Psychology, mine and theirs

[steuard]

I'm apparently still on Eastern time, so here are two entirely unrelated notes on psychology inspired by our recent house hunting trip:

• I seem to have no intuitive sense of the value of money in amounts over a few thousand dollars. Amounts up to $100 or so are fine: I have at least a rough feel for how many books or CDs I could buy for that, or how nice of a meal. I can extrapolate up to a few hundred reasonably well. Above that I start relying on travel to give me a sense of scale, but travel prices vary wildly from year to year and thus don't help as much. Above a couple thousand dollars, I completely lose track.

  In particular, amounts $10,000 and up feel basically like play money to me: I recognize intellectually that they're huge and important, but pricing anything at that point feels more like a game than an actual computation of value. Negotiating for a salary or a house becomes just a matter of maximizing my score. If the starting point of the overall market had been $10,000 higher or lower, I don't know that I'd recognize the difference (but I'd still play the negotiation game). Maybe in poker it's a good thing to "play the person, not the cards", but it always feels like a crazy way to interact with such significant amounts of money.

• Small, rural towns in America have been struggling for a long time, and that leads to a much stronger dedication to the local community than I'm used to in larger cities. Whether in conversations about banking or on signs in downtown stores, people from the area clearly disapprove of dealing with national chains if there's a local alternative. And the owners of our B&B were glad that we were moving into town; they said that on occasions when a new professor came to the college and opted to commute in from one of the bigger cities 45 minutes away, those folks seemed to be saying "we're too good for you". I certainly sympathize, but it will take some getting used to: you don't see many people here in Upland with that perspective. (Even growing up in Lincoln, Nebraska didn't really have that feel, though I was very aware of it in the smaller towns nearby.)

Comments

[kirin]

I basically have that exact same issue with money. It's also one of the reasons why I just cannot get into active investing, and pretty much exclusively buy-and-hold indices, and deal with the whole issue as little as possible.

[wrenb.livejournal.com]

Small, rural towns in America have been struggling for a long time, and that leads to a much stronger dedication to the local community than I'm used to in larger cities. Whether in conversations about banking or on signs in downtown stores, people from the area clearly disapprove of dealing with national chains if there's a local alternative.

We even have that going on in Madison to some degree (and we're the State Capitol as well as being a university town). When I talk about my locavore tendencies with friends from the coasts they seem to think it's all the Michael Pollan bandwagon. But an awful lot of "Buy Local" is keeping jobs in our area. I can think of at least two organizations that are dedicated solely to supporting local businesses (Madison Originals restaurants and Dane Buy Local). Which is not to say that I don't shop at Target, but I also do a lot of shopping downtown from local businesses and the farmer's market. We're very lucky here to be able to do that.

[ukelele.livejournal.com]

Yeah, ditto. I remember feeling totally dislocated when a few thousand dollars here and there suddenly felt like rounding error when we bought the house. Even now, I can wrap my brain around the monthly payment, but the total debt inspires more giggling or panic than reason.

[steuard.livejournal.com]

I remember feeling totally dislocated when a few thousand dollars here and there suddenly felt like rounding error when we bought the house.

And that's part of why this worries me: situations where people are spending way out of their comfort zone are just begging for abuse by the unscrupulous. (Why wouldn't home inspectors raise their prices by a hundred bucks or so, when the home buyers are in the process of spending 1000 times that much?) I've seen this very clearly with weddings, and I'm sure it's an issue with home purchases as well. It's just not clear how to avoid it.

On a related note, I'm reasonably convinced that the human brain can only really grasp about three significant figures in any number, and even that sometimes feels like a stretch. (I would have felt really, really uncomfortable trying to bargain over the next sig. fig. of my salary, for example.) So on a large purchase, the smallest increments of reasonable negotiation are still well above the dollar ranges that I'm actually familiar with.

[ukelele.livejournal.com]

That last paragraph is a useful way to think about it.

I remember a similar feeling

[dmyersta.livejournal.com]

A tool I learned that was critical in order to "play the game to maximize my points" was to read the HUD-1; Ask - line by line - what each expense is for. The typical home purchase has about 7.5k in errors that when simply questioned will be resolved in your favor. On the last purchase we made, for example, there was a fee for sending documents by fed-ex that had been, in actuality emailed to us. When we questioned that particular expense they immediately apologized for the error explaining that they "typically" send the documents by fed-ex. Now the HUD-1 didn't say "fed-ex charge" it said "$70.00" and was named something that I don't recall. The title officer should be happy to explain every line and if they are not - your realtor has a feduciary duty to explain every line or get an explanation from the title officer if they don't know (which they may not). Basically - ask the title officer/closing attorney (if MI uses attorneys rather than title officers) since their office is the one that prepares the HUD-1.

I'm comfortable with amounts up to 60k at this point because 5k=really fun course I want to take; 20k=max I'm willing to spend rehabbing a house; 30k=max I'm willing to spend purchasing a house for investment purposes; doing this enough brings me to about 60k before it becomes "play money!!!" And I know when I first got started anything above $250 was like play money to me.