Afford Anything - The Emotional Complexity of Money, with Dr. Dan Ariely

Episode Date: August 31, 2020

#273: Dr. Dan Ariely, famed behavioral economist and best-selling author of Predictably Irrational, returns to discuss how to handle the emotional and financial volatility of 2020. Specifically: Preparing for a job loss The value of resilience Handling emotional spending Cutting through the noise to find a signal. For more information, visit the show notes at https://affordanything.com/episode273 Learn more about your ad choices. Visit podcastchoices.com/adchoices

You can afford anything, but not everything. Every choice that you make is a trade-off against something else, and that doesn't just apply to your money. That applies to your time, your focus, your energy, your attention, anything in your life. That's a scarce or a limited resource. Saying yes to one thing implicitly means saying no to something else. And that leads to two questions. Number one, what matters most to you? And number two, how do you align your daily decisions in accordance?

Answering these two questions is a lifetime practice. And that is what this podcast is here to explore. My name is Paula Pant. I am the host of the Afford Anything podcast, and today, behavioral economist Dan Ariely joins us to talk about how to handle the emotional and financial volatility of the year 2020. Dr. Dan Ariely is the James B. Duke Professor of Psychology and Behavioral Economics at Duke University. He is the New York Times bestselling author of many books, including Predictably Irrational, a book that challenges our assumptions about our ability to make rational decisions.

His TED Talks have been viewed more than 15 million times, and in 2018, he was named one of the 50 most influential living psychologists in the world. Dr. Ariely is the chief behavioral economist at Capital, an app that uses lessons for behavioral economics to help its users build stronger money habits. And this is his second time on the Afford Anything podcast. He joined us a few months ago to discuss behavioral finance, and today he joins us to talk about how to prepare for a job loss before it happens, how to think about cutting down on spending, the value of resilience, how to handle emotional spending, the illusion of control, and how to cut through the noise to find a signal. If you enjoyed the insights that Dr. Ariely shared during our last interview, or if you enjoy behavioral finance, you will love today's episode. Here he is, Dr. Dan Ariely. Hi, Dan. Hello, hello.

How are you? I'm excellent. How are you doing? Excellent. That's a little bit too much, I think, for these complex days. I am tired, but I'm having a momentarily good day, which is admittedly rare. Yes. So I think the whole question when you say, how are you?

The question is, what's a 10? What's excellent? Is excellent compared to regular days? It's compared to Corona days. and, you know, we get used to things. Actually, it's surprising, right? We've been at these things since March, and all of a sudden, happiness is measured in very different ways.

So I'm okay. And we tend to overweight that, which we can easily recall. Yeah. Yeah, so my last few meetings have been tough. So maybe that's the reason for okay. Oh. Well, I hope that then after this interview, this will be so good that whatever you do next,

you'll be starting at a higher point. Very good. I'm hoping for that. Dan, as you know, many people in the U.S. are about to, presumably, to the best of our ability to know any of this information at all, it looks like people are about to receive reduced unemployment benefits. Those who have lost their jobs will not be collecting as much as they were. And they also have given a spike in unemployment claims, probably no hope. of finding or little hope of finding new work. How do people rationally manage their money

in a time of such logistical and emotional upheaval? Yeah. So first of all, it's very, very tough. And the thing to understand is that the emotional complexity of losing a job is very, very high. It's a bit like a death, right? There's something that happened that is not really expected you didn't plan for it, you don't know when it's coming, and especially for people that some of their friends at work remain employed

and they lose their job. It's a heartbreaking process. So it's not just the loss of money, it's loss of energy, of motivation, very, very tough situation. Nevertheless, we can't ignore the economic realities. And the first thing that people should do, and maybe they should do it even before they get the bad news as preparation, is to basically figure out what are the things that we can cut from our consumption

that would not be too painful. So you can say, oh, you know, I've been ordering out twice a week. Let me cut it down to one or zero or once every two weeks. Something like that, right? There's some things we can do that when we look at our spending, when we say, oh, this costs us a lot of money but didn't give us a lot of happiness. Let's cut it down. that's kind of the first thing to do in preparation. And then the second thing to do is to create a

plan for what are we going to do if and when we get this bad news that we've lost our job. Now, if you don't lose your job, you shouldn't cut too much because life is not about being miserable, right? You should cut some, but you shouldn't go into emergency action. But you should have a plan. Do I sell my second car? Do I take the storage space I have? and give it up. What are the things that I have that, if I have something that is long-term, I should cut expenses? One of the interesting things about cutting expenses

is that when we increase our expenses, we increase them across the board. So let's say we get the one day we get the higher salary, we buy slightly better cheese and slightly better wine, and every category goes up a little bit. When we lose money, the easiest thing to do is to cut down whole categories. So you don't just go to the same restaurant and don't eat dessert.

