MONEY The Economy

WATCH: These 3 Companies Can Raise Prices Without Losing Your Business

Netflix, Amazon, and Chipotle have raised prices without losing the support of their customers or investors on Wall Street.

MONEY Shopping

QUIZ: What Your Dad Really Wants for Father’s Day

Drawing a blank on what to buy your pops? Take our quiz to figure out the perfect gift to match his personality.

 

 

MONEY Shopping

Just Plain Awful Father’s Day Gifts, and What to Buy Instead

There are the Father's Day gifts that you think are funny or cute or clever, and then there are the Father's Day gifts that dads actually like and will use. Which kind are you giving dad?

Here’s a list of common Father’s Day gift categories that dads really don’t want, followed by what you should buy instead:

Gag Gifts
You might be tempted to have a little fun with dad on Father’s Day by purchasing something silly and embarrassing like “meggings,” denim swimwear, or another joke from this list of gifts so bad they’re awesome. You might think it’ll just be hilarious to see the look on dad’s face when he opens up an inflatable toupee, or a “Senior Moments” memory workout book, or adult diapers, or something else that makes a show of how old your old man is. Ha-ha-ha. Joke’s on you, uncool, bald, pathetic, incontinent old man! You know, dementia and death are probably right around the corner! Ha-ha-ha.

Granted, some dads might think this stuff is really a laugh riot too. But … probably not. Same goes for gag gifts that burp and fart. We don’t want them, nor do we appreciate the message sent when we’re given them. As one dad blogger put it on his list of Father’s Day gifts dad doesn’t want, “I understand that I don’t hide my body’s venting. But I realize every Father’s Day that’s how you see us. I’m just a cartoon fart machine to you.”

What to Get Instead: Almost anything, really. Heck, even some stupid “World’s Best Dad” T-shirt or mug—often on Bad Father’s Day Gift lists themselves—would be way better. Far better than that, though, would be something genuinely thoughtful and practical. It doesn’t have to be something the average person would consider a “gift.”

If you’ve noticed your dad’s wheelbarrow wobbles, or his favorite work boots have no more tread, or his college alma mater baseball hat is falling apart, go and get him a new replacement. Save him the trouble of a trip to the store. The elimination of a headache or a chore is a wonderful gift the average dad deeply appreciates. Above all, be sure that whatever you do or give implicitly demonstrates you see him as more than just a silly old fart machine.

Useless Gadgets
Just say no to anything that you’ve seen in the Sky Mall catalogue, and anything that you imagine might has or ever will be in the Sky Mall catalogue. Again, this basically comes down to knowing who the gift recipient is: Is your dad (or spouse) really the kind of person who would want—or even know what to do with—a wrist fitness monitor or a voice-activated golf cap?

Most dads hate to see money wasted, and hate it even more when the money is being wasted in their honor. Think about that before presenting dad with a dubious doohickey that’ll sit unused, unopened, indefinitely.

What to Get Instead: Some piece of technology that’s actually useful, and that dad actually wants. Dads aren’t tech idiots. They just like what they like, and they’re skeptical (for good reason) about the value of any hot new “must have.” Father’s Day, which should be a day of relaxation and enjoyment, isn’t the day to prod dad into embracing something unfamiliar. That’s sorta like giving a high school student homework on the day he graduates. It’s cruel.

If you know your father (or spouse) well, you should be in tune with his likes and dislikes, and what’s in his comfort zone. In some cases, it’s a great idea to give dad the newest version of his favorite e-reader or tablet, or perhaps even to splurge on the 70-inch HDTV you know he’s been dying to see in his living room.

If you’re pursuing this route, go the extra mile and make dad’s transition to the new tech as smooth, simple, and easy as possible. That might mean importing his contacts or e-book library, or taking care of the wiring and installation of the TV or video game system (yes, some dads are big-time gamers). Remember, Father’s Day isn’t the day to give dad extra work to do. Speaking of which …

Gifts That Put Dad to Work
Whereas moms may get “a dozen long-stemmed, obscenely expensive flowers” for Mother’s Day, the corresponding gift for fathers, according to Detroit News columnist Brian O’Connor, is “an entire flat of tomato seedlings from the farmer’s market for you to plant, weed, water and fertilize for the next three months.”

