plonkee money an english-er's thoughts on personal finance

March 31, 2009

fringe benefits of being employed

Filed under: education and career — Tags: , , — plonkee @ 12:25 pm

The benefits of going to work for a living.

There are many ways of generating an income, and lots of people seem to ideologically favour working for yourself, or working at home. Being your own boss is the great way to wealth apparently. Probably wouldn’t work for me, but each to their own.

One of the things that people who are for some reasonable reason against being employed talk about, especially those advocates of stay at home parenting, are the hidden costs of working. I’m talking about things like commuting, eating lunch out, buying nice clothes, conveniences that you use which you wouldn’t if you spent more time at home.

This got me thinking about the converse. The things that you can get from your workplace that would cost you money to have to provide for yourself. I mean, just like you don’t notice the hidden costs of working, so maybe we don’t notice the hidden benefits of working.

  • At my current job we get free stationery, not exactly for our own personal use, but still a pen is a pen.
  • My walking commute enables me to exercise easily for free.
  • I have to travel to London at least once a month, and I can use this train ticket to meet up with friends or family for dinner or drinks and then head back to my own place for no additional cost.
  • There’s a subsidised gym (which I don’t use)
  • It gets me out of the house everyday and talking to real people. What can I say, I’m an introvert at heart
  • They heat the place. If I had to heat my house all day, that would get expensive pretty quickly.
  • Let me know what benefits you get out of work.

    March 27, 2009

    sunk cost fallacy

    Filed under: banking and economics — Tags: — plonkee @ 1:57 pm

    Once you’ve irrevocably paid for something you should take that into account when considering what to do next.

    Err. No.

    Once the money (or time or effort) is gone, then it’s gone. There’s no point in worrying about this.

    I was on a great forum the other day for people who are interested in playing classical music. In the UK, you can take exams in playing instruments, the most commonly know are the grade exams. Distinction at grade 8 is the minimum standard required for acceptance at a conservatoire (don’t need the exam, just the standard). They aren’t free to take, and there was a post on the forum from a girl stating that she didn’t want to take her Grade 7 Flute exam, but was concerned because if she didn’t the entry money her parents paid would be wasted. The right way to think of it is that whether she takes the exam or not, the money is gone. She may as well do whatever is best for her in the long run.

    If you’ve spent money on something that you regret, one way to get over sunk cost fallacy is to consider what you would do now, if you were given (or won) that same object for free.

    If you buy a delightful pair of shoes that turn out not to fit, instead of bemoaning the money that was spent on them, ask yourself whether you would wear them if you had been given them for free. If not, don’t wear them just because you spent money on them. If prettiness is more important to you, then by all means, ruin your feet. (I stole this example from blunt money, but it’s good! and I admit that I’ve done it myself.)

    If you have an investment that you think was a mistake. Ask yourself what you would do with it if you say, inherited it now (imagine the mistake was someone else’s). Woud you keep it, or sell it?

    My buying a house that has dropped in value might have been a mistake. But if I were given the house plus mortgage now, I would just keep paying out on the mortgage, rather than sell and take the loss that I can’t afford. But if I couldn’t afford the mortgage payments, it would be a different matter.

    The only time you should take into account sunk costs, is when you’re learning from previous mistakes. Then it’s ok to remember that you spent a fortune on shoes that didn’t fit when you’re in the shoe shop choosing a new pair, and to take that into account by trying them out more carefully. Similarly, if your investment picking was rubbish then bear that in mind when it comes to pick new investments. Or if your house dropped in price a lot, take that possiblity more explicitly into account when you next buy (or firmly resolve never to move again, whichever).

    Don’t make the mistake of considering money that’s been spent and can’t be got back when you make your decisions.

    March 26, 2009

    keeping down the Smiths

    Filed under: Uncategorized — plonkee @ 2:03 pm

    Less worry about what other people are doing.

    If there’s one thing that’s more foolish than attempting to keep up with the Joneses, it’s trying to make sure that the Smiths can’t keep up with you.

    I was out at dinner last night, and the conversation turned to my least favourite subject – immigrants are stealing all our benefits money. My sole contribution was to point out that born and bred Brits also make false benefit claims, and given that they are the vast majority of the population, they probably form the bigger problem.

    Everyone was excised that if they had savings, they wouldn’t be able to get government help. And that it wasn’t fair that some people got more money than them. Whilst I get the point and don’t like people committing fraud either, I wasn’t happy with the conversation at all.

    Seriously folks, life isn’t fair. There will probably always be people richer than you, and poorer than you. Instead of wondering how Ms Jones manages to afford a Mercedes and a luxury holiday, or worse, how to stop Mr Smith’s kids from getting free lunches at school, why not just practice sensible personal finance?

    Spend less than you earn, save and invest the difference. Do things that contribute to your own happiness. Look after your health. Spend time with friends and family. Exercise your mind.

    Quit worrying that benefit thieves are making off with all the money unless you either (a) have specific examples in mind and are willing to shop them, or (b) are about to vote in an election and this is the most important issue in the world to you.

    Worry is bad for you, limit your worry to things that will affect you that you can do something about, and leave the rest well alone.

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