″...frequent purchases can have a substantial effect on your overall financial situation, but indulging in overpayment for convenience on the odd big one-time purchase is an affordable luxury.”
I’m not really sure if that explains the behavior as one could also argument that the “cognitive burden” of extra effort for everyday purchases is greater than putting it into those big one-timers.
I’m assuming that most everyday purchases are frequently repeated (e.g. you buy milk and eggs every week), so the cognitive costs of figuring out the best place to buy milk and eggs can be amortized out over many transactions.
There’s another good reason why savings in terms of percentages are reasonable to consider, beyond just absolute savings. You can travel fifteen minutes to the store where a shirt costs $20, and buy two of them. This makes it a much more complicated decision than saving $20 on a television.
Televisions are something that most people don’t need a lot of. Even if there was a half-price sale on televisions, you probably still wouldn’t be tempted to buy two of them (unless you’re really into giving televisions as gifts or you think you can turn a profit on e-bay). So with a half-price sale you’d probably just by one TV and smile as you save $1,010 off the sticker price. So for just $20 off of a $2,000 television, I really wouldn’t expect anyone to be tempted into buying two sets. It’s a very simple tradeoff, then: Would you prefer $20, or 15 minutes? (It’s still probably worth travelling, unless you make more than $80 per hour...)
Shirts, though, are the kind of thing you’d possibly buy twice as many of if the price were halved. Looking ahead to when the first shirt gets worn out, you’ll have to replace it. This could cost you another $40, plus the duration of a second shopping trip, which is probably longer than 15 minutes in total. Meanwhile, if you spend fifteen minutes now and buy two shirts, the fifteen minute travel time will pay itself back in the long run and you’ll save the $40 that the second shirt would have cost you.
This logic can be extended: If you are looking ahead that far, and have enough disposable income to spend $80 on shirts, you can avoid the second shopping trip by buying two shirts at the closer, more expensive store. But now your 15 minutes are worth $40, not $20. And for that price you could buy four shirts at the cheaper store...
Ultimately your decision to travel 15 minutes might come down to how much closet space you have for extra shirts, how much of a hurry you’re in right now, and how much money you have access to. Basically, there are many things that make 50% off on a $40 shirt more attractive than $20 off on a television. It shouldn’t necessarily be viewed as a bias.
(Edit: Umm, yes, but having said all this, it doesn’t really apply to houses. They’re more like televisions, and thinking in terms of the absolute savings is very much a good idea. $35k saved is $35k earned.)
″...frequent purchases can have a substantial effect on your overall financial situation, but indulging in overpayment for convenience on the odd big one-time purchase is an affordable luxury.”
I’m not really sure if that explains the behavior as one could also argument that the “cognitive burden” of extra effort for everyday purchases is greater than putting it into those big one-timers.
I’m assuming that most everyday purchases are frequently repeated (e.g. you buy milk and eggs every week), so the cognitive costs of figuring out the best place to buy milk and eggs can be amortized out over many transactions.
There’s another good reason why savings in terms of percentages are reasonable to consider, beyond just absolute savings. You can travel fifteen minutes to the store where a shirt costs $20, and buy two of them. This makes it a much more complicated decision than saving $20 on a television.
Televisions are something that most people don’t need a lot of. Even if there was a half-price sale on televisions, you probably still wouldn’t be tempted to buy two of them (unless you’re really into giving televisions as gifts or you think you can turn a profit on e-bay). So with a half-price sale you’d probably just by one TV and smile as you save $1,010 off the sticker price. So for just $20 off of a $2,000 television, I really wouldn’t expect anyone to be tempted into buying two sets. It’s a very simple tradeoff, then: Would you prefer $20, or 15 minutes? (It’s still probably worth travelling, unless you make more than $80 per hour...)
Shirts, though, are the kind of thing you’d possibly buy twice as many of if the price were halved. Looking ahead to when the first shirt gets worn out, you’ll have to replace it. This could cost you another $40, plus the duration of a second shopping trip, which is probably longer than 15 minutes in total. Meanwhile, if you spend fifteen minutes now and buy two shirts, the fifteen minute travel time will pay itself back in the long run and you’ll save the $40 that the second shirt would have cost you.
This logic can be extended: If you are looking ahead that far, and have enough disposable income to spend $80 on shirts, you can avoid the second shopping trip by buying two shirts at the closer, more expensive store. But now your 15 minutes are worth $40, not $20. And for that price you could buy four shirts at the cheaper store...
Ultimately your decision to travel 15 minutes might come down to how much closet space you have for extra shirts, how much of a hurry you’re in right now, and how much money you have access to. Basically, there are many things that make 50% off on a $40 shirt more attractive than $20 off on a television. It shouldn’t necessarily be viewed as a bias.
(Edit: Umm, yes, but having said all this, it doesn’t really apply to houses. They’re more like televisions, and thinking in terms of the absolute savings is very much a good idea. $35k saved is $35k earned.)