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Dollars and Sense: How We Misthink Money and How to Spend Smarter Hardcover – November 7, 2017
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“[A] surprisingly breezy exploration of the most common mental blocks to building wealth...It’s the rare kind of book that makes you feel a lot smarter, while simultaneously giving you actionable tips for improving your daily life.”
(Business Insider’s Best Business Books of 2017)
“[A] valuable guide... Engaging and funny, rife with anecdotes and advice, the book defangs a difficult topic while teaching a lot.” (Publishers Weekly)
“A lively look at how even the wisest among us are too often fools eager to part with our money...A user-friendly and often entertaining treatise on how to be a more discerning, vastly more aware handler of money.” (Kirkus Reviews)
“[An] engaging guide to decision-making about money...Highly recommended.” (Library Journal (starred review))
“If you want to get better at making good financial decisions, read “Dollars and Sense”…What the two authors do brilliantly is take behavioral economics and make it accessible.” (Washington Post)
From the Back Cover
Why is paying for things painful?
Why are we comfortable overpaying for something in the present just because we’ve overpaid for it in the past?
Why is it easy to pay $4 for a soda on vacation, when we wouldn’t spend more than $1 on that same soda at our local grocery store?
We think of money as numbers, values, and amounts, but when it comes down to it, when we actually use our money, we engage our hearts more than our heads. Emotions play a powerful role in shaping our financial behavior, often making us our own worst enemies as we try to save, access value, and spend responsibly. In Dollars and Sense, bestselling author and behavioral economist Dan Ariely teams up with financial comedian and writer Jeff Kreisler to challenge many of our most basic assumptions about the precarious relationship between our brains and our money. In doing so, they undermine many of personal finance’s most sacred beliefs and explain how we can override some of our own instincts to make better financial choices.
Exploring a wide range of everyday topics—from the lure of pain-free spending with credit cards to the pitfalls of house-hold budgeting to the seductive power of holiday sales—Ariely and Kreisler demonstrate how our misplaced confidence in our spending habits frequently leads us astray, costing us more than we realize, whether it’s the real value of the time we spend driving forty-five minutes to save $10 or our inability to properly assess what the things we buy are actually worth. Together Ariely and Kreisler reveal the emotional forces working against us and how we can counteract them. Mixing case studies and anecdotes with concrete advice and lessons, they cut through the unconscious fears and desires driving our worst financial instincts and teach us how to improve our money habits.
The result not only reveals the rationale behind our most head-scratching financial choices but also offers clear guidance for navigating the treacherous financial landscape of the brain. Fascinating, engaging, funny, and essential, Dollars and Sense provides the practical tools we need to understand and improve our financial choices, save and spend smarter, and ultimately live better.
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Okay, I was completely wrong—it’s nothing of the kind. I enjoyed reading this book. DOLLARS AND SENSE by Dan Ariely and Jeff Kreisler explains how we think about money, with special emphasis on the frequent ways we think WRONGLY about money. It’s not that we are stupid about money; rather, we don’t think objectively, and are easily manipulated in some areas.
I confess I am a bit of a chump and easily tricked by marketers, so this book was especially helpful to me.
For example, I really like those big, “50% OFF!” signs. I’m not alone, says the author. Bargains make us feel “special and smart. They make us believe we’re finding value where others haven’t.” I completely understand what the authors are saying. Deep down, I know I’m being manipulated by the “Savings” signs, but I still like the feeling of getting a great deal.
The authors discuss the “pain” of buying something. Not surprisingly, if there is little pain, we tend to “spend more freely and enjoy consuming things more.” That’s a big factor in using credit cards—they separate the moment of consuming from the pain of paying. “Credit cards capitalize on our desire to avoid the pain of paying.”
One of the favorite sections is the discussion of “Fairness.” We tend to value things more highly if we know a lot of effort has gone into the product or service. If it seems like the seller is gouging us, we won’t buy their product—even when it is in our best interest to do so.
The later part of the book provides suggestions to help us. First off, realize that some forces in our environment WANT us to make poor decisions. A bad decision by us means more money for them: “We fight a financial environment that actively tries to tempt us to make bad financial decisions. We live in a world where outside forces constantly want something from us.”
I thought this one suggestion was the best advice in the book: “From time to time, let’s stop and question our long-term habits.” Maybe getting that expensive coffee every day is not really a good idea.
Here’s an interesting idea that helps us save more money: We can also create a “Ulysses Contract.” (Named after the classic story of Ulysses tying himself up to prevent responding to the call of the Sirens.) A Ulysses contract is a process we setup to “create barriers against future temptation. We give ourselves no choice.” The idea is, have some sort of automatic savings process, to try to fend off future temptations. The authors cite a study showing that savings increased 81% under an automatic savings scheme.
So all in all, I found DOLLARS AND SENSE to be a fun, insightful read. It’s definitely not one of those “Make a Budget and Stick to it” type of financial planning books. The authors write clearly and includes a ton of examples, often citing scientific studies. I liked the funny illustrations by Matt Trower.
Advance Review Copy courtesy of the publisher.
Dan talks about a wide range of relevant research, not just his own. However, compared to his prior books, there is perhaps less detail on the research supporting his advice, and more of a focus on real world examples and lessons for daily life. Regardless, this book is a fun way to get highlights of what behavioral economics can teach us about money.
It is written in an engaging and entertaining manner. In fact, I found myself smiling and occasionally laughing as I listened (I had the audible version).
Also worth noting is that this book includes a very nice discussion of Mental Accounting, which is probably the most substantial research contribution of Richard Thaler, who won the Nobel Prize in Economics this year.
His studies had helped me to make better decisions everyday, based on what is important for me, and not for the aceptance of others. This book is as good as the others, but with updated insights about purchasing behaviours and experiential investments. The stories shared increase the spicy tone of the teaches (I'm pretty sure these come from Jeff).
If you want to learn about your own traps everytime you purchase something, I recommend you to read this book and keep it next to you credit card, your purse, or your wallet.