Because that's very tough. You go to the same restaurant reminds you that you can't do the same. But if you cut down restaurant, it's easier. You don't just reduce the quality of wine you buy. You just completely go down to cheap wine or whatever it is. So we need to have to start being more careful with our money in general from today or tomorrow. And then we need to create an action plan. What if?

What are we going to do? And then, you know, you said that it's very unlikely to find a job. Yes. I mean, it is going to be tough because there's not going to be lots of unemployment, but it doesn't mean we need to give up. And there are a few things we need to do. The first thing to realize is that finding a job in a time with this high unemployment just means getting lots of nose and not getting too impressed.

In the 2007-2008 crisis, the British government found that, people in average had to look for 100 jobs before they got one. That just means waking up 50 days and sending two resumes and hearing no and no and no and no for two months and then hearing a yes. So we need to not take no as a signal that we should stop, right? The thing that we do is you hear no, you hear no, you hear no, it basically depresses you and you don't want to keep on going. We just have to keep going.

One message is, yes, it's going to be a tough world. A lot of people would look for a job. The people who would be successful are the one who are more resilient. It's just trying. It's just trying. Another thing to consider is that people have a very hard time going back on pay scale. So imagine you were engineering a company and on some scale you were engineer five. Let's say higher numbers are better.

And there's another company. is offering to be engineer three at 75% of your salary. A lot of people find this very offensive. You know, we define ourselves by a job. We define ourselves by our success. We take pride in our progress. And all of a sudden, going back is a very, very tough thing to do. So often what people do is they just don't want to go back. And they reject jobs that have those characteristics. But we shouldn't. No, I'm not saying take any job. But it is also not the case that you should not look at jobs that are below your current grade or below your current income.

If I summarize, it's basically cut things now that don't give you enough happiness, make a plan for a day, for a rainy day if you get bad news about losing your job and try, try, try. And then don't look too badly at stepping to a different job or even bad. for a while. You mentioned that when people's expenses rise, when that lifestyle inflation happens, expenses tend to rise incrementally across the board. You might buy nicer cheese, nicer wine, slightly nicer clothes. But when a person cuts expenses, the easiest thing to do is cut a whole category. What safeguards can a person put in place to keep themselves from simply substituting

that category with something new. So you're saying what happened is you, let's say you decide to give up wine. Exactly. And now what you do is you say to yourself, oh, I have all this money that I freed up. Right. And then you substitute it with something new, like a more expensive cable package. Yes. So first of all, you know, if you do a little bit of it, it's not the end of the world.

And so if you cut $200 worth of wine and you want to add. $20 to your cable, not too bad. But what you write about is that you don't want to feel rich because you have a little bit less spending, and all of a sudden, you find a different use for it. This is the place where budgets are actually quite helpful. So if you look at your budget from last month, and you say, this is a reasonable way to spend my money,

I'm taking down this category, but I'm not going to spend more on other categories. That's kind of the important starting point. You can't basically treat the money and say, oh, I have more money now in my checking account. That's just not the right approach. You have to stick to the categories, and the categories you decide not to cut, it's important to keep them at about the same level. You also mentioned the importance of being resilient, the importance of being persistent as you

look for jobs or that same idea could be applied to a job. a lot of different uses, such as if you're a freelancer and you're looking for clients or you're sending pitches. How can a person maintain and build that resilience given that the natural thing to do after hearing sustained rejection over time is to give up? Yeah. You know, resilience is a fascinating topic. I'll tell you a long story about this. I became interested in resilience because lots of people with bad injuries write me. So I myself, as you know, I was badly injured and I write about it in my books quite openly about the challenges of being I was badly burned.

