When it comes to spending and saving, our bank accounts will be healthier if we stop looking at relative values and start looking at absolute dollars.
New York Times contributor--Harvard University professor--Sendhil Mullainathan--writes about one of the ways that intuition tends to lead many of us the wrong direction when it comes to financial decisions. Many of us are prone to "foolish frugality," saving where it matters less, and acting cavalier when it comes to spending more. Not all of us, however. Mullainathan writes:
Whereas the well-off may dabble in frugality, necessity makes the poor experts in it. To them, a dollar has real tangible value. A dollar saved is a dollar to be spent elsewhere, not merely a piece of token accounting.