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How do you make a long-term decision rationally?

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What strategies do you use when you need to make a decision that will affect your finances and lifestyle for years? Possibly for the rest of your life?

They may be huge decisions: Should we have a baby? Should we adopt a child? Should we move Mom into the spare room or pay to put her up in a life-care community? These are moves that will change your life permanently.

They may be decisions that, while still big ones, can be reversed or won’t necessarily last forever: Should I buy a car? Should I rent or buy housing? Should I quit my job and go back to school to finish a degree?

Or they may be smaller decisions that, while they won’t change the course of your life, will affect your finances for months or even a year or so: Should we get that new Play-Station? Maybe we should buy a $5,000 wide-screen HDTV and subscribe to cable when regular broadcasting goes off the air? Should I lend my weird cousin a couple thousand bucks to start a business, money that he’ll probably never repay?

Thinking through the costs and consequences of decisions like these takes some strategizing. And I must say, strategize as I might, I’m never perfect at arriving at the “right” decision, whatever that might be. Often I end up just going with my gut instinct.

Today, for example, I’ve discovered the Humane Society has a beautiful little Pembroke Welsh Corgi up for adoption, two years old, female, spayed…perfect! The Corgi is one of several breeds I’ve considered as a likely candidate for a new doggy roommate. They’re relatively small—about 25 to 40 pounds. And although they do shed, they’re generally sound, very smart, and because they’re herding dogs, they have a German shepherd-like disposition. They also have a big dog voice in a small dog body, a consideration for a woman who lives alone in an inner-city neighborhood.

When I consider the pro’s and cons of adopting another dog, I end up listening to a schizophrenic conversation between the Voice of Rationality and the Elf of Whim:

Rationality: You don’t need another dog. You need an engineer to fix the trolley that you’ve slipped!

Whim: Engineers can’t fix a broken heart. And as soon as that engineer has fixed the trolley, he’s outta here. I need some company, and at my age, you can be sure it’s not going to come with two legs.

Rationality: Moron! You spent $21,000 on Anna and Walt! Think of your pocketbook.

Whim: I spent it because I could afford it. You shouldn’t let your cheapskate instincts limit your life.

Rationality: The floors are clean. They’ve been clean for two solid weeks! You don’t even have to vacuum the darn things—you just dustmop and run the steam cleaner. There’s no dogsh** in the backyard to clean up every single day. The Burglar Portal is sealed shut. Corgis shed doghair dunes, just like Ger-sheps, and they track in mud that has to be scoured off the floor! Do you really want to do that again?

Whim: Uhm…well, no.

Rationality: You’re finally free—FREE, I tell you!—to go someplace on vacation! Do you really want to spend the rest of your life vacationing in the backyard?

Whim: Doesn’t much matter. I’ve seen the world and don’t need to see it again.

Rationality: What do you need a dog for?

Whim: To keep me company. To alert me if someone comes around.

Rationality: Join a club. Get a burglar alarm.

Whim: <<sob!>>

Rationality: Okay, okay. List the pro’s of getting a dog.

Whim: Companionship. Something alive to come home to. Rescue a nice dog. Walking burglar deterrent. Entertainment value. Maybe I will stop crying every day.

Rationality: Ducky. Now list the cons.

Whim: Expense, expense, expense, and expense. Dog dunes to clean up every day. Twice-a-day feeding. Filthy floors to scrub on hands and knees. Daily yard cleanup. Risk of dog drowning in pool. Possible excavation of landscaping. Restriction of activities—have to be home to feed dog, can’t travel without extra hassle and expense.

Rationality: I just can’t see a rational trade-off here.

Whim: Who are you, Mr. Spock?

Rationality: Have you thought of adopting a tribble?

The problem with making lists of pro’s and cons is that it’s very difficult to assign weight to subjective elements in the list. In this case, for example: What, really, is a dog’s companionship worth? How much, really, does having a dog limit your life and your ability to meet other people? How much, really, do you care about that?

Do you have any strategies that actually work when it comes to making decisions that involve both financial and subjective considerations?

Friday, June 13, 2008

5 Comments

Mrs. Micah

No tribbles. Ever! Wait…maybe just one would work, maybe it’s when there are 2 that problems start. But I think tribbles just might reproduce asexually.