I spent three years in hospital and lots of people with injuries write me. They don't care about my injury. They care about their injuries. And they're trying to figure out how do you find happiness and join life and so on. And, you know, when I can, I try to help. And there was one guy that I tried very much to help. and eventually he committed suicide. And I couldn't help him find a joy in life.

And when he committed suicide, I tried to figure out why he gave up and why some people seemed to be resilient. So I started spending a day with people with different injuries and challenges and trying to figure out what separates the people who have resilience and not. And I don't have yet an answer, at least not a complete answer.

But one of the things I found was that the people who seem to have resilience define their goals very differently. So Ben, the guy who committed suicide, looked for the meaning of life. He looked at the meaning of life. He was very badly injured and he couldn't find the meaning of life. What do you do that he's meaningful? The people that I find that are very successful are people who say, in a month, I want to be able to move my leg.

And in two months, I want to be able to lift a glimilar. glass with water. So they basically define very small tasks that are measurable and they can see progress. They take time scales that they can see progress. They don't look for the meaning of life. They look for something I want to see progress in two, three, four weeks. And I in, of course, there's other lessons as well. But I think for me that's one of the main lessons is that when we want to have motivation, we need to define the behavior in very concrete terms. and we need to see progress on some reasonable time scale. So let's go back to work.

If we said that in 2007, 2008, you had to apply to 100 jobs. We shouldn't feel good or bad about getting a yes or enough from a job. That's just out of our control and it's more probability anyway. We should redefine the task and say, did they submit to resumes today? right in the moment you've done that you should feel good about yourself right i did my job i said to resumes now you can play another game with it you can say you know what it's not about getting a job it's just getting this company to acknowledge they got my resume that's great intermittent step right because many people don't even acknowledge getting it let me get them to call me things like that so

we need to make the outcome that we're looking for more within our reasons measurable and in our control. And there's a concept in Hinduism called karma. And there's lots of definitions of karma and different people look at it differently. But my definition is that it's the law of cause and effect. And it means that when we do good things, we increase the probability of good things will happen to the world and to us. And when we do bad things, we increase the probability that bad things will happen

to us and to the world. And it's not deterministic. It's not for sure. It's probabilistic. It might happen. It might not. We don't know. But our job ends at the end of our work.

Right? So my job is to do good things. And when I do good things, now it's the world turn. And they might come back in a good way. They might not. I don't know. But my responsibility ends at me doing the best job I can. So in our world,

it's about if you worked on your resume and you wrote it in a way that fits this job and you did the right adaptation, you didn't cut corners and you did the good job, you should be happy with yourself. It's not about the outcome. It's about the fact the moment things left you, it's up to you. The markets continue to confuse a lot of people this year. We're in a recession. we have a record unemployment, the market as of the time of this recording is still high. How do people cope with the inevitable confusion that arises from the fact that circumstances around them seem so random, that the law of cause and effect does not seem to be at work in this environment?

Well, or you could say the relative amount of randomness compared to signal is very, very different, Right. So we do have a lot of randomness. And what's happening to the stock market is baffling. Now, the U.S. government printed a ton of money, people who have jobs, money go into pension plans. Pension plan keep on investing in the market because there's nothing else to do. There is a reinforcing cycle that is not about the logic of the market. It's just because the system has been designed to pull money into the markets. So, you know, more money will come into the market. If a month happened and there's no good news in the market, still, all of our pension plans need to go somewhere.

So it has nothing to do with the logic of the market. It's just a load of money goes into it and it has to find its way somewhere and then it keeps value propped up. But in terms of the logic around us, it is incredibly confusing. It's very hard for us not to try to interpret things. right we look at the sky and we see clouds and we immediately make stories we say this big cloud is changing the little cloud and this cloud is a good one and this little one is not so good we're so good in telling stories we look we look at random patterns and we tell stories and in the stock market it's the same thing at the end of every day you see these pundants

review the market and they tell you a story but you know they could have told you the opposite story it would have been just as convincing so so a lot of it is just interpreting noise and not signal. I personally try not to look at the market too frequently. If I was going to make different decisions, I would read more. But right now, I don't really think I know more than other people. I don't think I'm clairvoyant, certainly not more clairvoyant than other people. So I kind of assume I'm generally informed, but I don't have any.

particular edge over other people so I don't have anything on top of you know that other people don't know I like I don't believe that I know that the market will go down and other people don't so the basic thing to do is to say look I have no idea but I don't want to focus on the unknowns let me focus on the things that I could do something about now here's the thing if you think about all the asset classes all the asset classes we have stocks and we have and we have real estate and you can make more asset classes if you want. But the biggest asset class we have is human capital.

