Word count: 2004 ~8-9 minute read time

I have wanted to branch out more and more, as I did with my short story, and discuss things I'm interested in that others might like to read about and discuss as well. They are topics that may or may not be explicitly political or cultural, but perhaps exist on the fringes or are related via intersectionality. There was also some interest online on topics such as this, written by somebody well outside of the mainstream sphere of journalists that typically write about these things.

I’ve been interested in personal finance habits for some time now, probably have been reading about it off and on for 10 years or so. The psychology of spending and finance has always been of interest to me. Recently I re-read a couple of classics, The Richest Man in Babylon and Think and Grow Rich, as well as took a look at some of the research again. Not a lot has changed since the last time, it's always good to refresh any skills though, I have a friend that reads all of his financial books every other year or so, it's his "thing" and hobby. Personal finance is, of course, skill and discipline just like your health/diet, exercise, any sport or physical activity and so on, hence why I revisit it from time to time.

Here are a few concepts I found very interesting this time around:

Research shows that paying with cash activates a pain response in our brains, a signal that we had to "lose" something in order to gain something else. Credit cards do not elicit such a response, and writing a check does cause a small amount of pain, but not nearly as much as paying in cash, which hurts the most. Paying cash signals to our brain that we have lost something of value. https://www.theglobeandmail.com/life/health-and-fitness/health/the-pleasure-of-consumption-and-the-pain-of-paying/article24436723/ see also; The Red and the Black: Mental Accounting of Savings and Debt, Prelec and Loewenstein (1995).

Carrying this idea forward, a 2000 study called Always Leave Home Without It: A Further Investigation of the Credit-Card Effect on Willingness to Pay, found through a series of studies that people were willing to pay significantly more for the same things if they were paying with a credit card over cash.  Some of the studies found people willing to pay 83% more if they were using a credit card, and similar studies have found people spend much more at the grocery store, at restaurants, and all-around when using credit cards over cash. https://www.valuepenguin.com/credit-cards/credit-card-spending-studies

This is a salient point because there are swaths of people who do not carry any balance on their credit cards, they pay them off each month and get some “bonus” to the tune of ~1% back or so. The thing these people are missing is that although they get their 1% back or whatever, they are almost guaranteed to be spending more at every place they use a credit card, and are depriving themselves of the pain and joy of using cash (Read Ernst Junger’s book On Pain, and learn to love the hardship.)

Interestingly, due to the extra mental anguish you feel through paying with cash, the things you do buy, be it coffee or durables, you enjoy more and value more. I assume, although I've not seen a study saying this, that it also would cause a person to care for their things more carefully as well and act more deliberately in terms of all things finance. https://www.forbes.com/sites/elizabethharris/2016/07/28/study-paying-cash-hurts-and-makes-you-value-your-purchase-more/

Paying for things with a lower or no pain method, such as a credit card or check, you get the item you bought, but do not feel the pain of losing the money until later, when the bill comes, this essentially de-couples the pain from the transaction which leads to spending more as you do not “feel” the sting of letting the money go. The relationship between money leaving and buying things is de-coupled. All of this is by design. 

There is more money made on debt than anything else, and debt is one of the most heavily marketed products, if not the most, of all time. There are throngs of people working for all the large banks with one goal in mind, to get as much money from you as possible. I know people who think they are “outsmarting” the banks by using their points and “gaming” the system. They are not. The couple percent return they make, or the bonuses they get from moving money around to another card to the next 0% APR for 12 months offer or whatever they think they are getting, is nothing compared to what the merchant bankers get by having them play these stupid little games. Not only does all research show you spend more when you’re out than you would otherwise with credit cards, it’s wild to assume that banks would let people play their own rigged game and win. Just because they are not paying monthly interest does not mean they are not losing. They are giving the banks processing fees, allowing them to charge merchants more money for the “privilege” of accepting credit cards, but most importantly they are getting you to spend more on things you likely do not need thereby taking away funds that could be put to better uses. The opportunity cost of spending is rarely considered.

Every dollar you spend on one thing, is a dollar you do not have for something else, and that something else may have a higher value to you. Not buying a new gadget or trinket is money that could go towards the future in the form of saving or some investment, maybe in yourself, maybe in this movement, whatever. It’s not just “what does this item cost?” It is also “what does buying this item prohibit me from doing later?” that should be added into the calculation of costs.