Maybe while you’re still recovering from the loss you could spend a little time at an animal shelter? Volunteer or somesuch? It might make you want a puppy even more (in which case you could get to know the dog a bit) or you it might give you just enough. Or help your rational side emphasize the downsides.

Friday, June 13, 2008 – 02:13 PM

Debbie M

Oh, sure, I make the lists.And they are both the same length.

Then I weight each item on the list, and the two lists still total the same amount.

At this point I decide that either decision would probably be okay.

Another strategy is to think of the worst-case-scenarios for both actions.Or at least worst-case imaginably likely scenarios.For example, if you get a dog, it could be all sweetness and light during the interview, but once you get it home it shreds everything and is always escaping and biting someone.Or maybe you turn out not to enjoy the companionship of that particular dog after all.(Not: the dog could really be an illegal alien in disguise and since you saved it, it’s now going to destroy the planet.)

And if you don’t get the dog, you will always be unhappy and bitter, unable to make connections with anyone, and you get fired and kicked out of your house and die … oh, wait, I am exaggerating again.

And you can think of other ways to handle your concerns (like your “Join a club.Get a burglar alarm.” response)

You can think of ways to minimize the probable and possible negatives of both decisions, like start a pet savings account or brainstorm ways to find companionship.

I’m wondering if calling one point of view Rationality and one Whim is a hint for you.One could also argue that continuing having a dog is rational and suddenly deciding this is the time to go dog-free is a whim!

Good luck.

Friday, June 13, 2008 – 02:17 PM

andyjean

Hey there. I’m a believer in having a dog. The trick is to get the right dog. You’ve got other comments already with good advice on the list making. My only additional advice is that you need to start your list from true zero. When you made your list you were already focused on a specific dog so you are already locked into some of the cons. Think about starting over from the point of view that you will manage the cons any way you can, including choosing a breed of dog that will eliminate some of them, and then figure out ways to minimize the rest.

I had to go through the same process two years ago. When my baby girl wanted a puppy for her graduation, I was against it. My list of cons was very similar to yours. I know I’m not going to stay on top of cleaning up dog hair every day, and I’m not willing to live with it. Most of the year there is nobody at my house for 10 hours a day. That’s no life for a young thing. I also knew we couldn’t stand the chewing, puddling puppy phase. I also had concerns about traveling with a dog, how it would behave in public and whether it would trash my car. The list got long, but my baby wanted a puppy and all my reasons for denying her were selfish.

So for months I secretly researched dog breeds, finally settling on a miniature schnauzer. They don’t shed. Not at all. The breed also met my size requirements and had a decent reputation for health, temperament and activity level. With the breed picked out, I started looking for the right dog. I didn’t get far before I realized I had to define what was right for us. Based on past experience, I knew we needed a dog with a temperament midway between total alpha and trembling submissive. Instead of a new puppy, we needed one that was four to six months old. At that age they can stand more alone time, and if you get one that is socialized properly, lots of the bad puppy stuff is over.

As baby girl’s graduation date neared, I scoured pet ads, rescue organization postings, talked to local veterinary assistants, and tried every other possible source looking for leads. Then I went and actually saw all the pups I found in the right age range. It was hard to walk away from some, but I knew it was best in the long run to pass on the timid and the hyper, no matter how cute they were. With four weeks to go, I found the perfect little five month old male. His family had to let him go because they discovered their son had a pet allergy. Because I could see the dog with the family in their home while we visited, I could tell that there was a very good chance that he had the right temperament and had been well socialized. They were even willing to give the puppy a temporary home with the child’s grandmother until my daughter’s graduation day so that once he joined our family, she would be home with him all day every day for three months. That way he’d be even older before he had to face a 10 hour stretch without his family.