What to Get Instead: Feel free to buy those tomato plants—or some other gift that’s really something of a project—but volunteer to take responsibility, or at least share the responsibility, for them. Not just on Father’s Day, mind you, but for the long haul. Come harvest time, make dad his favorite homemade sauce, or if you can’t cook, slice those tomatoes up and serve them with fresh mozzarella, basil, olive oil, and balsamic vinegar.

Gifts That Tell Dad He Should Change
Even worse than gag clothing gifts for dads are some of the clothes that givers actually expect dad to wear—and that cause him extraordinary discomfort as a result. Sure, traditional dad fashion may be embarrassing (black socks and sandals anyone?), but it’s even more embarrassing to see a blissfully uncool, out-of-it dad try to pull off donning the latest trends, be it skinny jeans, floral prints, or whatever else someone deems as “hip” at the moment. Or rather, to see a dad being forced to wear such clothing because one of his children decides it’s in his best interest.

Father’s Day is about fathers. It’s about celebrating who they are, not who you think they should be. The day you’re honoring your father is not the day to implicitly send the message that you think he should be more fashionable, or lose weight (would you buy your mom a treadmill for Mother’s Day?), or learn to cook, or try some cocktail that’s all the rage, or stop snoring, or change in any way. Yet some gifts unsubtly send just those messages, and they come across not as helpful, but as disrespectful and insulting.

What to Get Instead: His tried-and-true favorites. Whatever brand of cigars, Scotch, craft beer, sunglasses, or sandals he favors is a can’t-miss gift. Stop fooling around and get the man what he likes. By doing so, you’ll demonstrate you know him well, and that you accept and love him for who he is.

Or you could just get a “World’s Best Dad” T-shirt. At least he can mow the lawn in the T-shirt without drawing snickers from the neighbors. That’s more than you can say for skinny jeans.

MONEY psychology of money

WATCH: How to Get More Bang for Your Happiness Buck

Want to get happy? Economist Justin Wolfers explains the best ways to spend your cash.

+ READ ARTICLE

Check out our full interview with Justin Wolfers on the connection between money and happiness.

MONEY psychology of money

The Money-Happiness Connection

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Justin Wolfers photographed in Washington, DC Joe Pugliese

We put the question to economist Justin Wolfers, who recently conducted one of the broadest studies on the relationship between money and happiness to date. His answer -- yes, sort of, but it ain't cheap -- breaks with the conventional wisdom on the subject.

Does money buy happiness?

Wealthier people are happier than poor people. Wealthier countries are happier than poor countries. As countries get ­richer, they get happier. The relationship between income and happiness is extremely strong.

What’s the nature of that connection? Does money actually make you happier?

I should give the usual “correlation isn’t causation” disclaimer here. When I say rich people are happier than poor people, I don’t know if it’s the money that’s making them happy. When I say rich countries are happier than poor countries, I don’t know whether it’s the greater money that makes the average American happy or whether it’s the greater opportunities. Maybe it’s democracy, rule of law, or having functioning markets and political and social institutions.

Saying richer countries are happier than poorer ones seems obvious. Has other research found otherwise?

There’s something called the Eas­terlin paradox [named after University of Southern California professor Richard Easterlin], which claimed that while rich people are happier than poor people, rich countries are not happier than poor countries, and as countries got richer, they did not get happier. Now, what we [Wolfers and fellow University of Michigan professor Betsey Stevenson] did was study more comprehensive data. We looked at ­surveys, including the Gallup World Poll, of 155 countries covering 95% of the world’s population. It turns out that rich countries are indeed happier than poorer ones, and as countries get richer, they get happier.

