Join us today for an episode about the way we use money irrationally...
Today's episode is focused on the irrationality of people and money...
In today’s episode about investing in others through stewarding your treasures, I talk with you about why we are often not rational in our view of money, why this matters, and how you can recognize and modify your view of money.
Join in on the Chat below.
00:00:00 Welcome to episode 685 of the inspired stewardship podcast. This is Wendy Gentry from Baker university. I encourage you to live your life from the inside out. And one way to be inspired to do that is to listen to this. The inspired stewardship podcast with my friend, Scott made her
00:00:35 where people go out and fuck purchase things to make themselves feel better. And it actually works in the short term because you get a dopamine hit from the purchase and you feel good. And then later you regret it and you feel bad again, or there's consequences to your decision and those consequences cause you to feel bad. Welcome. And thank you for joining us on the inspired stewardship podcast.
00:01:00 If you truly desire to become the person who God wants you to be, then you must learn to use your time, your talent and your treasures for your true calling in the inspired stewardship podcast. We'll learn to invest in yourself, invest in others and develop your influence so that you can impact the world
00:01:30 I talk with you about why we are often not very rational in our view of money. I share why this should matter to you and how you can recognize and modify your view of money. As we talk about stewarding your treasures, wouldn't it be great. If you could support this podcast and do it without costing yourself an extra dime, it turns out you can.
00:01:53 All you have to do is use inspired stewardship.com/amazon. When you're ready to make a purchase via Amazon and a small commission, we'll come back to support the show. If you enjoy the show, when you're ready to buy from Amazon, just use inspired stewardship.com/amazon. When it comes to our money where you've also got a degree to which we're irrational and our decision making is based so much on emotion,
00:02:23 as opposed to real concrete logic or weighing all of the pros and cons. You know, that book that I talked about earlier this week, predictably irrational that's, that's really the main focus of that book. Dan is a, a economist himself. He studies economy in psychology. He, so he uses money to frame his book though, as I pointed out earlier this week,
00:02:47 you can also use it to talk about time as well. And it's all sorts of things he talks about, you know, how we make decisions. And one of the anchors he talks about. One of the ideas he talks about is the idea of the menu effect. Meaning what choices you present to people affects their decision making. If you stop and think about this for a minute,
00:03:08 you've seen this where people come to you and they give you three options. But the truth is one of those options is so obviously bad that there's no possible way you would choose it. And so realistically you have two options. And because of that, we often end up being steered towards one of them. I'll give you an example. He, he talks about,
00:03:31 uh, the economist magazine, a subscription magazine, and it had at one time, this is different. Today, three options to subscribe for a year. It was $59. You would get the online version, $125 and you would get the print version or for $125. You could get the online and the print version combined. You would get both online and a physical copy and overwhelmingly people chose that third option because by having that $125 print only version option,
00:04:06 it suddenly became a no brainer to get both. And you effectively got one for free. That's what it looks like. And in fact, when you took that middle option out, when you offered the $59 versus the $125 online in print, all of a sudden overwhelmingly people would go for the $59 option. The cheaper one. See, normally we look at deals.
00:04:28 We think about pros and cons. We think about how much something costs, but we don't really just think about that in a vacuum. This shows how, when we present money, decisions can affect what we do. He talks about things like the anchoring effect. If somebody comes along and tells you once you've bought a product for a certain price, then you're kind of anchored to that price.
00:04:50 That price suddenly becomes the reasonable price. How, how we, uh, how we look at things like that, you know, think about supply and demand, which is a basic of economic principles. And yet the truth is that it's not exactly supply and demand. We can actually make decisions and have runs on a product that have nothing to do with supply and demand,
00:05:13 but actually have to do with the emotional feelings that we have around it. The anchoring effect can do that as well. Whether or not something is positioned as being free, affects our decision making when it comes to money because suddenly free things. It's a different mindset. It's a different thinking. We don't think about something that's free the same way. We think about things that cost money.
00:05:40 Again, he uses an example of, if a friend asked you to help move a couch, you would move the couch. If a friend offers to give you a dollar, to help him move a couch, all of a sudden it feels insulting because they've tied a social norm, helping a friend into a monetary thing and they've undervalued it. They going at a very low value.
00:06:04 But in fact, if we would price that in a different way, then all of a sudden it becomes worthwhile. So the way we react to things has to do with our emotions about it, has to do with how it's presented to us, has to do with how even our emotional state, you know, people will buy things. Sometimes when they're down,
00:06:23 it's called shop therapy or retail therapy, depending on who you talk to, where people go out and purchase things to make themselves feel better. And it actually works in the short term because you get a dopamine hit from the purchase and you feel good. And then later you regret it and you feel bad again, or there's consequences to your decision. And those consequences cause you to feel bad.
00:06:46 So there's always a pro and a con. There's always another shoe that can drop later. The way we view money really matters. Understanding that it's not this sort of black and white thing, but it's much more about our emotions, our decisions, our habits, our behaviors is important because for instance, doing a budget, doesn't actually help you save more money.
00:07:11 It doesn't actually help you achieve your goals. It's what you do in response to that budget. It's how do you track, how do you plan, how do you measure and how do you change your behavior? Based on that, it's the changing the behavior part that matters. This is why folks can get into and out of debt multiple times, despite being against debt.
00:07:34 This is why people can declare bankruptcy and then turn right around and do the exact same things that got them into the trouble in the first place and have to do it all over again. Because the way that we really view our money has less to do with the math and much more to do with who we are. This is why, if you begin to recognize that,
00:07:56 then you have some hope of beginning to move past this and to, to begin to set up systems and processes and habits and routines and behaviors that really change your whole life. Now, it's not perfect. It's never perfect. In fact, the truth is I've been doing this for decades now, and I still struggle at times with it. We all do it.
00:08:22 It's, that's one of the reasons that I've set up accountability, processes and accountability people. Because again, like we talked about with time, oftentimes going to that external accountability can help you get better. If you've got a spouse, that's an internal accountability tool as well. It's one reason that that can work, but only if you're communicating well, only if you're on the same page,
00:08:45 only if you're under standing each other and have shared values and shared goals and shared priorities. Does that work? This is again, one of the reasons that this can be so powerful when you begin to understand how we view money and how it affects everything in our life. Thanks for listening. Thanks so much for listening to the inspired stewardship podcast. As a subscriber and listener,
00:09:18 we challenge you to not just sit back and passively listen, but act on what you've heard and find a way to live your calling. If you like this episode on the stewardship of treasures, you can sign up for our treasures tips by going to inspired stewardship.com/treasures or text in the U S four four two two two treasures tips. And we'll send you five weeks of our best tips on stewarding your treasures until next time,
00:09:57 invest your time, your talent and your treasures, develop your influence and impact the world.
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In today's episode, I talk with you about:
Our aversion to loss is a strong emotion and one that sometimes causes us to make bad decisions. - Dan Ariely
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