All the work and waiting paid off. We can’t imagine being without the little guy, and he is almost no trouble at all. The key is that I held out for the right dog even though it took four months to find him. The rest of the cons on my list have been easy too. He was mostly trained from the start and has practically trained himself ever since. The house stays cleaner than I imagined it could be with an inside dog. Keeping him clipped every month ($35/mo for me and well worth it) means he doesn’t drag leaves and crud into the house. I manage the muddy paws by keeping the doggy door locked on rainy days and meeting him at the door with a towel every time I let him in. I feed him outrageously expensive food made from human-grade ingredients with no cheap fillers and low on potential allergens. I’m fine with the expense because I know it will pay off in less pooper scooping and stave off expensive degenerative diseases. Now that he’s fully grown, he eats once a day in the morning before I leave for work. I feed him just enough to keep him trim and limit snacks and treats the rest of the day. Feeding him last thing before I leave helps to minimize the separation anxiety. It also means that I can run errands after work or go out with friends without worrying about him home alone wondering where his dinner is. When we go on a trip without him he goes to a doggy daycare. On the financial side, yes, we spend money owning a dog, but we’ve got it to spend and there is no question that having him improves our quality of life.

Wow, that was long. Sorry. I’ll be stepping off my soapbox now, except for one last thought – Walt and Anna gave you lots of good blog material. Are you really ready to give that up?

Friday, June 13, 2008 – 03:37 PM

Bret Frohlich

I learned about worst-case-scenario decision making a while back and it has changed my life for the better.Now, I can make quick well-reasoned decisions and I feel confident, even if it doesn’t turn out perfect.

Before, I used pros-and-cons decision making and it always left me with a nagging doubt, even if everything turned out OK in the end.

If you want the dog, then just get it.Life is too short to deprive yourself of the companionship.My friend had a Corgi and she loved it.Me, I love my aging German Shepherd.She sheds a lot, but nobdody jumps in my backyard.

Friday, June 13, 2008 – 11:13 PM

vh

I like the “worst-case” approach. It cuts through a lot of dithering…and listing pro’s and cons certainly does lend itself to dithering.

Finally I decided in favor of getting the little dog (see the next day’s post for a photo). It may be dumb…but what’s the worst that can happen? She’ll chew up $3,000 worth of leather furniture, bark until the neighbors call their lawyers, and end up back at the Humane Society. Hey…how could I turn her down?

Saturday, June 14, 2008 – 09:24 AM

Consumer-proof Packaging: A Modest Proposal

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Yuk. Still suffering from the diarrhea I picked up at a restaurant last Sunday, I drove over to the local Albertson’s at 5:30 this a.m. to restock the generic Imodium.

Both the brand-name and the Albertson’s knock-off versions come in those damned consumer-proof packages, where each pill is individually sealed, like an insect frozen in amber, between a layer of stiff plastic and a layer of tinfoil-coated cardboard. I no longer have enough strength in my hands to push the pills through either of these substances. Whenever I get pills packaged in child-proof containers, I put them into a bottle or other container that I can get open, since I find the consumer-proof packaging well-nigh impossible to get into when I need the stuff.

You can’t slice these bubble-packs open with a box-cutter. The ditzy little pill bubbles are too small and sealed in too tightly, so that when you take a box-cutter to the flicking packaging you cut up the 25-cent-apiece pills. So you have to take a pair of scissors and cut each and every pill out. One at a time.

But cutting along the sides of the pills doesn’t break into the bubbles. Again, they’re too tightly packaged for a couple of slices to break them fully open. So now you have to get a knife and pick each pill out through the slices you’ve made along the edges of the bubbles.

So to get a couple of pills for your upset belly, you have to break out the following tools

  1. box-cutter
  2. scissors
  3. knife
  4. broken fingernail
  5. cut fingers

Fighting with consumer-proof packaging is the last thing you feel like doing when you’re sick.

Now I realize that many people are too stupid to store pharmaceuticals out of children’s reach (although believe me, a three-year-old could get into these things a lot easier than an old lady with arthritic fingers). And I realize that many people’s children are too dumb to distinguish between pills and candy. But “takes a village” or not, I believe that’s the parent’s problem, not every consumer on the planet’s.

If we must protect parents from their own carelessness or stupidity, how’s about we require manufacturers to market medications in two kinds of packages: child-proof and human-accessible. We could then legislate that if a parent who buys human-accessible meds allows a child to eat the stuff, the parent will be subject to prosecution for manslaughter and child abuse, and prohibited from suing the pharmaceutical manufacturer. That’s easy. Retailers could be required to post a sign to that effect, and manufacturers could be required to put a warning on every pill bottle, just as wine, beer, and liquor makers have to threaten every woman who ventures near an an alcoholic drink.