[Easterlin says that Wolfers has mischaracterized his findings, and that his paradox indeed asserted that rich countries are happier than poor ones. Easterlin also says that while happiness and income are correlated over short-term periods, the relationship disappears over the long run.]

Psychologist Daniel Kahneman and economist Angus Deaton, also drawing on Gallup data, famously concluded that happiness doesn’t really increase above incomes of $75,000 a year. How do you square that with your research?

Whenever people talk about happiness, they are imprecise in their language. I’m mostly analyzing questions that ask you how you think about your life overall, or how happy you are, taking all things together. These are questions that we think of as being “evaluative.”

The $75,000 number comes instead from measures of affect. Rather than being evaluative, they gauge what’s going on with you right now. They say, “How did you feel ­yesterday?” This is not asking you to judge your life as a whole. And Kahneman and Deaton found at very high incomes more money did not increase well-being. The increases above $75,000 were vanishingly small.

Back to your research: Is the relationship between money and happiness linear? Will I feel the same jump in happiness with each $1,000 raise?

No. If you think about how much extra well-being is associated with each dollar, it’s absolutely a situation with diminishing returns. But if you describe it in terms of the percent change in income, a 10% rise yields a roughly similar rise in well-being to everyone in the world. A 10% increase in a very poor country like Burundi is equivalent to a 10% increase in a very rich country like the U.S.  But to get a 10% increase in ­Burundi doesn’t take a lot of dollars, whereas in the U.S. it takes a lot.

Happier3

The U.S. economy has grown a lot since the 1970s, but you’ve found that happiness here hasn’t increased much. How can that be?

I never said that the only thing that changes happiness is income growth. Something else is going on in the U.S.

Average per capita income has grown, but that can be misleading. If you look instead at the median—the income of someone making less than what half the population makes and more than what the other half does—income has barely risen over the past 40 years, once you adjust for inflation. Income has actually fallen for those at the lower end of the scale. If income has barely grown for most people, we shouldn’t be surprised that happiness has barely grown for most people.

So how can we fix that?

We can do it through the minimum wage or the tax system. We can do it through the benefit system as well. Things like the earned income tax credit. Remember, an extra dollar doesn’t buy much extra happiness for a millionaire, but it buys quite a lot for a working-class person.

Raising the federal minimum wage is politically difficult. So is making the tax system more progressive.

Compulsory education up to an age older than 16 could also work. Research shows that education and skills not only increase income later in life but also increase happiness.

What about the personal implications of your research? Are you happier now that you make more money than you used to?

Unquestionably, yes. When I was in graduate school and I went into a store, I was always looking at the prices. I was constantly calculating. You ask yourself, “Can I afford to buy this box of cereal?” You think, “If I buy more of this, maybe I can afford less of that.” You’re making these tradeoffs and you’re constantly aware of these ­tradeoffs. And it’s tiring.

The first thing I did when I had a well-paying job is I stopped looking at those price tags. Now I never really feel stressed about money. Even if I lost my job tomorrow, I have my degree, and I can get another job. I get to live free from stress and worry and the constant calculating of tradeoffs that I had earlier in my career.

So would I be happier if I became a hedge fund manager?

Don’t let an economist bully you into believing money’s all that matters. And don’t let a psychologist bully you into believing that money is completely unimportant. How you manage that tradeoff is going to require a lot of experimenting and thinking and introspection. People choose occupations based not just on money, but also on meaning. There’s nothing in my research that says that’s a bad idea.

MONEY Odd Spending

There’s Probably No Cash in Your Wallet. Could That Cost You?

140528_EM_NoCash_1
Nikola Bilic—Alamy

If you walk around with little or no cash, you're in the majority. But choosing plastic over cash for everyday purchases could mean you'll spend more in the long run.

According to two recent surveys, the majority of consumers walk around with little or no cash. Most prefer plastic for the sake of convenience and safety. There could be an unfortunate side effect, however, based on the theory that people spend more when making purchases with credit or debit cards rather than cash.

