A New Car or Ten Thousand Lattes?

At Big Think, Dan Ariely discusses ways to think about money so you splurge less — like equating expensive wine with gallons of milk and making paying hurt a little more. Ariely’s advice could have been useful to some people in the Congo, who lament they didn’t see their Prada suits as houses for their families. (HT: Marginal Revolution) [%comments]

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  1. Isaiah says:

    I frequently denominate big-ticket purchases in “neons”.

    My first car was a 1995 plymouth neon, and cost me $1000. It had no cruise control, AC, power windows or locks, or radio. About half of the paint had flaked off of the body, and it was ugly as sin. But it did take me 300 miles across Iowa to visit my girlfriend every weekend for a summer, to Florida and back to visit my grandma, to colorado and back for hiking trips, and to southern california and back twice for summer jobs, in addition to empowering me to get around town without relying on the charity of friends. in short, it gave me freedom.

    Now I have to think hard about if a new car is really worth 15 neons, or if that new laptop or TV is really worth 1.2 neons.

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  2. patrick says:

    You still can’t race or sleep in a latte.

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  3. Sendhil says:

    Our poor brains aren’t adapted to this world of a little plastic card symbolizing wealth. Making one’s expenditures more concrete is a great idea. (Following the lead of the Quantified Self folks may help with this too.)

    It seems like this point of view is gaining some traction in this age of “recession chic” and “frugalistas” (even on TV commercials, of all places).

    I’d humbly offer another perspective as well: It’s not just lattes you’re trading for the new car, it’s also lives. This essay remains relevant and well-written, ten years later: http://www.nytimes.com/library/magazine/home/19990905mag-poverty-singer.html

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  4. Joe Jubb says:

    It’s all about value to me… I’m not above spending the $$, but it absolutely drives me nuts that one night (in Canada) in a pub could usually buy me a good power tool. Paying $7 for breakfast, no matter how nice the restaurant, is just not worth it to me. Now, if I can only factor that value thing into justification for a(nother) new fishing rod.

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  5. Efftrain says:

    To Eric M. Jones and the rest of you who prefer to routinely back-stab our national defense, brush up on your Freakonomics. It’s a well-known fact that the marginal flyaway cost of an F-22 is around $140 million, but since the production line is shutting down as we type, we’ll use your number.

    From Air Force Magazine, February 2007:
    “To confront the F-22-led “Blue Air” collection, the joint force mustered its best “Red Air” threat—front-line F-15s, F-16s, and Navy F/A-18 Super Hornets. The F-22′s team blitzed the opposition with a favorable 241-to-two kill ratio. What’s more, the two lost aircraft were F-15Cs, not F-22s. The Raptors came through the engagements untouched.”

    (1 X $300mil) < < (241 X $50mil)? TRUE.

    http://www.airforce-magazine.com/MagazineArchive/Pages/2007/February%202007/0207raptor.aspx

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  6. C Mountford says:

    Surely this depends on how much cash the person has to spent at once – give a person $10,000 in one go and i’m pretty sure they’d go for the car. However, tell them that they’d have to save up maybe $500 per month for almost 2 years and i’m betting most would succumb to the daily latte…it’s not in our nature to think long term when it comes to spending and don’t stores love capitalising on this!

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  7. Anonymous says:

    I like the currency of barrels of pennies. A barrel (42 US gal like oil) of pennies is $2,500 or $60/gallon. A million dollars is 400 barrels of pennies. That’s a pile of drums 10 long, 10 wide, stacked 4 high. (before it smashes through the floor)

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  8. Bill Ford says:

    I measured the costs of my fly fishing gear at a per pound for trout cost. In the beginning (for the first season, before I knew what I was doing) my $500 investment in gear worked out to be about $200 per pound. Years later, with additional gear and supplies purchased I’m probably still at about $25 per pound.

    On a simliar note, I used to get really upset about how horribly i play golf on the one or two corporate tournaments I play in per year. Now i look at it from another angle-I’m getting two shots for the same price everyone else is paying for one shot……..

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