There’s a limit to how much we should protect people from themselves.

consumerism, consumer safety, packaging, pharmaceuticals, child-proof packaging

Wednesday, June 11, 2008

1 Comment

Mrs. Micah

That makes sense. Like they have those more accessible caps on Advil bottles and the like for seniors. Of course someone could get in trouble for letting a kid near one of those. *hugs*

Wednesday, June 11, 2008 – 04:03 PM

Not all Costco gas is equal

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The other day while I was at Costco topping off my gas tank with the last gasoline priced under $4 in the future history of humankind, SDXB happened to go into the Costco on his side of town for the same purpose.

He paid $3.86 a gallon.

Say what? I paid $3.93 a gallon: a seven-cent-a-gallon difference! Same day, same time of day, same retailer.

Only difference as far as we can tell is the demographics. My Costco is a ghetto store that serves a downscale clientele in a tough part of town. His Costco, located on the booming westside, caters to the upper middle class and a large, relatively affluent retirement community.

Why, one might ask, should low-income customers have to pay seven cents a gallon more than people who can afford an extra ding at the pump? Beats me. Only thing I can figure is Costco must figure us pore folks are too dumb to know better, too lazy to drive across town to get a better price, or too broke to run our cars far enough to get out of the ‘hood.

This has long been so of grocery store prices: they’re always higher in areas where many of the customers don’t own cars. A friend worked as the manager of a ghetto grocery store, and he reported that they jacked up prices across the board because they had a captive audience of people who either could not or would not drive further afield to buy food and household products. Maybe Costco does the same.

Message: If you live in a downscale area, consider driving to a more affluent district to seek better prices.

4 Comments left on iWeb site

BeThisWay

I noticed that same thing about grocery stores long ago.Touristy areas also always charge an arm and a leg, too.

It’s good to know, though, while planning your purchases. I often bring non-perishables on vacation just to avoid that type of gouging as much as possible.And if you need gas and are going to see SDXB or have to be in the other Costco area anyway, you can do your fill-ups there.

Tuesday, June 10, 2008 – 08:38 AM

Karen

A Costco representative came to my business awhile back to sell memberships, and she they do price the gas individually.Basically, people go out in the morning in the immediate area and compare the local prices so they can price just below all of them.
But as some areas are more expensive than others, two Costcos in my city that are 30 miles apart will definitely have different prices.
Needless to say, I go to the “ghetto” Costco when I need gas.:-)

Thursday, June 12, 2008 – 07:27 AM

Karen

P.S.I realize this is the opposite than what you experienced, but it may have also been timing.
I’ve gone to fill up twice in one day for our second car at Costco, and paid a different price!

Thursday, June 12, 2008 – 07:30 AM

vh

It’s true that in general gas prices are lower on the westside. That may account for the difference.

But we pay dues for the privilege of spending our money at Costco. That should buy us consistent and fair pricing across the board–not a gouge because we live in a downscale neighborhood a few miles away from a different neighborhood in the same city. That’s unfair and unreasonable.

Personal finance nerds 1, spendthrifts 0

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So, who’s “funny about money”* now? In the face of a recession that could deepen to the point of (dare we say it?) depression, frugality is suddenly a trend. Such a trend, we might add, that think-tank scholars are climbing aboard for the ride.

David Brooks, writing in today’s New York Times, reports on a paper from the Institute for American Values titled For a New Thrift: Confronting the Debt Culture. To make 19 column inches short, the gist of this document, to which 62 scholars have signed their names, is “get out of debt, stay out of debt, and live within your means.”

Brooks puts an interesting moral spin on the issue, suggesting that fundamental American values have been corrupted by an evil confluence of forces: credit-card debt, the growing financial polarization between the haves and the have-nots, lotteries, pay-day lenders, and even Wall Street with its obscene executive compensation.

Uh huh.

“The Devil tempted me and I did eat.”

Brooks offers a few half-baked attempts at solutions to this metaproblem, none of which are worth much. But he does point out something that probably is correct:

Benjamin Franklin spread a practical gospel that emphasized hard work, temperance, and frugality. . . . For centuries [the United States] remained industrious, ambitious, and frugal. . . .

There are dozens of things that could be done. But the most important is to shift values. Franklin made it prestigious to embrace certain bourgeois virtues. Now it’s socially acceptable to undermine those virtues. It’s considered normal to play the debt game and imagine that decisions made today will have no consequences for the future.

Lordie! Let’s hope we reform our evil ways before we’re all tossed out of Eden!

*Funny about Money’s title came from a (former) friend who, imagining no one was listening, remarked on another friend’s voicemail that I was “a little funny about money.” She’s in her mid-70s now, working three jobs to pay off the huge debts her million-dollar appetite racked up. Observers tell me she looks very tired.

The value of reconciling your check accounts

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Saved from my own stupidity! Whew…

The credit union still sends paper statements, and so I still reconcile my accounts against the monthly statements. This is a function of mental laziness: I’ve never worked up enough energy to figure out how to reconcile against the online records.

But I do keep an eye on my accounts online, and this month I wondered why the CU’s bottom line was SO radically out of whack from Quicken’s. Alarmingly out of whack, one might even say.

Come to find out, I had failed to shred an $840 check I thought I’d voided, but instead had blithely sent it along to Vanguard…and then wrote and sent an identical check to replace it. Oops!

Meanwhile, believing the first check had been atomized, when my next extra-large paycheck arrived I wrote a third check to Vanguard in the same amount. Each of these payments was to transfer money from a second income stream into savings. So, where I thought I’d written checks for $1,680, I actually had arranged to transfer $2,520. This error would plunge my checking account to the bottom of a puddle of red ink the depth of Lake Tahoe!

Luckily, I had not yet mailed the last check. (And luckily, I had not taken Vanguard up on the opportunity to make electronic transfers from my checking account directly into mutual funds.) So, voiding and shredding the third check recovered the error.

If I hadn’t been in the habit of reconciling my bank accounts regularly, I wouldn’t have tumbled to that Senior Moment until it was too late to avert an overdraft.

Catching your own errors is just one good reason to reconcile your accounts at regular intervals. We all make mistakes-and even the bank sometimes enters errors in customers’ accounts (Johnson Bank once credited me for $10,000 deposited for someone else!). It also will allow you to catch fraudulent transactions. Personal finance software such as Quicken or MS Money hugely simplifies this chore, or in the case of the arithmetically challenged (such as moi), makes it possible.

If you don’t use a program to keep track of your funds, you should reconcile your checkbook each month. The steps are as follows:

  • Compare your check register with the statement. In your check register, subtract any charges (checks, ATM withdrawals, automatic payments, bank fees) appearing on the statement that you haven’t already deducted from your balance. Write this figure down.
  • Still in your check register, add any new inflows, such as deposits, automatic paycheck deposits, and interest or dividends. Add these to the amount you got in step 1.
  • Now enter any deposits made after the statement’s ending date. Add these to the total you obtained in step 2. Write this total down.
  • Next, in your register, check off each check that the statement shows as as having cleared the bank. On a separate piece of paper, list the check numbers and check amounts. When your list is complete, add the check amounts to obtain a total.
  • Subtract the total you got in step 4 from the figure you got in step 3. The result should equal your check register balance.

If it doesn’t, the first thing you should do is check all your arithmetic. If that doesn’t reveal the error, then you get to compare each figure in the statement and the check register, very very carefully. Over and over and over again.

Programs like Quicken, as you can see, circumvent a great deal of agony, first by doing the math for you and second by making it relatively easy to spot errors. If you’re reading this blog, you probably already use financial software. But lest you wonder why your mom or your weird cousin Bob has never reconciled a checkbook, ever, and figures the account is out of money when the checks run out, it may be that she or he is math-challenged. There is simply no way I could reconcile my bank accounts manually — it’s flat out of the question. I’ve tried. After I finished tearing out all my hair, I just gave up. If SDXB hadn’t insisted that I try Quicken, I would have no idea what is going on with any of my accounts.

What a mitzvah! The cheapest PCs out there will run Quicken, Money, or downloaded freeware. It’s well worth encouraging the arithmetically puzzled and the computer-bamboozled to learn how to use such a program, even if they never do anything else with a computer.

1 Comment left on iWeb site

Mrs. Accountability

Clicked through from the 156th Carnival of Personal Finance to read about your expensive doggies – hubby and I have one that we love so much, hope nothing expensive ever happens, we’ll go in the poorhouse for him.I agree with your reconciling checking accounts post – I read on a blog not too long ago that the person never did reconciliations, and why they didn’t think it was necessary to do so.I would be a bundle of nerves!The blog writer said they watch their account online regularly, so felt comfortable to not reconcile.I have reconciled my accounts for over 25 years with both paper statements and online statements, and have found enough errors that I would not be comfortable giving up this monthly chore.I read your “Life’s a Killer” story, awesome how you handled your stress situation.I also participated in the 156th CoPF (my 3rd entry) with my free Gas Calculator (MS Excel format).I really like your writing style, adding you to my reader.Nice to meet you!

Monday, June 9, 2008 – 07:01 AM

Estate Sale Coups! And a bonus: how to sharpen your knives

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The other day La Maya and I drove to an enticing yard sale in a somewhat distant suburb. It was a long drive, but it was worth it, because we landed several good catches.

Best, pour moi, is a Brighton wallet with 19 card slots, a clear ID slot, space for a checkbook, two interior compartments, and a zippered outside pocket. Incredible! The closest style Brighton is advertising today sells for $119. Add Arizona’s 8.3% sales tax for a total of $128.88. I got it for ten bucks.

I also picked up a classic Gerber chrome, diamond-surfaced honing steel, an item that apparently is no longer made. Wüstof makes something similar, $79.95 at Amazon.com, marked down from $140. With local sales tax if purchased from a Phoenix-area retailer: $151.62. My price: $8.

But it didn’t stop there. For another eight bucks I grabbed a brand-new Henckel’s Twin Cuisine Five-Star 10-inch high carbon stainless steel slicing knife: $110 brick-&-mortar retail. Add the 8.3% sales tax, and you’d pay $119.13 for it.

Not bad: $26 for $399.76 worth of merchandise! You could save a fair amount by purchasing from Amazon.com-the Brighton’s not available there, but check out the alleged price difference for the other loot…and the honing steel and knife both qualify for free shipping.

As soon as I got home, I sharpened and honed the knives. The new Henckel’s took a superb edge, and my favorite old standard knives perked right up, too.

BTW, another blogger recently advised using a steel to sharpen your knives and posted a good video showing how to use one. That’s only half the story. A honing steel is for honing: putting the finishing touch on the sharpening process and keeping your knife’s edge polished between sharpenings. To actually put an edge on a knife, you need to use a stone or a knife sharpener.

Using a stone takes some skill. You can learn it, but don’t practice on your best knives until you know what you’re doing. And electric knife sharpeners should should be banned by federal law: nothing will wreck your knives faster than one of those things. They eat into the blade and leave you with a misshapen piece of metal. Over time-and not very much time-an electric knife sharpener will eat away so much of of the blade that your knife is useless.

An effective, easy, and harmless alternative is a manual knife sharpener. They look a bit like an electric sharpener but do not plug into an outlet. And as you can see from Amazon’s little ads, they’re very cheap, especially compared to the $150 price tag on an electric model. You pull the knife through a slot flanked by two stones set at the correct angle. These shape the metal to give you the correctly shaped cutting edge without eating up the knife. Once you have the knife sharp enough that it will slice a sheet of newsprint with no pressure applied, you can run the blade over a steel for a final honing to create that clean, razor-sharp edge.

I have a Chef’s Choice manual knife sharpener. Wüstof makes one for Asian knives, which I’ve not seen in person. They’re cheap and they work: best investment in kitchen gear I ever made.

BTW, if you take your knives to a “professional” for sharpening, ask the person what he uses for the job. If he proudly displays his electric knife sharpener, don’t leave your knives there! Many knife-sharpening shops use the same blade-eating Chef’s Choice electric sharpener you can buy at Amazon.com or Williams-Sonoma. Doesn’t matter who uses it: an electric knife sharpener will destroy your blades.