On the Matter of Being Distracted
By Brad Thomason, CPA
May 29th, 2015
The other afternoon I was waiting for a new batch of fries to get ready at the Burger King down the road from our office. I had gotten entranced in work and it was about 2:00 in the afternoon before it dawned on me that I hadn’t eaten lunch (ergo, no fresh fries…). An infomercial was playing on the TV in the seating area. It promised a grand new world in which people could knock a few bucks off their monthly cable bill by switching services.
For quite some time now I have conducted a loose and unofficial study of offers like this one (OK, study is too big a word, really: call it a general awareness…). Sometimes it’s an offer for cable. Sometimes cell service. Sometimes it’s a rewards program from a credit card company, or a miles program from an airline. The common theme is that by doing whatever the offeror wants you to do, you can pick up a few bucks.
I am not about to make the case that saving money is bad. But I do find these programs interesting because of the effect I have hypothesized they might have on other activities in the financial quadrant.
I don’t have any rigorous data to back this up, but it has been a recurring observation of mine for many years that people seem to have a limited amount of attention span when it comes to financial decisions; and when that attention span is depleted, they are through thinking about such matters, irrespective of how much of the important stuff hasn’t yet been addressed.
There is however ample data that shows that most people don’t engage in meaningful financial planning. I have always wondered how much attention span was eaten up by these various offers which, though financial in the strictest sense, are hardly material.
We all know that guy who spends dozens of hours doing research on prices, and insurance coverage and loan rates prior to buying a new car. The net effect of all that effort? Maybe $1,000 off the sticker price or other costs associated with ownership. Is it good to save a thousand bucks? Of course. Except that’s not really the most important question. Could he have put that time and effort to a different use and gotten a larger benefit? Because chances are, he didn’t do both.
It is much easier to tackle the puzzle of the best cash-back card, or find that last quarter-point of savings on a loan rate, than it is to take on Financial Planning, capital F, capital P. We don’t have to wonder about why folks do the easy stuff first. But when the easy stuff is all we do, when the easy stuff depletes whatever juice we had for tackling financial questions, we end up getting tiny wins in exchange for leaving the big wins un-pursued.
In fact, it’s questionable, in practice, if those small savings get us anything at all, other than the means to go spend the money on something else. Most people who knock $20 off their monthly budget for X do not follow that up with a call to their 401(k) provider to increase their contributions by ten dollars a pay period. The folks on the infomercial who wanted you to save on the cable bill? They suggested you take the savings and go buy a new, bigger TV. As incentives go, I guess maybe a new TV is more exciting than a miniscule add to the retirement kitty. If I were hawking cable packages I’d probably suggest that, too.
The point of all of this is that it’s very easy to get distracted by things which can save you some money and which probably feel at some level like a responsible action to take. I just wonder though how much actual benefit any of those activities really generate. And how much of our attention span for the truly important financial decisions they burn up in the process.
What about you? Have you ever gone on the hunt for the best hotel rewards deal, or clipped coupons, or bought things you really didn’t need in the first place because they were offering a buy one/get one deal? I only ask because someone’s gotta be taking advantage of this stuff, or else they wouldn’t keep offering it, right?
If you did, and you got a good deal or just had fun chasing the answer, good for you. But hopefully it didn’t get in the way of you working on the heavier-lift parts of your financial world, too. And if it did, maybe the next time a tempting distraction comes along, you can let it pass you by and spend that time and effort on your long-term investment or retirement income plan instead. It will probably yield a much larger dividend, no matter how enticing the free set of steak knives is.