Dollars and Sense: How We Misthink Money and How to Spend Smarter

People often say they’d prefer being the highest-paid employee of a company rather than the lowest-paid one—even if it means making less money.

During the experience, expectations actually have the ability to change how we experience the world around us.

People actually refuse free money in order to punish someone—someone they don’t know and probably won’t deal with ever again—just for making an unfair offer. These results show that we can value a dollar at less than zero because of our sense of fairness.

When vacationing at a posh resort, we often don’t get upset when we’re charged $4 for a soda, even though it costs $1 elsewhere. In part, this is because we’re lazy and like to lounge around like beached royalty. But it’s also because, compared to the thousands of dollars we’re spending on the rest of our tropical getaway, $4 seems like relatively

The language tells us a story. Then, listening to the description from open to pour, from tipped glass to inhaling the “nose,” from swallow to aftertaste, we join the wine’s story. That enhances and transforms how much we value the wine and our drinking experience.

The main psychological force of credit cards is that they separate the time that we consume from the time we pay. And because credit cards allow us to pay for things in the future (when exactly is our payment due?), they make our financial horizons less clear and our opportunity costs more blurry, and they lessen our current pain of paying.

We are willing to pay more when we see the costs of production, people running around, the effort involved. We implicitly assume that something labor-intensive is worth more than something that isn’t.

And, most important, when the payment is extra salient, we dramatically change our spending patterns. In short, because of the pain of paying, we’re willing to pay more before, less after, and even less during consumption of the very same product. The timing of payment truly matters.

more? If we’re like most people, we would enjoy the safari much more if we paid for it in advance. Why? Because if we paid for it on the last day, the last few days of the safari would be filled with thoughts like “Is this worth it?” and “How much am I enjoying this?” By having these thoughts constantly rattling around in our heads, our enjoyment o