Coffee heat rising

How to bamboozle a buyer

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From The Atlantic Monthly comes a précis of a recent study [1] published by Cornell University’s Johnson School reporting that consumers tend to see a precise price, such as $355,756, as a better bargain than one that ends in zero, such as $355,000. When asked which was lower, subjects consistently responded that the precise figure was cheaper than the round number.

Not only that, but at least in real estate, a zero at the end of a listing price works to lower the sale price. If you live in South Florida and list your home at a price ending in at least one zero, your final sale price will be about .72 percent less than that of a house listed at a similar price that doesn’t end in a zero. Three zeros will make it .73 percent lower, and for each additional zero, the price will drop another .39 percent. Doesn’t seem like much, but every little .72 percent counts: for the $355,000 house, that’s $2,556.

The strange psychology of pricing is well known to all of us who shop in stores where prices end in 98 cents. Retailers have long recognized that when confronted with a $15.98 item, buyers think the object costs $15, not $16. So, for that matter, do the sales clerks. Once in a household goods store on the order of Linens & Things, I happened to remark to the sales clerk that thus-and-such a gadget was $16.

“Oh, no!” she exclaimed. “It’s $15.98.”

“That’s the same as $16,” I said.

“No,” she insisted, “it’s $15.98.”

“Well,” I insisted back, “$15.98 is only two pennies less than $16. It’s pretty much the same as $16.”

She actually had to think about it for a moment. Finally she allowed, “Yes, I guess it is.”

What does this mean for the frugalist? Round up! Round up to see the real price. And in the real estate market: pay attention if you’re a buyer. If you’re a seller, for heaven’s sake come up with a price that ends with a digit between 1 and 9.

1Manoj Thomas, Daniel H. Simon, and Vrinda Kadiyali. “Do Consumers Perceive Precise Prices to Be Lower Than Round Prices? Evidence from Laboratory and Market Data.” Johnson School at Cornell University Research Paper No. 09-07, September 2007. January 10, 2007. http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1011232.

Five good things you can do for your finances this week

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1. Make one day this week a no-purchase day. For a whole day, refrain from buying one thing, not even gas for your car.

2. Hold the Starbucks! Brew your own coffee before you leave the house. Want a sweet roll for breakfast? Buy a few at a bakery, bring them home, and enjoy one with your coffee.

3. Pay $10 toward the principal on a debt. If you don’t have a debt, put in in savings. If you already have a Roth IRA, put it there.

4. Divide your monthly budget into four “cycles” of about one week each. Try keeping within a weekly instead of a monthly budget.

5. Take your lunch to work at least two days this week.

Like the results? Repeat!

How Much Is That Doggie in the Window: The cost of owning a pet

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Out of idle curiosity, I ran a Quicken category report for the past 12 years and restricted the categories to one: “Dog.”

According to Quicken, to date I’ve shelled out $8,217 for the privilege of owning a dog—well, for five of those 12 years, two dogs. That doesn’t cover everything. For the first few years of Anna’s residence with me, I didn’t break out every food and toy and miscellaneous expense for the pooch.

And it doesn’t count the leather chair that had to be rebuilt after Anna chewed an arm off it (that was when SDXB started calling her “the thousand-dollar-a-day dog”). Or the carpets that had to be replaced after a long, slow house-training. Or the van I bought to carry her around after she developed a habit of placing her muzzle next to my ear and screaming until my eardrums hurt every time I put her in the car. The Camry I replaced with the gas-guzzling Sienna had at least another five years on it, and it was a great deal more fuel-efficient than the Dog Chariot. If you calculated in the cost of the replacement flooring (all tile) and the larger vehicle and the cost of running said larger vehicle, you’d be looking at, oh, say, another ten grand. That would bring us to something like $18,000 for the pleasure of 12 years of dog company.

Well, it doesn’t match the cost of raising a child. Yet.

But the next time you gaze into two limpid pools of puppy-love eyes, think: this is not a minor undertaking! Bringing a pet into your life is expensive. Vet bills (which can take your breath away-my last bill was $450!) are just barely the half of it. Over time the combined costs can add up to something very, very large.

Would all that money have gone into savings? Probably not. It likely would have been diddled away on living expenses. I do have to say, though, that if I hadn’t had that $450 vet bill, the larder would have been quite a bit fuller in the month I had to pay it. Yes. It would have been nice not to have to go hungry, or to raid retirement savings, to pay for the cost of owning a dog.

Anna is very elderly and frail. She won’t last much longer, alas. It makes me very sad. I can hardly imagine what my life will be like without a furry companion.

Still, when I contemplate the possibility of adopting another dog after she’s gone, I have to ask myself: can I afford another $18,000? Or even $8,217? When I’m 70-something and scraping by on Social Security, will I be able to take care of a dog?

I don’t think so. In fact, the cost of pet ownership is rapidly moving beyond the means of the average middle-class American. At one point, I estimated that a single person would need an annual income of at least $80,000 to own a dog without having to tighten her belt now and then. Possibly a two-earner household could afford an animal more comfortably. But for single middle-class earners, dogs are about on the order of horses: an indulgence for the wealthy.

How much do you spend on your pets? Do you think this is affordable in today’s economy?

Bonus Frugal Household Hint: Free water

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Here in lovely uptown Phoenix, we awoke to pouring rain. Gloomy day for commuters, joyous day for plants.

Put a light dose of plant food in your favorite houseplant watering container and set it under the eaves to collect runoff. If it has a narrow opening (I use old gallon juice jugs, for example), set a funnel in the opening to capture more water. When the container is full, pour the rainwater on the indoor plants.

Plants seem to be able to tell the difference between rainwater and tap water. It’s like spring tonic for the indoor set. And it’s free!

Do you harvest rainwater? Please share the ways you catch store, and use runoff.

Frugal Household Hints: Vinegar is sweet

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Vinegar is the cheapest household cleaner around. Nothing does a better job of cutting through a film of grease.

1. Put vinegar in a squirt bottle (you can dilute it about 50-50 with water). Spray the kitchen counter and wipe dry with a soft cloth or paper towel.
2. Spray mirrors or windows with vinegar. Wipe dry with a microfiber cloth.
3. Pour about a cupful of vinegar into the dishwasher before adding detergent and running the cleaning cycle. This will eliminate hardwater film, especially if you use an enzyme detergent.
4. Pour 50-50 vinegar and water into your steam iron. Let it sit for an hour. Then turn the iron to “Linen,” hold it over the sink, and squirt steam out of it until the reservoir is mostly empty. Drain; refill with plain water, and drain again. After the iron is cool, wipe the sole clean.
5. Soak a paper towel or small rag with vinegar. Wrap it around a calcium-crusted spigot. Layer a piece of plastic wrap over it and secure with a rubber band or wire tie. Let stand for several hours. Remove vinegar wrap and use a plastic scrubber to clean off mineral gunk. (Do not try this on fancy finishes!)
6. To polish copper: first put on a pair of rubber gloves. Wet tarnished copper with vinegar. Sprinkle with salt. Rub with a sponge or rag. Rinse well. (Do not even think of trying this on silver!)

Got other uses for vinegar? Please share!

Time is not money

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‘Twasn’t long ago that I posted a comment to a blog in which I held forth on the rock-solid value of my time, which I calculated at around $60 an hour. That was the bargain rate. Platinum Edition: $200.

Wrong.

My time isn’t “worth” anything: it has no monetary value. Neither does yours. Like other clichés we use to order our lives, that fine old saying “time is money” has a nice ring to it, but it’s not the ring of a genuine silver dollar.

As metaphor, the “time is money” turn of phrase is just slightly off kilter. Time is more like water or air: something that is and should be freely available to everyone. You don’t have to work to earn time, or come into it by inheritance, or win it at the gambling table. You already have it. Is it limited? Yes. So is money. But that doesn’t make time the same as money. Water and air, as we’re rapidly learning, are limited, too. But they are not money. Like time, they can be manipulated to create money, but they are not the same as money. Time, water, and air are not intrinsically “worth” the same things that money is “worth”: they do not buy the same thing.

Here is a major source of stress in our lives: the disconnect between the way we think about time and what time really is.

This insight came to me the other day as I was trying to race around the city, charging from dreary destination to dreary destination so that I could get done with my errands, so that I could get on with something else. Every which way I turned, some clown pulled in front of me and ambled down the road at five miles an hour under the speed limit.

Flaring toward road rage, I growled at no one and everyone, What is the matter with these people! Don’t they know how much my time is worth? Where do they get off wasting someone else’s time? If I could have caught one of the morons, I’d have dragged him out of his car and throttled him right in the middle of the street. It felt very much like they were stealing from me: stealing time, stealing money.

The idea that our time possesses monetary value—that it is money—leads naturally to the feeling that it can be wasted, and that if someone else is doing the wasting, they’re effectively stealing something of great worth. It’s an idea that’s so universal you can’t escape it. As workers, we’re paid by the hour. Our vacation time and our sick leave are assigned monetary, hourly value. Lawyers and accountants and psychiatrists and therapists assess us by the hour, not by what they can do for us. We “budget” time; we “spend” time; we “waste” time.

If even half the other drivers out there subscribe to this point of view, I thought, it’s no wonder road rage has become a menace. Who wouldn’t be furious at the theft of something so valuable?

This attitude needs to change. Believing that something as commonplace as air must be husbanded, coveted, budgeted, and even somehow earned just naturally leads to greed, resentment, and stress. It’s hard to see past our culture’s insistence on assigning a monetary value to time—most of us are paid by the hour, leading us to think of life as something that can be broken into coin-like pieces. But that’s an illusion. We are paid for our skills and abilities, for the product of our intellectual or physical labor. The amount we can demand for our time depends not on how much time we have to sell but on how much our skills are valued.

Time is not money!

  • We don’t spend time: we pass time.
  • We don’t budget time: we write lists, make plans, and schedule appointments.
  • We don’t waste time: we idle or get distracted.

When you start looking at the minutes, the hours, and the days in this light, a whole new perspective dawns. Slow-moving traffic, a long line at the grocery checkout, a chatty acquaintance on the phone, a tedious meeting suddenly become a lot less frustrating, because none of them is taking anything of value away from you.

This is huge. A basic change in attitude—time is part of the environment, not the coin of the realm—relieves a vast amount of frustration and stress. It’s not an easy change, because it requires you to throw over a concept that permeates our lives. But what you get for the effort can’t be measured in coin.

Money buys stuff. Time buys experience, wisdom, and peace of mind.