An inch is not a mile …

You decide that you need a new TV because your old one blew a tube (do they still have those?) and watching the blank screen is a real bummer.

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 cardβ€”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.

Got it?

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11 thoughts on “An inch is not a mile …

  1. Did you really get paid to mention Best Buy? Do I get paid for mentioning it in a comment? πŸ™‚

  2. There ya go. I Love how people always advertise, save $100.00 .Like you said, you didn’t really save anything because you just spent that $800.00. Like many, my son likes to trade up,and always thinks he did well cause he just got 25% off on something,when he didn’t really need to spend on that new couch in the first place.

    People, ask yourself,will this couch last another year? another 5 years?Don’t spend unless you need to .Keeping up with the Jones es just puts you further away from your goals.I don’t spend money unless I can justify the expenditure.

  3. David – If you do get paid, you’ll have to split it with me πŸ˜‰

    But, I don’t accept ANY advertising / promotion / affiliate links on this blog … so, no, I didn’t really get paid πŸ™

  4. I believe the term is anchoring – mention a high number and people think they are getting a bargain. As Adrian said, you’ve still spent the $800 but with two small children to entertain the real saving is in therapy sessions for the parents.

  5. Retailers have tried to change the meaning of the word saving to getting a good deal. Don’t believe them! Saving is not spending all of your money, and that is how you got that $900- spending any of it is still just spending.

    However, if you invest that $900 it should grow over time.

    -Rick Francis

  6. @ Rick – …. and, you can watch your bank balance grow instead of watching TV πŸ™‚

    Actually, I was working on the assumption that the old TV is blown and having some sort of TV is a necessity.

    It is for me … no TV, no World Series of Poker reruns πŸ™

  7. funny you mention it. i just got a new tv a few days ago and opted for the 46 inch sony lcd. plasma is cheaper and has a higher refresh rate, but i didn’t find the images as crisp. Besides, broadcasts are at 60Hz, so the 120Hz sony with the inserted frame smooths things out well enough. Comparing the LED to the fluorescent back-light — the LED definitely has brighter whites, especially the Samsungs. I found this surprising because I read that the blacks are typically no good on “conventional” lcd’s, but it was the white’s that stuck out at me. The price difference between the two sets wasn’t enough to justify the differences. There were a couple lower tier LCD/LED’s, the colour rendition on skin tones looked phony though. And the tube CRT that I’m looking for a buyer for seems to blow the all away for colour accuracy (just one mans opinion). The next hurdle will be overcoming the digicable encryption. The new set picks up the free analogue channels but rogers has encrypted the high def. I read that it’s possible to save some cash by getting an antenna to pull digital signals out of the air. Supposedly these are better because some compression is done to transmit the info on a cable vs. through air. All told I think I saved about $1000 bucks after price matching and deciding against the LED or 3D stuff (what’s to say that there won’t be autosterioscopic sets available soon), and that’s not including the $20 sale of the old TV. Sure, I could have put the money into stocks, but the Phil Town rule#1 stock selection thing really hasn’t worked out for me in the last few months, and the Amish furniture salesman gave me the willies.

  8. Definitely wins the Most Infotaining Comment Award. Thanks Ill Liquidity! πŸ™‚

  9. Adrain,

    I don’t think there is anything wrong with spending some of your saved money on wants, but you should call it what it really is spending your savings.

    With so many people upgrading to HDTVs I would be amazed if you couldn’t get a perfectly usable TV for free from freecycle that way you can watch your poker games and your balance increase.

    -Rick Francis

  10. Please be careful when using that Freecycle crap. Too Many people on there use the free(t.v.) or whatever, to lure you there to sell you something. And the monitors who are supposed to be keeping an eye on this stuff seems to always be looking the other way.
    the other thing that happens a lot is you see something advertised. You write and say your interested and you get no response from the person giving it away,until at one point, they write and say (oh) that item is gone already. This is because they have struck up a friendship with someone else on freecycle and won’t give the item up to anyone else but their friends.Its can be a real joke for sure.

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