That's the biggest one we have. And if we're up to investing in anything, I think the right thing is to invest in human capital, which is basically let's take a course, let's improve ourselves. You know, all the other categories, it's unclear what's going on with them. Our human capital is staying with us. That's the one we should build. So I would say, yes, confusing, difficult, complex, unclear, but let's not spend too much time on debt. And let's take the one thing that we can control, which is also going to stay with us for longer, and let's try to invest in debt.

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You've mentioned multiple times. Signal versus noise. How do you separate the two? And what tips do you have for anybody who's trying to figure out how to filter information in an over-informed age? Yeah. So let's even think about, I think about like COVID information or what's happening in politics, what you have something in mind or just very general? Yes, I mean, all of the above. I think the root of it is the core decision-making skill of how to filter through an abundance of information to find the core of what matters. Yeah.

So basically there's kind of two two big strategies. The first one is trusted sources. And so you could decide what the sources that you trust. let's just make up the New York Times as one of them. And then there are other sources like Facebook where things come from all kinds of places where you might want to weigh them less. Generally, we don't do the exercise of figuring out the credibility of the source. We just read something and we don't when we don't change.

As things become more complex and there's more information, I think there's more of a need to go first to trusted sources. And the reason why I'm saying first is that because our first impressions matter a lot. So if you say, I have a question of whether masks work or not, let you say. I'm not sure. If you start by looking randomly, you'll get all kinds of responses. And sadly, the first responses you would look at, the first thing you would read would have too large of an impact on your opinion. So you just so happen to read some, you know,

websites that are uninformed, you will get the impression that masks are not helpful. So in era when you have too much information, you should first go to places with high credibility. And the reason is because that's what would create your first impression. It will have the biggest effect. If you first go to low credibility sources, they will have too much of an impact on you and it will be less accurate. So if you say, should I look first, let's see you trust in New York Times and you don't think that Facebook is very informative, go first in the week times and then to Facebook rather

than the other way around. So that's about credibility, credibility and about sequencing timing when you want to first get credibility. The other thing is about averaging information, getting information from lots of places, not stopping too early after one. And this is actually a very complex advice because if you look at some information and it's, It's frightening or complex or something, you don't necessarily want to keep on reading about it. If I start, I look at an article on what's happening to people who are being breathalized during COVID-19. I don't necessarily want to keep on reading more things about that. But it's a place where we have to, right?

We have to assume that each report has some grain of truth and some grain of bias. and hopefully the bias is not systematic and if you read lots of them the average would be a better representation than the individuals. Not perfect, but it will be a better representation. So it's good to read a variety of things and get an overall impression

about what is the understanding of the facts. No, I'm not saying go to uncredible resources but if you're trying to do something and let's see you're going to the American CDC also go to the European equivalent, also go to the South Asian equivalent, maybe the Korean, get a variety of sources to look at this.

You know, we're asking the question whether people build immunity to COVID-19, look at what the CDC is doing, look at what the British are doing, look at what the Dutch are learning, the Swedish, get a variety of sources, and overall that will be better. What you're describing sounds very time intensive, very labor intensive.

Yes. There are many things, everything ranging from health information to financial information to career development that we need to learn about and make decisions about and form opinions about on a daily basis. How do we rank such things? How do we decide where to focus those more labor intensive efforts? Yeah. So think about those two strategies.

There's a strategy of credible sources, and there's the strategy of lots of work. Mm-hmm. You know, in general, I would say start with credible sources. That's always a good strategy. And then if you don't feel sufficiently satisfied, then go for variety. I think that's overall a generally reasonable strategy. People often spend for highly emotional reasons. People often spend in order to cope with feelings of anxiety, fear, even guilt.