Last week, VoucherCloud, a UK-based deals and coupon site, released the results of a survey of 2,341 Americans indicating that “over half of American citizens (57%) ‘never’ carry cash, instead relying solely on credit and debit cards to pay for their daily expenses.” Only 10% of survey participants said that they “always” carry cash, and another 33% said that they carried cash “rarely” or “sometimes.”

Could this be true? Do the majority of American adults you pass on the street really have empty wallets? There’s reason for skepticism. Let’s start with the question that prompted the responses: “How often do you carry cash with you on an everyday basis?” Many may read this question as essentially asking, Do you always carry cash? That’s different than asking if you usually keep a few greenbacks in your pocket.

What’s more, another recent survey, from Bankrate, focused on the same subject but ended up with very different results. In its survey, which asked, “How much cash do you usually carry on a daily basis?” Bankrate found that only 9% selected the option “Don’t carry cash/does not apply.”

There’s no denying that folks carry a lot less cash than they used to. According to Bankrate’s data, more than three-quarters of people generally walk around with $50 or less: 40% usually have less than $20 on hand, 29% say $20 to $50, and 9% typically go cashless (or “does not apply,” whatever that means).

In both surveys, participants said they felt safer that way. The top reasons given in the VoucherCloud survey were “concerns over safety and the risk of theft” (65%) and “risk of losing my wallet and/or its contents” (53%). Women tend to carry less cash than men—77% of female respondents said they keep $50 or less handy, versus 61% of men—perhaps owing to the fact that women “may prefer to carry less cash than men so as to reduce the risk of being a target for criminal activity,” according to Bankrate chief financial analyst Greg McBride.

As for whether it’s wise to carry little or no cash, the surveys come to very different conclusions. When asked, “Do you spend more or less when paying by card instead of cash?” 84% of VoucherCloud respondents said they do more damage when spending with plastic. “While using payment cards rather than cash is a widespread modern phenomenon, because it is so quick and convenient, it can become a dangerous trend for some of us!” VoucherCloud’s Matthew Wood warned. “It’s much harder to keep up with what you’re spending as you don’t see the money leave your hands and, because it’s just a little piece of plastic, it doesn’t feel like a real exchange. It’s easy to get carried away.”

There’s plenty of research out there to back up this theory. Generally speaking, the idea is accepted that handing over cash feels more tangible and “hurts” more compared to quickly swiping a card. Many budget and personal finance experts recommend going cash only and maybe even freezing credit and debit cards in a block of ice as a strategy to limit one’s spending.

The Bankrate study, on the other hand, makes the argument that people today think of any cash as “petty cash” that will inevitably be spent quickly and carelessly. So it stands to reason that people don’t want to carry around too much. “If you’re carrying more, maybe you feel you have more, and you feel you spend more easily,” Joydeep Srivastava, a professor of marketing at the University of Maryland, told Bankrate. To many consumers, cash on hand is as good as cash spent. “As soon as you draw it from the ATM, it’s like you’ve already spent it,” said Srivastava. “You don’t feel that pang of guilt of spending it anymore.”

So which theory is true? If you’re trying to avoid unnecessary spending, should your primary mode of paying be plastic or cash? And by extension, is it best to carry lots, some, or no cash? The truth is, the answers probably vary a lot from person to person.

If you’re the type who is constantly piling up credit card debt or getting hit with overdraft fees on a debit card, it may be time to put the plastic on ice and limit yourself to cash-only expenditures. And it’s probably best to try to plan out your daily expenses and limit how much cash you carry around. Because if you have more cash than you need, you know you’ll just spend it.

MONEY psychology of money

Is my data safe?

In the April issue of Money, before the story of the Heartbleed bug broke, Money spoke with computer security expert Bruce Schneier, chief technology officer at Co3 Systems and a fellow at Harvard Law’s Berkman Center for Internet and Society. Schneier said it is difficult for consumers to protect their data on their own — a point that Heartbleed has demonstrated all too well.

Is my data safe?

