Category: Frugality

The Reality of Saving Energy, Money, and the Planet

Which uses more energy, a recycled glass bottle or an aluminum can made from virgin material? Most people think it is the recycled bottle. Of course, I wouldn’t have brought it up if the correct answer was the popular one. TurnsElectric Wires Crop - Diligentdogs out, recycled and new glass bottles use about the same amount of energy and both use a bit more than a new aluminum can. The energy consumption of recycled cans are an order of magnitude lower.

I got this from an interesting paper recently published on common perceptions versus the reality of energy savings. Much to my non-surprise, they found that perception and reality are only roughly related. “The observed correlations between judged and actual energy values, although positive, may be too small to support sound decision making.”

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A Tax on People Who Can’t Do Math

I’m still on hiatus (and still unemployed) but I spent some of what was a glorious holiday weekend in New England indoors, surfing the web and reminding myself why I started Bad Money Advice.Lottery Tickets Crop

WalletPop had a post that caught my eye. Poor people spend 9% of income on lottery tickets; here’s why.  It discusses a theory about why “poor households, with annual take-home incomes under $13,000, on average, spend $645 a year on lottery tickets, which comes to about 9% of their yearly income.”

I am not going to express an opinion on the theory, because I didn’t have the patience to read the whole post. I couldn’t get past the first paragraph. 645 divided by 13,000 is 4.96%. That confused me until I realized the statistic refers to households with incomes of at most $13,000, and not an average of $13,000. It was that phrase “which comes to” that threw me off.

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Most Bad Habits are a Bargain

I like Wallet Pop. Just thought I’d throw that out at the start before I got into today’s topic.

Latte crop Tim Boyd The other week Wallet Pop ran one of those lists-with-stock-photos features that are popular on sites with a lot more production value than this one. The subject was 10 Bad Habits and What They Cost You. It is a list of minor vices and what they will set you back over the course of the year. The feature does not actually say that if you didn’t do these things you’d be rich, but we know that’s what they mean.

This is, of course, the latte thing again. The idea is that your budget is leaking cash on a daily basis to pay for little luxuries and conveniences. Plug those holes and all will be well. And Wallet Pop gets a total annual cost for its collection of indulgences of $12,289, which is real money for many people. The difference between saving and spending that amount over many years could translate into a significant difference in retirement lifestyle.

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The Bad Example of the Secret Millionaire

Heard about the secret millionaire of Lake Forest, Illinois? I’ll assume not and recap. Grace Groner was born in 1909 and graduated from Lake Forest College in 1931, just about the worst year of the 20th Century to enter the job market. Luckily for her, she landed a position as a secretary at the then B&O_stock obscure firm Abbott Laboratories. She was a secretary there her entire career, retiring at age 65 in 1974. She never married and lived modestly.

So far, it’s a story that could be called poignantly mundane. But add in a few more facts and it transforms into a personal finance parable that will be repeated, and probably distorted, for some time to come.

In 1935 Groner bought three shares of her employer’s stock. From that day on, she reinvested the dividends and never sold a share. She past passed away this January, having reached 100. Her estate, including what is now a $7 million position in Abbott, was left to her alma mater, Lake Forest College.

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The Thrill of the Hunt

I have a favorite, although rather obscure, Monty Python sketch. An older housewife type (a "pepperpot") sits on a park bench. Another approaches dragging a car engine on a cart, saying she’s been shopping.IC_engine

"Did you buy anything?" asks the first.

"A piston engine!"

"What d’you buy that for?"

"Oooh! It was a bargain."

It’s not their most memorable bit. But it deftly sums up a way in which we can short circuit our own thinking when we shop.

As I’ve written here several times, when we shop we are not creatures of cold calculation. We can’t be. There are just too many choices at the mall and not enough time to find the one optimal allocation of our money over everything we could buy. Instead, we operate on a set of learned behaviors that approximate the optimal outcome. One of those is bargain hunting.

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