

Then there’s this view of so-called ethical consumption, in a review in spiked online of Neal Lawson’s All Consuming:

Ironically, even the most fashion-conscious teenager is less obsessed with consumption than today’s anti-consumerists. The learned professors, journalists and political lobbyists who study in detail the choices available to the public are a sorry sight.

Of course such self-appointed experts are not opposed to all forms of consumption. Although they despise the purchase of luxury items by the masses they are happy to indulge what they see as their own refined tastes. Indeed, the notion of ethical consumption is essentially a way of validating the shopping of the elite while deriding the masses at the same time.

From the elite’s perspective, consumption becomes what author James Heartfield calls ‘status affirmation’. The purchase of what are deemed to be ethically acceptable products is seen as marking individuals out from the rabble. So anyone who likes, say, ordinary chocolate biscuits is sneered at as a gullible consumer while those who eat overpriced organic Duchy Originals are viewed as cultured individuals.

from here. And there is something in that. It isn’t much of an advance to replace one sort of snobbery with another. But still, if one kind of snobbery is helpful to others while another isn’t, I’ll opt for the first over the second.

But what if we don’t buy new things at all? What if we only buy old things and reuse them, or recycle goods?

… salvage itself is a mechanism, both in practice and in thought, procedure and ideology, deeply ingrained in the circuits of late capitalism. And much further back than that.

From the total inanity of green “upcycled” goods (“ie. recycled/reclaimed into something special”, because “Ethical is Beautiful” and they insist on “only using laptops“) to wrenching fillings from your teeth to sell to Cash For Gold U.S.A. (for the oral hoarding days must come to an end in these lean times). From the total staggering obscenity of price mark-ups at trendy vintage clothing shops to desperate children rummaging through the stinking mountains of trash. These are apocalyptic times generally, but in particular, the figure and action of salvage looms perhaps largest.

from Putting the Punk back in Salvage, pointed out by Giovanni Tiso. Particular venom is reserved for vintage clothing, which hurts me.

Dear reader, you must decide what to do for yourself. If you have a coherent plan, please share.

Spending money on what gives you jollies

An important part of the philosophy we have been trying to promote here is that spending money is not bad in itself; rather, spending money on things that don’t give you jollies is bad, if you could be using that money on things that do give you jollies. True, this could be rather broadly defined — not having a penniless and starving old age sort of gives me jollies, but not in the same way as some really classy coffee beans, or seeing a good show — but in principle anyway we are trying to encourage applying your resources where it counts for you, whatever that means.

So I was intrigued by a New York Times article on people’s spending preferences and satisfaction.

I cannot help but feel that we are getting a view into the psyche of the New York Times reader rather than a universal guide to human happiness here, but it’s still interesting.

…we were struck by how much overlap there was between the most-expensive list and the most-happy list. People repeatedly included on both lists their homes, their college education, their vacation trips, their high-priced electronics (large-screen televisions, Blu-Ray player, audio equipment, computers) and certain models of cars (BMW 325, Audi A4, Jaguar, Subaru WRX, Toyota Prius, Honda Civic).

Personally, looking back, I would say:

Expensive but jollies-producing: musical instruments, foreign travel, books, my espresso machine and grinder.

Expensive and a big waste: rollerblades and other speculative forays into hobbies that didn’t take; the cake mixer and certain other marginal kitchen appliances; ill-advised “investments”.

Cheap and jollies-producing: musical engagements, large and small. Cooking nice food from crap ingredients. Class fees for capoeira.

Of all the material goods I own, I’d have to say that right now, my Ortlieb pannier bags are giving me the most jollies from sheer joy of possession, never mind their utility. I feel a bit stink about being so attached to such mundane objects, but I cannot help it.

Cheap and cheerful, or expensive and durable?

A warm and frugally welcome to our new visitors from Pundit. Thanks to a comment from George Darroch on a post there, we seem to have acquired quite a lot of you.

I was interested to read Eleanor’s post, The Frugal Elitist, because among other things it outlines a strategy that I find quite tempting at times: to buy an expensive item on the basis that it will outlast several cheaper ones, or yield more jollies than several cheaper purchases.

My husband calls me a ‘frugal elitist’ because I insist on buying quality but I don’t buy much. When we moved into our current home we found we needed an extra bookshelf and something to put dishes in. We ended up with a leather and wood bookshelf and a beautiful oak Dutch hutch we will use for the rest of our lives. We could have bought something much cheaper that would have done the job in the interim but I prefer to have less and better stuff. (more)

I think this strategy can be sound but it needs some strong caveats.

First, some things are out of the question for me because I tend to lose or break them easily: quality sunglasses (broke them), leather gloves (lost them).

Second, if you have any aesthetic sense at all, you can be tempted into buying things that are merely beautiful without being more durable, functional, or efficient than the cheap equivalent. For instance, a lot of clothes fall into this category.