A: Well, that depends … What does that question even mean?

For example, the recent theft of credit card data from Target — as well as names, phone numbers, and email addresses — worries people.

That story is all over the Net, but if your card number was stolen, it didn’t cost you any money and you got a new one. Most of the other data is in telephone books. And all of it is for sale, cheap, from data brokers. If the bad guys want that stuff, getting it is easy. It’s common information, and not very useful for fraud.

So is there anything about data people should be worried about?

Sure. Pretty much everything you do on the Internet is spied on. I used to say that Google knows more about my interests than my wife does. But actually that’s wrong: Google knows more about my interests than I do.

Google knows exactly what I’m interested in and when I’m interested, and Google remembers those things more than I do. Do I remember what I was interested in six months ago? I don’t. Google remembers.

What’s the danger there?

We think we have a right to private thoughts, and that’s increasingly unlikely. That’s why the question “Is my data safe?” makes no sense.

The problem isn’t security of your data. When you go on Google or Facebook, for example, you say, “Yes, I am open to you spying on me.” And I’m talking about legitimate, legal uses.

Take the Nest thermostat, which connects to the Internet. All your heating and cooling data are stored in the cloud, meaning on the company’s servers. The company knows when you’re home, when you’re not.

You might have said, “Well, that’s a small company.” But Google just bought Nest. Now Google has that data, along with its other data. [Nest's CEO has said that data is used only for Nest services, and that if this changes, users will be asked to "opt in."]

And what can happen when companies have all this data?

Then they can use it for psychological manipulation — for advertising. That’s the fundamental business model of the Internet. Google’s profit is the net difference between the value of your data, to them, and the value of the services they’re giving you for your data. You are not the customer of Google or Facebook or other free services. The customers are advertisers. The product is you.

Is this just about showing me targeted ads?

The Federal Trade Commission is now looking at what to do about cellphone tracking in stores. You can be surveilled in a store because you’re carrying a phone. We’ve moved into an era when we are always observed.

Is this really spying? If a computer monitors me to send me ads, that’s not like a person looking at me.

Someone at Google said having a computer read your email is like having a dog see you naked. And that’s sort of what you’re asking.

It’s a computer — what’s the problem? But then think of the difference between a computer and a dog. You can trust the dog. The dog will never say anything. But a year from now if someone asked the computer what it saw you do, the computer might tell.

What about criminals getting into my data?

There are hacker threats. Compared with the threat of what you give away, they’re kind of the background noise, but they’re real. Primarily people are stealing data for financial fraud, and the effort is to get account numbers, passwords — information that can be used for identity theft.

Can I protect myself?

You can do things around the edges, but in the main, not really. And what’s interesting is why not really: Most of your data is not under your control.

How can you protect your Gmail? You can’t. Google protects it. Google can do a good job or a bad job, but you can’t fix it.

That Target hack was interesting because it happened out of Target servers: You as a Target customer could do nothing. It was a wholesale attack: Stealing one credit card is inefficient, so thieves break into a server and steal 40 million.

What are the things you can do around the edges?

You can do things like not putting your passwords in an email. Have good antivirus software. Make sure your software is updated. This is good computer hygiene. But the big threats are not related to those solutions.

Is biometrics, like using your thumbprint to open your phone, safer than using a password?

I wrote a piece on Apple’s new fingerprint ID, and I said on the whole this is a good idea. It secures the phone in ways that you’d probably not secure it otherwise. But the neat thing about a password is that if someone steals it, you can make a new one. If someone steals your biometric data, you can’t get a new thumb.

You said having a credit card number stolen isn’t that big a deal. Why? It feels scary.

Card fraud has been largely solved by credit card companies. They want you to use your cards, so they’ve made it easy to get problems fixed. Other kinds of identity theft are nastier, like when someone gets credit in your name.

Card lenders are also legally liable for the losses. You’ve said liability is a key to good security.

We need to put the risk onto the organizations with the power to fix the problem. Congress limited the amount you were liable for credit card fraud to $50. The lender pays the rest. So the people in the position to implement security have the incentive to do so.