Given that we are living, as the cliche goes, in such uncertain times, many people right now are facing a high temptation to emotionally indulge themselves through spending at precisely the time that their budget is least able to accommodate such a thing. do you have any advice for people who are facing that dilemma, whose essentially financial coping mechanism is now taken away? I would say go cheap. The thing you're mentioning is it's really about control. So much of our control is being taken away. And shopping is one of the ways in which you can gain control, right? You basically go somewhere, you wave your little plastic card,

and things in the world move, right? something that used to be somebody else's, it's all for a sudden yours. It's an amazing power to have. And, you know, it is a feeling of control and we have lost lots of control. So wanting to gain some of it is a good idea. Now, we can engage in other ways, in other ways. So for example, you could say, let me exercise and let me not just exercise, but let me exercise in a kind of way that I could feel progress. So instead of walking, I'll do push-ups or I'll do plank and I'll measure how many seconds I can, I'll feel the progress every day. That's cheaper and better. But if you have to go spending, spend cheap, right, decide to buy a balloon. I buy a fancy balloon, but buy a balloon,

right, rather than sneakers. If the feeling of control is important, go for it, but buy a book, buy a balloon, buy something cheap, or buy something that you were going to buy a substitute anyway. You're going to buy olives, buy slightly better olives. But try not to go for the things that are really expensive. Maybe a good strategy is give yourself a budget for these things. I'd say, okay, let's say $20 a week, I'm going to spend on things that are just going to create some feeling of control. In your book dollars and cents, you talk about the pain of paying

and how separating the pain of paying from the time that you enjoy a purchase gives you a different sense of that purchase. So, for example, every time I take an Uber, I pay for that particular ride. So I'm very aware of exactly how much that ride costs, you know, versus if I were to have a one, theoretically, a one month all you can Uber pass. I might ultimately end up paying more, but it wouldn't feel as bad. in those ways, particularly now as people are trying to handle their budgets more responsibly, how can people make assessments about their spending, given that sometimes that overspending is prompted by the desire to avoid pain? Do we just embrace additional pain?

Is that the answer? Yes, that's the answer. The answer is that credit cards, and particularly credit cards online, are supposed to get us not to think about paying. And we need to think about paying. So what is taking the pain of paying away? It's basically getting to buy something without thinking about how much it costs. And credit cards are very good at it. And websites are very good at it.

But if we want to think about opportunity costs and we want to think about opportunity costs, and we want to think about spending and we want to basically restrict our spending, we have to think about opportunity costs. So the answer is yes. We have to suffer some more in the process. There's no way to not increase the pain of pain. We have to increase the pain of pain. And simply be okay with the suffering. You know, not be okay. I mean, we don't hope that that will be the case. But we need to experiment with it, yes. Hmm. Great. Well, thank you, Dan. Are there any

final takeaways that you would like to communicate? You know, I sadly think we're in for a long haul. I think we need to get used to a new reality. It's been very, very tough for everybody. But the longer we look at it as something temporary and hope that it will be over and then we'll go back to our normal life, I think our resilience is going to be lower. We need to somehow figure out that like this is the new normal and we need to figure out how to manage and find happiness within this new normal for the duration

and the sooner will recognize that this is here to stay and for a while the better off will be we'll adjust we'll adjust to this new normal and we'll be better off this is a very sad way to end

the discussion but I think it's also sadly correct right well and it links to the previous thing that you said about embracing that pain and accepting it. And that's part of the process of ultimately making the decisions that increase resilience. Yeah. Great. Well, thank you so much, Dan. My pleasure. Lovely to talk to you and talk to you again soon. Welcome back. What are some of the lessons that we have learned from this conversation with Dr. Dan Ariely. Here are seven key takeaways. Key takeaway number one.

Cut back on entire spending categories. If you need to save money, maybe you want to boost your emergency fund, you want to pay off debt, you want to prepare for the possibility of a future job loss or furlough, how can you go about saving money? Dr. Ariely recommends cutting out entire categories rather than cutting back. So, for example, you could eliminate entire categories such as restaurants, entertainment, or alcohol. And by eliminating the entire category of spending so that, for example, alcohol spending falls to zero, you avoid the temptation that comes with spending just a little bit on it that ends up turning into just a little bit more. When we lose money, the easiest thing to do is to cut down whole categories. So you don't just go to the same restaurant and don't eat dessert because that's very tough.