Third, I don’t have deep knowledge about many things. For example, I do buy expensive musical instruments. I know their ins and outs, I know what I’m looking for, I know what’s rubbish and what isn’t. I am on much shakier ground with consumer electronics, or cars. If you don’t know what good construction looks like or what fabrics last, how can you tell whether an expensive coat will last one season or five?

Fourth, you have to actually do the maths. For example, my bookshelves include some very cheap ones from the Warehouse. They’re ugly, but they’ve lasted years and several moves, and probably have another move or two left in them. If I need more shelves, my first thought is going to be salvaging some planks and bricks, student-style. The expensive shelves that last a lifetime just don’t add up as a deal for me unless they actual cost less than a lifetime’s supply of cheap ones from the Warehouse. No doubt Eleanor is more averse to squalor than I am, and I don’t disapprove of the mindful purchase of something that gives you great jollies (like my musical instruments), but we shouldn’t kid ourselves that something represents a saving when it isn’t.

Fifth, unless what you are buying will appreciate over time, then it has to be not just the same cost as a lifetime supply of cheap things, but a bit cheaper. Here’s why. Suppose I could buy 5 cheap frobbles that last 5 years each, or one very durable frobble that lasts 25 years for $1000, and suppose I have $1000 lying around. If I take the cheap strategy, I only lay out $200 upfront, and I can invest the remaining $800 until my five years is up, invest the remaining $600 plus interest from the first five years for the next five, and so on. And also, I have the flexibility to decide I’m not that into frobbles any more, and spend my $800 on something else. If I take the expensive strategy, I lose all the interest, and my money is all sunk into one frobble which I may have to sell at a loss if I need the cash.

So I think my overall strategy would be this:

1. Things I am paid to take away. Free is for people who lack ambition.
2. Free things.
3. Where I don’t care about beauty, a succession of cheap things OR one expensive one, whichever has the least lifetime cost, bearing in mind whether an expensive one holds its resale value.
4. An expensive thing that gives jollies, looks nice, and lasts longer than a bunch of cheap ones.

Value for money in legumes

Following up on Stephen’s post on the musical fruit, I thought I’d weight up my options on chickpeas, one of my favoured legumes.

Chickpeas are blimmin great, they’re moister than most legumes, they make dishes like hummus (one of everybody’s favourites), and spicy pumpkin and chickpea soup.

The question you have to ask yourself is, is it better to buy dried or tined beans? From an environmental point of view you’re going to go for dried. Other than the cost of heating the water to cook the legumes, the only other cost is transportation of said legume to the market in which you the consumer purchase it. Tinned things on the other hand are heavy, using more fossil fuels, and need additional products like tins to be manufactured.

So no real competition there.

But. And there’s always a but. Are they easier on the back pocket?

100g of dried chickpeas from the local New World costs $0.99, and that seems like a pretty good deal right? Even with the cost of cooking them added in, they’re still going to come in cheap (incidentally, if anyone knows the kw/h used by a typical household stovetop, I’d love to hear it. The interweb has been useless in this instance).

I took my 100g of chickpeas, soaked and cooked them, and ended up with ~230g of ready to eat peas.

In the tinned variety, you can buy 415g of cooked chickpeas from the Pams range for $1.55. That’s almost twice as many peas for only $0.56 more, right?! Wrong. Once you tip off the brine they use to preserve the peas after cooking them for you, you end up with ~245g of peas.

My shonky maths stands to be corrected, so lets run through this carefully.

• Dried chickpeas are $0.99 for ~230g ready to eat, making them $4.30 per kg.
• Tinned chickpeas are $1.55 for ~245g ready to eat, making them $6.33 per kg.

What this tells me is that the manufacturer has added 68% more value to their product by cooking them for you, which is lovely for them but not so lovely for you – or the environment.

And this is why frugality is so important to me. By getting it together to cook my own chickpeas I’m not only saving myself money, I’m preventing communal resources being squandered on useless commercial activity. Worse, supermarkets are full of this type of crap. Instant pasta sauce? I’m looking at you, buddy…

UPDATE: There’s an “Turkic” store of some kind in Newtown that sells pulses. Their chickpeas are $5 a kilo. This would add up to $2.15 per kilo cooked. I’d say you’re hard-pressed to find a better bargain than that.

The place is on the corner of Constable/Riddiford St, heading towards New World. Which I was.

Family history and fatherly advice

Sorry for the posting pause. My daughter is visiting for the Oz school holidays, and Dad came to stay for a few days, and what with one thing and another a coherent post didn’t make it to the top of the to do list. (And that Che fulla is just not pulling his weight).

While Dad was here we talked about this whole frugality business. My grandparents were all working class and frugality was a necessity, not a lifestyle choice. My parents were likewise careful. Mum made our clothes when we were little, Dad had a huge fruit and vegetable garden, there were home-made preserves, home-brewed beer, and a hard-nosed approach to every major purchase. So I thought that he would just approve of my new-found commitment to frugality straight away, for the ancestral habits are frugal.

