Hey everyone, it’s Whatever Wednesdays again. I could talk more about my Dodgers and how awesome they’re playing, but today we’re going to go to a topic with a little more depth. Let’s talk about Cognitive Dissonance.
What is Cognitive Dissonance?
The definition you can find online is this: (from wikipedia)
In the field of psychology, cognitive dissonance is the mental discomfort (psychological stress) experienced by a person who holds two or more contradictory beliefs, ideas, or values.
I’ve talked about this before when I was going through medical school, about which specialty to choose. It was the conflicting beliefs of “I want to be a neurologist” and “I probably don’t really like neurology”.
However, nowadays I find myself having this feeling when it comes to finances. For example, you would think that because I talk about finance a good amount and early retirement and FIRE and such, that I am 100% all about saving and frugality.
For the most part, you’re right.
I’ve even talked about how I’m not really a car guy (even though I thought I was) and I’m not really materialistic or anything in general. However, as I drive around in my little 2011 Honda Fit Sport and pretty much just “blend” in, part of me still wants to buy an Acura NSX or a BMW M4. This thought popped into my mind when I was driving home one night from work and saw an Acura NSX, a car I loved growing up as a kid and I like the new one just as much.
I mean, if I really wanted to, I could buy either car. I mean, I think most doctors probably could. Of course, I think this even though I know it’s not a good value for me and I wouldn’t get any real good use out of it. For those who don’t know the roads of Oahu aren’t that great and their are a lot of high speedbumps and curbs all around town. Not optimal.
Then you have to understand that I probably only drive my car at most like 300-400 miles a month. In addition, my commute is just probably 90% city driving with little or no traffic. Long story short, I don’t spend much time in my car. So then, why do these two conflicting ideals still exist?
I think that if given the choice, a person will usually opt for the more luxurious or higher performance option — because why not?
Like most things in life, there is a constant struggle between wants and needs. This becomes especially difficult when you add in one more variable… and that variable is the means.
Means?
Yea the means to buy things.
In fact, it probably wouldn’t change too much of your day to day lifestyle in order buy them. So now the tug of war between wants and needs becomes a little more in the favor of wants. You can buy more things that you want — so you do.
For this reason, I usually don’t buy anything unless I’ve given it a few hours or I’ve had a night’s sleep to consider them. The only time I break this rule is if it is a particular item that I’ve been watching and it drops below my $ threshold to buy it.
Basically, I think that everyone has some form of cognitive dissonance when it comes to their finances. The ideas of “live in the now” and “save for the future” both exist in everyone. It’s hard to do both and it will always be a tug-of-war between the two extremes. You need to find your own happy medium for these kind of things.
I think it is important to keep this cognitive dissonance in mind and be aware of it. Then, always remember to evaluate things with your own internal Value Cost Ratio.
TL;DR
Be aware of your own cognitive dissonance.
Exercise your own Value Cost Ratio.
Life is short. Be Happy.
-Sensei
Agree? Disagree? Questions, Comments and Suggestions are welcome.
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