A SHORT QUIZ ABOUT YOUR FINANCIAL FOIBLES

What we do isn't always logical because we aren't Vulcans or computers. How would you answer the following three questions? How would your spouse?

Question 1

Would you rather buy an item
A) here for $100 or
B) nearby for $50?

The $50 difference looks huge. Depending on your perspective, you could buy the item for half the price nearby or double the price here.

Question 2

Would you rather buy an item
A) here for $1,000 or
B) nearby for $950

Now the gap doesn't seem as big but is the same $50. The seller has a better of chance of getting you to buy here.

Question 3

Would you rather buy a house
A) here for $299,900 or
B) nearby for $295,500
Assume that all other factors are the same.

The gap looks tiny in comparison to the overall price. Yet the gap is $4,400. That's enough to buy you four each of items 1 and 2 at full price. You could easily get four of the best iPad and lots of nifty apps.

Answers

We make odd decisions (or know others who do). How did you make your last $500 purchase?

Would you spend a bonus or lottery winnings as carefully as your hard-earned money? Maybe not, but money is money.

Perhaps you haggle over price but agree to hefty delivery charges, expensive financing or costly extended warranties. Maybe you get a nice deal on a new car but lose on your trade-in.

If a stock drops in value, do you sell or wait for it to return to the purchase price. The stock has no memory of the starting point, but we do.

Our foibles interfere with our decisions and can be used to manipulate us. Unless we're vigilant.

Links

• How did you make your last $500 purchase?
• The A-B-Cs of 1-2-3: The key to numeracy (financial literacy)
• Three reasons financial literacy eludes us
• Predictably Irrational by Dan Ariely (Wikipedia)
• image courtesy of Billy Alexander (North Carolina)

Podcast Episode 106 (3:03)

direct download | Internet Archive page

PS When the police nab a speeder, we're attentive … for a while.

REASONS TO BE CYNICAL

Last month, we looked at how to fight cynicism. This week, I've seen too many reasons to question intent, to treat as guilty until proven innocent. We'll look at BMW, a Mastermind and seven emails.

The Vehicle Exchange Event

We'll start with an email from a BMW dealership. Click on the graphic enlarge it.

Here are highlights.

• my vehicle is in a "preferred status"
• this dealership did the research and selected themselves as the test location
• another test "will not take place again until investigation data has been assessed"

This email felt fake. It's addressed "Dear Customer" though this dealership has my contact details. There's a typo ("sight" [as in eyesight] instead of "site" [as in location]). The content doesn't make much sense. The entire message is a graphic, which seems spammy. There's no mention of the vehicle I got from them, which their records would show.

Here's the big flaw. I returned my leased BMW three years ago. They have computers and databases. Why don't they know that? I doubt they want my current Mercedes.

A Mastermind

Through someone who knows someone who knows someone, I got invited to join a speaker's Mastermind. I was interested because I'm

• honing my skills, which is why I joined Toastmasters
• seeking audiences ready to improve their numeracy to avoid pitfalls the Globe & Mail has exposed

Pixels are free but thee invitation had very little information. I figured the group would be like Toastmasters: members helping members. The organizer (a fourth someone) phoned me. At my prompting, he revealed that this group was a business targeting amateurs who want to become full-time paid speakers. Those who join this "lifestyle" pay over $2,000 a year and meet each weekend during prime family time.

The write-up implied the group was a real Napoleon Hill Mastermind and free. The reply? Nothing explicitly said the group was free and there's nothing wrong with making money. When you infer what a salesperson implies, are you entirely to blame?

Here's the sad part. I'd already told others about the group. A lawyer and a friend (yes, they're two different people) expressed interest. I filled them in and apologized for not investigating better.

Seven Emails

This week, I got added to four email lists without permission. The senders implied that we'd met but we hadn't. That's sneaky. That's spam. I unsubscribed.

Finally, I got three disguised sales pitches from people I thought were above trickery:

1. one asked about weaknesses to develop a course … and sell it to me
2. one speaker was back by popular demand … to sell a seminar
3. one with typos asked me to explain why I hadn't attended previous seminars

I've seen enough movies to know that "anything you say can and will be used against you".

Fighting Back

Why are tricks being used? They must work and be reasonably legal. Our trusting natures get used against us. Buyer Beware instead of Seller Inform.

Horoscopes and sales pitches show that creating ambiguity takes extra skill. Why can't they be clear instead? We eventually see the tricks and be tougher to fool again.

Links

• How to fight cynicism
• Why I finally joined Toastmasters
• The Globe & Mail on Canada's insurance loophole: what else is wrong
• The A-B-Cs of 1-2-3: The key to financial literacy / numeracy
• The foolproof measure of trust

Podcast 105 (4:36)

direct download | Internet Archive page

PS What do you do when you feel fooled?