You go to the same restaurant reminds you that you can't do the same. You can save yourself from the temptation of spending creep by cutting out an entire category altogether. So perhaps you place a ban or a moratorium on spending money on personal grooming services like haircuts or dyeing your hair. Perhaps you place yourself on a three-month travel ban or a six-month travel ban. Or maybe you cut all takeout and delivery from your budget for the next month, 30 days. By eliminating an entire category altogether, you are. are likely to have greater success than you would be if you were to simply try to cut back on that category, and then at the end of the month, look back on your spending and realize you've spent more on that category than you intended to.

Now, which category should you cut out? Dr. Ariely says to prioritize whatever brings you happiness. Take a look at what you have spent in the last few months. Where do you have the most regret or what expenses could you have done without in hindsight? Once you look back on your previous spending, you'll have a clear sense of what the answers are. Where did you spend a lot of money but not get a lot of value out of it? Cut there. So that is key takeaway number one.

Key takeaway number two. Reframed rejection. The job market is tough and it may remain that way for some time. Dr. Ariely says to mentally prepare yourself for rejection because at this point it's a numbers game. You just need to continue sending out resumes until you find a place. that says yes. During the 2007-2008 recession, the British government discovered that on average, people had to look for a hundred jobs before receiving one offer.

That just mean waking up 50 days and sending two resumes and hearing no and no and no and no for two months and then hearing the yes. So we need to not take no is a signal that we should stop. right? The thing that we do is you hear no, you hear, no, you hear no, it basically depresses you and you don't want to keep on going. Rejection is tough, but the best thing that we can do for ourselves is to keep at it and trust that it's not personal. It's not a reflection of your abilities. It's the reality of a tough

market. Everyone is going through this, including many smart, talented, capable people. It's not just you. It's not personal. Keep going. Dr. Ariely's advice is to make sure that you're not measuring your success on your ability to find a job quickly. Instead, measure your success on something that is within your locus of control, such as sending out a certain number of resumes per day. Once you've done that, you've done your best. Your job right now is to find a job, and by looking through listings and sending out resumes or following up on previous resumes that you have sent in the last few days, you're making progress. So set parameters, set goals based on what you can control, meaning your own output, rather than the downstream result or consequence of that, such as finding a job. That is key takeaway number two.

Key takeaway number three. Create measurable goals and define behavior in concrete terms. Another recommendation from Dr. Ariely is to focus only on what's inside of your control. We touched on this in the last key takeaway, but he expands on it when he tells. talks about the importance of creating measurable goals. We need to make the outcome that we're looking for more within our reach, measurable, and in our control. So going back to the previous example, sending your resume is within your control, connecting with one or two people in your industry is within your control,

but getting an interview or landing that job is not within your control. So don't let your happiness or your self-worth hinge on things. that are not inside of your control. If you prefer, you can take his approach and focus on doing good things, because when you do good things, when you do things that are aligned with your objectives and your values, you've done your best. My responsibility ends at me doing the best job I can. So that is key takeaway number three.

Key takeaway number four. Invest in human capital. We don't know what the stock market is doing or will do in the market. future. And we have no control over what the stock market or the broader economy overall is going to do. No one has a crystal ball and any attempts at making projections are simply educated guesses at best. Instead, what we can do is invest in human capital, meaning ourselves, and go from there. The biggest asset class we have is human capital. That's the biggest one we have. And if we're up to investing in anything, I think the right thing is to

invest in human capital. Examples of human capital, of investing in ourselves, include taking courses, reading, educating ourselves, and improving our skills, particularly as they relate to a career or an entrepreneurial venture or an investment or anything that will allow us to grow our net worth. Dr. Ariely's reasoning for this is that nobody has the ability to take our human capital away from us. No one can ever take away your skills, your knowledge, your expertise, your confidence, your ability to get things done. Once we have developed knowledge or a skill, as long as we practice it and nurture it, it's ours. It's ours to keep no matter what. So there is less

volatility in investing in human capital as compared with investing in the stock market or hinging all of our hopes entirely on broad macroeconomic forces outside of our control. So that is key takeaway number four. Invest in human capital. Invest in your own skill sets. Key takeaway number five. Find credible sources. The world is increasingly full of noise.

It can be hard to figure out where to get information. And being on the receiving end of a torrent of conflicting information can fuel anxiety. it's natural to have anxious thoughts around the unknown. So how can we cut through the noise and find a signal, find what's worth tuning into? Dr. Ariely offers two strategies. Two big strategies. The first one is trusted sources. Remember that the first source you check will have a large impression on you.

You want to check informed, trusted sources first for this reason, because of the fact that that first impression matters. Dr. Ariely also makes a second suggestion. The other thing is about averaging information, getting information from lots of places, not stopping too early after one. As he mentions, this can be a tough guideline to follow, especially now with such intimidating news circulating every day.

But it's important to sample a wide range of sources and opinions. Each contains some grain of truth and some grain of by, and you're trying to piece together the full picture with all of this information. Dr. Ariely gave the example of checking the CDC in America and then checking the equivalent of the CDC in a number of other countries. What are they saying? Are there any patterns? That might be a clue as to what's true. Now, if this feels overwhelming to you, he says that it's okay to start with credible sources first. Start with one or two, and if you feel satisfied after reading few articles, then it might be okay to move on. But it's also worth asking yourself, just how much do you need to know?

How will this affect your life or your actions? How will this influence your decisions? How much knowledge do you need in order to be able to make decisions and take action? Because in order to avoid being overwhelmed with too much knowledge, too much noise, it is prudent to be thoughtful about how much we take in. the greater the impact that a piece of news or piece of knowledge has on the actions that we take or on our day-to-day life, then the more time we may want to spend researching. But if some knowledge or information has minimal impact, then it may deserve minimal effort or output on our end.

So that is key takeaway number five. Key takeaway number six. Don't completely resist. emotional spending. Now, this seems like a counterintuitive key takeaway. You see, there's often a lot of shame around emotional spending. There's self-shame where we beat ourselves up, or there's shame that we get from others when we spend impulsively or emotionally. But Dr. Ariely makes the point that the motivation behind emotional spending is usually the motivation to gain a sense of control. And insofar as that is the motivation behind it, shame is not useful.

It's really about control. So much of our control is being taken away, and shopping is one of the ways in which you can gain control, right? You basically go somewhere, you wave your little plastic card, and things in the world move, right? Something that used to be somebody else's, it's all for a sudden yours. It's an amazing power to have. If you are in a situation, as many of us are, in which your life has been upended, it makes sense that you, us, we would want to gain back some sense of control. And shopping is one of the easiest ways to feel that. And so don't hide from it. If this is your natural inclination as it is for all of us, embrace it, but do it responsibly. As Dr. Arieli says, go a little cheap. Instead of splurging on an entirely new wardrobe or a high-end piece of technology, treat yourself to a book or treat yourself to a nicer version of something that you are already going to buy. If you're already into budgeting or if you need a budget to help, you can give yourself a small amount each week that is yours to spend freely on those things.

Having that budget, by the way, may also give you a sense of control because you feel as though you've mastered the direction of your money. you're no longer wondering where it went. That isn't true for all people. For some people, having a budget may actually make you feel the opposite. It may make you feel as though you have no control. You will constantly have to ask permission from your budget like you're a little kid. And if that's how you feel, then try the anti-budget. With the anti-budget, you don't need to ask permission from your budget.

You simply designate how much you're going to save, lop that off the top, and what's left over is yours to spend. So pay attention to how different actions make you feel, budgeting versus anti-budgeting, spending on a book versus spending on an upgrade to something you were going to buy anyway. Pay attention to the ways in which that handling of money fuels the sense of control that you're looking for. And when you find that, lean into it. As Dr. Ariely reminds us, shopping is one of the ways that we can regain a sense of control. And that is particularly at times of distress precisely what we need and what we seek. And given that set of circumstances, given that that is the reality, there's no need to exacerbate your anxiety by swimming upstream or by denying yourself if instead you could lean into those impulses in a measured, responsible way.

And so that is key takeaway number six. don't resist emotional spending, but handle it wisely. Finally, key takeaway number seven, embrace the pain of the process. If your goal is to reduce your spending or to be more mindful of your spending, then you need to embrace the pain of paying. If we want to think about opportunity costs and we want to think about spending and we want to basically restrict our spending, we have to think about opportunity costs.

So the answer is yes. We have to suffer some more in the process. There's no way to not increase the pain of pain. We have to increase the pain of pain. Now this takeaway, this observation about the pain of paying, comes from the book Dollars and Sense. It was co-authored by Dr. Dan Ariely and Jeff Chrysler. And Jeff Chrysler is also a former guest on this podcast.