Parkinson’s Law / Lifestyle Creep 

Parkinson's law is the idea that "work expands to fill the time available for its completion". There have been many corollaries to this adage, such as data or "stuff" will expand to fill storage capacity, explaining things like no matter how much storage you have in your house, you run out of places to put things. Lifestyle Creep is a similar concept to Parkinson’s Law, it states that as income rises, our expenses rise to meet the new income due to spending money on things that were not necessary before. A typical example being when a person gets a raise or promotion, they trade in their paid-off car for a newer car with payments or a lease. They may go out more, spend more on clothing, whatever, but if they don’t pay close attention, the “extra” money from their income going up does not make its way to savings or a better use, it is engulfed by the new lifestyle, while levels of debt and security remain the same. The “downside” of Lifestyle Creep is when incomes go down, but people do not adjust quickly enough to the lower income, continue to spend the same, then go broke very quickly or end up in debt to finance their higher lifestyle. We see this constantly with lottery winners and professional athletes, most going broke within a few years after leaving the professional league or after winning a lottery, their incomes dropped, but the spending continued.

In The Richest Man in Babylon, one of the major takeaways is to always set aside money for the future, savings, investing, etc, first, the adage "pay yourself first" is meant to not only ensure the money gets set aside, but it acts as a bulwark to Lifestyle Creep harming you. If you’re always putting say 10% of your net income away first, the idea is that even if you spend the rest as it increases, you are still planning and saving for the future. Very low time-preference concepts, mostly. Most of what I’ve read about in personal finance comes down to having a low time-preference, delaying rewards/gratification, and thinking ahead. 

Also known as the Hedonic Treadmill, this is a concept that observes humans return to a baseline level of happiness despite increases in lifestyle. For example, I drive an old car with a bunch of miles that has zero luxuries on it, suppose I went and financed or leased, or even paid cash, for a nice new Mercedes Benz with heated/cooled seats, a real smooth suspension, those mirrors that tell you when somebody is in your blind-spot, and whatever else nice cars have today. The new car would give me some temporary dopamine and a relative bump in happiness, however only for the short term. In a few months or a year or whenever, maybe after I become fully accustomed to the car, or after it gets older too, or when I get tired of making payments, my level of happiness will return to the same day-to-day place it was with the old car whose heat works when it feels like it. This is the adaptation, and the treadmill is then thinking "well if I just had that NEWER Benz with the even nicer creature comforts, then I would be happier and feel better." This concept of Hedonic Adaptation leads to “chasing the dragon,” if you will, in terms of consumer goods and spending.

I don't know why, but every source I look at to find levels of credit card debt in the USA has a different amount. Some are by the total "average" and others only the average of households with credit card debt, which changes the calculation. This study says 41%+ of households have credit card debt, with the average amount being $9,300  https://www.valuepenguin.com/average-credit-card-debt This source using the same average calculation says around $6,000 https://www.nerdwallet.com/blog/average-credit-card-debt-household/ I’ve seen others claim somewhere around $15,000. In any event, it’s a lot. The average rates are saying from 15%-24%, meaning the monthly INTEREST alone is somewhere around $75-$140 for the low end depending on rates with carrying a $6,000 balance, and $115-$185 for a $9,300 balance. That is a lot of money that goes directly to making some of the evilest and vicious people to ever walk the Earth very wealthy, like obscenely wealthy. Like enough money to buy elections and fund billion-dollar media apparatuses and NGOs to destroy a nation.

There is a 2006 documentary called Maxed Out, about consumer debt, some of the players in the game, it shows the lives of people who had their life ruined by debt, and some of the people getting rich off of it. It's worth watching just to see how candid this one collection agency is with their total contempt for people. It features Elizabeth Warren and some other DNC members prominently. You see how the GOP sides so heavily with big finance and how there are issues, financial regulation being a large one, where we could take a third-position and win a lot of hearts and minds. The film is a bit slanted, but objectively, I found very little I disagreed with. It's quite eye-opening to some of the financial practices themselves, the impact on our people's lives, and the need for a strong third position to protect them from these predatory goblins.

So I'm up late (as always) writing this blog-post about interesting financial studies I was reading about spending habits, coupling, spending-pain and so on, and naively thought to myself "wow this is nice not writing politic things for once." then I went into about *WHO* is behind all this and what they do with their money. Ultimately this comes down to that old saying “a fool and his money are easily parted” and understanding predatory usury and who is behind both.

If everybody in our sphere cut up/canceled their cards, paid off all of their credit card debt, and stopped paying interest, it would not only deal a blow to the enemies of mankind, but would free up over $100 per month on average per person that could help support their own families, our own institutions and people. $1,200 by the end of the year in usury money alone. It just takes some discipline and pain, which after all, is how everything is ultimately paid.