You're misunderstanding the question they've posed people.
In either situation, the question is "is half an hour of transit worth $50 to you." Whether it's $50 saved on a $300 item or a $1000 item has no impact on the $ saved per minute.
In either situation, the question is "is half an hour of transit worth $50 to you." Whether it's $50 saved on a $300 item or a $1000 item has no impact on the $ saved per minute.
They don't realise it's not worth focusing on saving a dollar here and there, if they then move ahead and overpay for a house or a car (e.g. by not negotiating).
Half the battle is getting a good (or great) deal on expensive, one off purchases, if possible (say everything above $2k). Don't worry about the rest. As with everything: 20% of the "work" gets you 80% of the way there.
You can then not worry about the smaller expenses -- the ones that are generally time consuming and annoying to track -- that tend to make your life miserable.
Yes, Starbucks is expensive, but you're not going to go bankrupt drinking their coffee. You're also not going to get rich by not drinking it.
I observed people spending 5$ both morning and lunch/day, but for arguments sake stick to 1/day. thats roughly 1300$/year. now imagine living paycheck to paycheck and spending that (very common). they end up taking on dept @20% interest.
in a 5 year window, just that spending on starbucks is effectively costing them nearly 10,000$.
edit: keep in mind, i heard the average 401k savings is ~5k
I spend about $50 on starbucks a month, mostly on weekends in the morning, $500/y would be not such a big gain. On the other hand the quality of life I'm getting without good morning coffee would be much, much worse.
If I would need extra $500 that bad, I would consider doing some side work or even changing the job.
It's very easy to go over the top of living frugal and forget what is the sole point of earning money and living your life in a first place.
They're correct. You should spend the same amount of time to save a dollar on A as you do to save a dollar on B. And you should spend 100x as much time to save $100.
If you're willing to spend 10 minutes to save $100, then you are only willing to spend 6 seconds to save $1. If you can't immediately identify a way to save $1 that would take less than 6 seconds, then don't try to save $1. Each person has a different time/dollar ratio. Some people might be willing to spend 2 minute to save $1, and thus willing to spend 1 hour to save $30.
An example: I was raised by a single mother in poverty, where she would try to scrape by and live on welfare without working, year after year after year. She would only think about tomorrow's expenses, and she'd do a great job budgeting to make sure we had enough food to eat and so forth. As a child, I would show her job listings, explain the value of utilizing her assets as well as she could (she had her inheritance invested terribly), and all that. She would never be able to understand it, as she couldn't think that far ahead with all her mental capacity being devoted to making the best decision to save $50, as mentioned in the other comment.
In conclusion, optimizing those tiny financial decisions often leads you to neglect the ones further out. That's the issue the parent comment was highlighting.
Also, traditional economics isn't a fool if you account for the limited economic reasoning capability, and consider that reasoning capability as a scarce resource to be allocated.
Anyway and meanwhile, $50 off of $1000 is a 1/20 or 5% discount. Now it's still the same $50 they don't give a shit about, but it's also now an insignificant discount. Would they spend extra time on what to them is a rounding error on a $1000 purchase? They're not really getting a "deal" anymore, it's a bore, and they decide to spend the extra $50 just to buy back their half-hour. So long as the price is still "about $1000" they're OK with it.
Adversity and scarcity breeds a precision and a ruthless attention to detail that prevents that $50 from escaping. Meanwhile abundance leads to a relaxing of all such, and maybe even a dulling of that skill. Being born into wealth I imagine would put you at an even bigger disadvantage in that regard... though I might be okay with having such problems...
[0] I'm paraphrasing of course and I changed Law to Economics. http://www.bartleby.com/73/1002.html
Let's make it more extreme. A $50 item for free or $50 off a $5000 purchase. Discounts as big as 100% off don't come every day. Maybe you'll never see that deal again in your life. You should jump on it. Where as a 1% discount is something you see every day at dozens of stores. There will probably be a bigger discount next week, so don't bother going out of your way.
If you have to make a choice between the two, you choose the item with the less-common discount.
But that's not what the study asked. The study said "you need to buy this item now, where will you buy it?" In this case it is illogical to prefer the higher percent discount, dollar value is the only thing that matters.
Without that added utility, saving $50 alone might not be worth 30 minutes to them.
Edit: Upon realizing that you'd save the $50 every time you go / every 30 minutes spent regardless of how often, me (and presumably the parent) are wrong, and I'm going to bed. :)
But damn, people working 15 hours per day at minimum wage might also pay the $50, if they can't readily get time off work.