When he came on the show, he said the same thing. He talked about the pain of paying, and he illustrated that we have a half. habit of thinking that Amazon shipping is free, discounting the fact that we pay a yearly price for this service. And so if we were to divide out that yearly price by the number of times we get something shipped to us, then that quote-unquote free shipping may actually cost $1, $2, $5, $10, depending on how often we place orders. Paying monthly for a service like Amazon Prime or like Netflix is much less painful than paying each time we want to pay. to watch an individual episode of a show, or each time we want to have an individual item shipped to

us. But ultimately, if we want to become more mindful of our spending, then it needs to be painful and it needs to be measurable. It doesn't need to be bad. This pain is helpful because it's informative and to that extent it's also transformative. It can help us reach our goals by connecting the experience of making the payment with the receiving of that product or service. And as we make those connections, we no longer end up having a million streaming services that we rarely use. The a la carte model, while each individual unit item may be more expensive, may ultimately as an aggregate be cheaper. So embrace the pain of paying and create a connection between the time at which you render payment and the product or service that you

receive. Those are seven key takeaways from this conversation with Dr. Dan Ariely. Thank you so much for tuning in. If you enjoyed today's episode, please do three things. Number one, leave us a review on whatever app you're using to listen to this show. These reviews are incredibly helpful in allowing us to book awesome guests on our podcast. Number two, make sure that you hit subscribe or follow in whatever app you're using to listen to this show. And number three, share this episode with a friend or a family member if something that we talked about today reminds you of somebody that you know. If you know somebody who can benefit from hearing this conversation, send this episode to them. You can get a link to this episode at afford anything.com slash episode 273. This episode is the final episode that will

air in the month of August 2020. This episode comes out August 31st. And of course, the following day kicks off September, which means that it also kicks off the September sabbatical. So this is a practice that I started last year in 2019 and that I will repeat again this year and that I intend to make into an annual tradition in which I take the month of September off from creating new episodes so that I can spend that time, well, this year I'll be spending that time reading, thinking, reflecting, doing the deep work that is required in order to hopefully make this a much better show and make everything and afford anything much stronger going into the year ahead.

So that's my plan for the September sabbatical of 2020. Last year in 2019, I spent the spatical vacationing. I traveled. This year is going to be the exact opposite. Last year was a vacation and this year is a true sabbatical in the reflective, deep work, deep thinking sense of the word. So that is what's in store for the month of September. We will be, during the month of September 2020,

we will be airing interviews from our archives that include some of the most, insightful, actionable interviews that we've done with interesting guests. We'll be airing an interview that we did with Josh Schlesinger from CBS News, where she talks about 13 dumb things that smart people do with their money. How can educated, financially savvy people make some pretty glaring mistakes? She reviews these 13 things and talks about how we can save ourselves from making these common mistakes. We interview Gretchen Rubin, the New York. The New Yorker. York Times bestselling author of multiple books that focus on habits and happiness. She talks about how we can use knowledge accumulated from the world of research to learn how to bring greater

happiness into our day-to-day lives. We will be airing an interview with Dr. Cal Newport about deep work and the importance of cutting out distractions, cutting out the day-to-day of what we do so that we can have periods of time to focus on reading, thinking, writing, and deep, deep work, because that is, at its core, some of the most valuable work that we do, but it's also some of the most rare work that we do. So we will be airing all of those interviews and more that's all coming up on the September sabbatical. So make sure that you hit subscribe or follow in whatever app you're using to listen to this show so that you don't miss any of those excellent and insightful upcoming episodes. Thank you so much for tuning in. My name is Paula Pant.

This is the Afford Anything podcast, and I will catch you in the next episode. It's 11 p.m. where you are. It is 11 p.m. Are you typically someone who works at night? You know, given that I'm in Israel now, and given that I work during the day with the Israeli government and at night with the U.S., I end up having very long days. How do you maintain your energy and your focus and your concentration, given that you work such long days. How do you sustain that without losing productivity? Lots of coffee. And then I do

task switching. So I figure out what are the most important things I want to work on. And then during the day when my energy kind of wanes off, I switch to a different project. And some of them, you know, in different stages. Like, you know, editing is very different in writing and thinking is very different. So basically I try to have some variety.