But no. “What are you saving for?” he asked. And then he pointed that he and my Mum saved most of their adult lives, and just as they were beginning to be able to relax and enjoy, she died. In retrospect, he thought they might have been happier if they had spent more and scrimped less.

That is something I have been mulling over ever since.

• Frugality preserves my independence. In highly-paid jobs there is the concept of “fuck you money”, which is the amount you need to be able to walk whenever you feel like it. Highly-paid or not, saving is the only way most of us will ever acquire fuck you money.
• Frugality is a moral choice to take no more than our share of the communal resource.
• Frugality is the best insurance against adverse circumstances: practising it increases my capital while decreasing my wants.
• Frugality frees me from keeping up appearances. I am not shabby. I’m frugal. (OK, I’m shabby AND frugal, but you know what I mean).

Those answers deal with the criticism “you can’t take it with you.” It’s true that my savings are useless to me when I’m dead (although they’ll be damned handy to my family), but it is the act of saving as much as the result that provides the rewards.

So why be frugal?

My most humble opinion is that frugality is best when it’s either: something your born with, or something you learn. Now, if that sounds like I’m pretty much stating the obvious then you’re probably missing that frugality is also something that can be forced on you. ‘Being poor’ is really just enforced frugality.

The kind of frugality I think we’re driving at here is the sort where you could afford to buy a stonking great Ford, but don’t. And why? Either because you know your mother would frown, or because you know that the petrol will cost too much (and it’s bad for the environment anyway).

When writing to this site I really want to outline and build a philosophy of being frugal. Not because of tight-fistedness, but because of a conscious decision to buy less junk, and to make more sense out of what it is that we all do; constantly consume.

So let’s start by stating that we all have to consume, and consumption is what drives the modern economy. If you live in a city then you have no option but to purchase goods and services from other people. And in doing so, you enrich others, as they enrich you by purchasing what you offer. Not exactly rocket science.

But who says that we have to purchase what the market offers? The market is always growing, changing, and evolving, but it isn’t always smart. Sometimes it offers you cheap stuff that looks like a bargain, but you’re actually doing yourself and others around you a disservice by spending your cash on it. Worse! Some people buy crap with money borrowed from Australian banks… In other words, they borrow from another country to buy crap from a further country, and offset that purchase with the value of a good or service they haven’t even provided yet.

And the last paragraph is the last of the economics you’ll hear from me. Because I’m not very good at it.

I do have common sense however. And buying crap that I only believe I need is something to be avoided.

My contribution to this blog will centre on consumption. Do I really need all the stuff I’m surrounding myself with? Do I need to pay someone else to do something that I could easily do, or learn to do, myself?

My own observation about current New Zealand society is that we’re moving away from No.8 wire thinking and forgetting how to do really simple things. Simple things like cook a healthy meal. Instead we pay someone else (often an Australian), to make a pre-packaged meal that we have to use a specific appliance (a microwave) to “prepare”. Now right there is a whole lot of spending that you don’t need to do. You don’t need a microwave to cook things when most if not all houses have a stove (so why buy one?), and you don’t need to pay someone else to cook for you (because it’s easy, even for time-poor people).

At the heart of all this writing will be a philosophy of a simple life. A life that can be full of gadgets, games and gourmet food, but a conscious life, one where I know what I’m consuming, where it’s come from, and where it goes to when I no longer need it. It won’t be perfect, but then neither are you or I.

A penny saved is more than a penny earned

This blog is dedicated to frugality: in other words, we are thinking about making the best of what we already have, rather than trying to get more. And yet, isn’t getting more a worthwhile goal? Why shouldn’t we put as much effort into making a dollar as saving a dollar?

There are two reasons.

First, tax. Every dollar you earn is taxable. So if you earn one extra dollar, you’ll keep less than one dollar. Maybe quite a lot less, if you earn enough. But if you save one dollar out of income which has already been taxed, that whole dollar is yours. If a few seconds of self-control save you a dollar, that’s a lot easier than working for it.

It’s worth figuring out what your net after-tax earnings per hour are. Then when you contemplate a potential saving, you can say “it would take me x hours to earn that money.” If you only think of savings at their nominal price, you’re leaving out the chunk of your earnings that goes for tax.

Second, this blog wants you to lead a more fulfilling life. A life where you only do things that you think are worth doing for their own sake. Sadly, many of the things that would get you an extra dollar demand you do things you don’t want to do. This would be the Tom Sawyer definition of work:

Work consists of whatever a body is obliged to do, and […] Play consists of whatever a body is not obliged to do.

(If you can get extra dollars doing things you want to do, you go for it and don’t let anyone hold you back).

If you have to work all the hours God sends to make those extra dollars, that’s not necessarily the best use of your time, if you have other goals than accumulating money. We all know that time is money—the corollary is that money is exchangable for time. I am mingy about the exchange rate. In this blog, we will assume that you are too.