A friend called me the other day with a very interesting query. He wanted to purchase a home espresso machine, and after much back-and-forth narrowed down on the gold standard.
The two Italian models were Lelit Bianca 2.21 and La Marzocco Linea Micra. The first would set him back by ₹2.21 lakh, while the other by ₹3.41 lakh.
My friend is passionate about baking and coffee. I suspect that he surreptitiously nurtures the dream of running his own café, or a coffee bar. And he had set his heart on this purchase.
So what was holding him that he kept wavering on this decision for the past year? Well, the tug of war between his heart and mind was because he could not justify the cost to himself. Somewhere in his mind, he believed that it was not right to spend so much on a “want”.
This black-and-white classification of need and want is where he erred.
I answered him based on the tremendous research and brilliant insights of author and behavioural finance expert Meir Statman, the Glenn Klimek Professor of Finance at Santa Clara University. Statman suggests that we need to view our preferences, wants and errors through the prism of benefits. And this helps individuals choose wisely.
What do people want? They want three benefits: utilitarian, expressive, and emotional.
Utilitarian
Q: What does it do for me?
A watch has the utilitarian benefit of informing you what the time is. The utilitarian benefits of a car are in ferrying us from one place to another. The utilitarian benefit of a restaurant is in feeding us when we are hungry or when we have not cooked sufficiently to feed our guests. The utilitarian benefits of investments are to create wealth so that one day we don’t have to work.
Expressive
Q: What does it say about me?
Bu hikaye Outlook Money dergisinin October 2023 sayısından alınmıştır.
Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 8,500+ magazines and newspapers.
Already a subscriber ? Giriş Yap
Bu hikaye Outlook Money dergisinin October 2023 sayısından alınmıştır.
Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 8,500+ magazines and newspapers.
Already a subscriber? Giriş Yap
The Future Of Credit Card Usage
Credit card usage is increasing in India, but it's prudent to manage credit wisely
Liquidity Coverage Ratio Framework
At the recent monetary policy committee meeting in April 2024, Reserve Bank of India (RBI) Governor Shaktikanta Das proposed changes in the liquidity coverage ratio (LCR) framework to successfully meet liquidity risk.
STRATEGIES TO HELP YOU STAY ABROAD AFTER STUDIES
More Indians are now going abroad for higher studies with plans to stay and work. But living costs, the lack of job opportunities and the burden of education loans could often pose a problem. Assess the opportunities and be practical before making such a decision
FROM SAVINGS TO SECURITY: HOW INDIANS ARE PREPARING FOR THEIR SUNSET YEARS
The Outlook Money - Toluna Retirement Survey conducted in December-end 2023 threw light on how Indians plan and save for retirement. A growing number of Indians now understand the necessity of retirement planning, and want to enjoy their retirement years with kith and kin
Here's How To Install A Solar Panel
It is the season of solar panel subsidy announcements. Right after the Centre launched the PM Surya Ghar Muft Bijli Yojana to offer subsidies to 10 million households to set up rooftop solar systems, the Delhi government has announced an extra capital subsidy of ₹2,000 per kilowatt (kW) to Delhi residents for rooftop solar panel installation. Both governments have caps on subsidies. Some other states, too, offer incentives on the use of solar rooftop panels.
Master Your Own Money Choices
Instead of judging others, have clarity about what you want from your money, where you want to spend it and how you want to feel about it
3 THINGS TO CHECK BEFORE YOU EXIT YOUR POLICY
If you think that the insurance policy you bought doesn't quite align with your goals, you may surrender it. But that comes at a cost. Here's why you should do the calculations
Small And Mid Cap Rally: Be Wary
You may include small- and mid-caps in your portfolio for diversification, but understand that they may not replicate last year's returns and are relatively more volatile
HOW TO MAKE SENSE OF THE GOLD RUSH?
The precious metal has been on an upward rally for the last couple of years due to factors as diverse as geopolitical conflicts, bulk buying by central banks, and hope of rate cuts, of late. The key, therefore, is to invest in gold in a staggered manner
'People Are Normal. They Are Sometimes Ignorant But They Are Not Stupid'
Meir Statman, the Glenn Klimek Professor of Finance, Leavey School of Business, Santa Clara University, California, is the second generation of behavioural finance experts who refused to label people as \"irrational\" and instead called them \"normal\". In his latest book, A Wealth of Well-Being: A Holistic Approach to Behavioral Finance, he expands the circle of finance to include life well-being and shows how they are inextricably intertwined. As part of an interview series, 'Wealth Wizards: Money Maestros in conversation with Nidhi Sinha, Editor, Outlook Money', Statman spoke about his research, and explained concepts through anecdotes that can help you take balanced decisions. Edited excerpts:
