How You Spend Money Part 6… What Questions Are You Asking?
This is the sixth and final of a series of emails that deal with our relationship with Money. (You can read the other ones here). Most of this is based on the work of Morgan Housel, the author of The Psychology of Money.
6. Are you asking $3 questions when $30,000 questions are all that matter?
There’s a saying: Save a little bit of money each month and at the end of the year you’ll be surprised at how little you still have.
Author Ramit Sethi says too many people ask $3 questions (can I afford this latte?) when all that matters to financial success are $30,000 questions (what college should I go to?)
Historian Cyril Parkinson coined a thing called Parkinson’s Law of Triviality. It states: “The amount of attention a problem gets is the inverse of its importance.”
Parkinson described a fictional Finance committee with three tasks: approval of a $10 million nuclear reactor, $400 for an employee bike shed, and $20 for employee refreshments in the break room.
The committee approves the $10 million nuclear reactor immediately because the number is too big to contextualize, alternatives are too daunting to consider, and no one on the committee is an expert in nuclear power.
The bike shed gets considerably more debate. Committee members argue whether a bike rack would suffice and whether a shed should be wood or aluminum because they have some experience working with those materials at home.
Employee refreshments take up two-thirds of the debate because everyone has a strong opinion on what’s the best coffee, the best cookies, the best chips, etc.
Many households operate the same – how does yours operate?
To Your Prosperity,
Rennie
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