You check your budget then the catalogs and decide that $900 is a reasonable target price for the type of TV that you want, so you trundle down to Best Buy [AJC: Ka-ching! That’s another $1,250 for product placement. Whoohoo!].
Luckily they have the TV you want at only $850 … better yet, with your $50 Best Buy Rewards vouchers [AJC: + $350 Voucher Mention Bonus] you get the whole kit for $800.
So, what should you do with the $100 that you just saved?
That’s the question asked (and, comprehensively analyzed) in a guest post on I Will Teach You How To Be Rich on The Psychology of Money Savings, where the author talks about this as “the last mile of saving”:
So you’ve cut back your car insurance, negotiated a lower interest rate on your credit card—or nabbed a great deal on a new TV. You’re congratulating yourself for being a smart saver, and keeping more of your hard-earned money in your pocket.
Peter Tufano, professor of consumer finance at Harvard Business School, says that many people confuse a lowered rate (on car insurance), or getting a discount (25% off a TV) with saving money.
You can thank a psychological phenomenon that economists have dubbed malleable mental accounting.
C’mon, this isn’t a ‘mile’ … it’s barely a savings ‘inch’: you haven’t ‘saved’ anything … you’ve just spent 800 bucks.
If you really want to think about saving, treat the $100 that you ‘saved’ from your original (actually, notional) $900 budget as ‘found money’ and save 50% of that.
Better yet, vacuum the dust off the back of your TV from time to time and maybe it won’t overheat and you’ll be able to ‘save’ the entire $900.