As we move into this era where you have less control over security, those who have control should have the liability. If your email provider has lousy security and you suffer privacy loss as a result, you should have legal recourse. That aligns the incentives properly.

Sometimes people seem to shrug off all these privacy concerns. Why?

They’re not unconcerned. It’s that this is how you live your life. You really don’t have a choice. It’s hard to live without Facebook or a cellphone. We’re dealing with immediate gains vs. long-term, nebulous losses. Those are hard tradeoffs for people.

So what do I do, then?

Take a deep breath and go outside and play.

MONEY psychology of money

Why is Saving Money So Hard?

Harvard economics professor Sendhil Mullainathan says people's failure to save shouldn't be blamed on a lack of self-control. Photo: Joe Pugliese

Sendhil Mullainathan, a professor of economics at Harvard University and a recipient of a MacArthur Foundation "genius" grant, answers the big question of why setting aside money for the future is so difficult.

Why is saving so hard?

There’s a popular image of people who don’t save for the future as lacking in self-control. But the reason saving is so hard has less to do with self-control and more to do with a scarcity of attention.

If you have urgent current expenses to cover, then future priorities like college and retirement fall off your radar because they are simply less pressing.

Scarcity of attention prevents us from seeing what’s really important. The psychology of scarcity engrosses us in only our present needs.

That’s a theme of Scarcity: Why Having Too Little Means So Much, your new book with Princeton professor Eldar Shafir. When saving is so hard, how can you get better at it?

People think saving is difficult because they think it requires a heroic tightening of your budget. In reality, you can make a big dent with automation and by capitalizing on a few opportunities requiring self-control.

For example, I have a healthy savings rate. But I don’t consciously save anything. I just have a chunk of every paycheck go straight to a savings account. With the money I get, I actually spend willy-nilly.

I overcame my scarcity of foresight by setting up this system. It’s like jumping into a pool: You just have to steel yourself and do it once, and you get benefits going forward. The ability to save automatically is among the most powerful tools available to us.

How do you know it’s so strong?

One piece of evidence is a study of investors in TIAA-CREF a few years back. After having chosen their 401(k) mix, the median number of times people changed their asset mix in any way over their working life was zero.

The best use of automation is something like the “Save More Tomorrow” program [developed by behavioral economists Richard Thaler and Shlomo Benartzi]. It sets up a regular deduction that doesn’t kick in right away. This is how companies sell you things: They start out cheap, then you’re automatically moved to a paid subscription later. You should do the same with your savings.

What if you don’t have a steady paycheck? How do you save?

In that case, you can’t just automatically put aside money. The question is what you do at times of abundance — say, if you get a tax refund. You have a magical opportunity to escape scarcity. But studies show that if I give you an abundance shock of $10,000, you don’t just spend that $10,000. You end up spending $20,000, because you’re thinking, “I have all this extra money.”

You forget how you felt under the conditions of scarcity. You need to think, “Instead of using this windfall to buy something nice, I should put it in a savings account.”

Are there any good tools for getting yourself to do this?

There’s a cool website I’ve used, FutureMe.org. It lets you write an email to yourself to be delivered later. Say you are struggling to make a credit card payment. You send yourself an email to arrive in December, when you’re going to get your Christmas bonus, saying, “Remember last March when making that payment was a pain? I don’t want to be back there. As attractive as shopping is right now, let’s put some of our bonus toward paying down the credit card.”

In addition to making it hard to save for the future, how does financial scarcity affect us?

Our thoughts constantly go back to making ends meet, even if we are trying to focus on something else. The starkest implication of this, which we have evidence for, is that the same person has significantly less mental capacity to address a problem when he is poor than when he is well-off.

It is safe to say that when people are short on cash they might be less productive at work, be worse parents, and have less self-control.

What’s the effect of scarcity on a societal level? Over the past 12 years, the mood in the U.S. has gone from a sense of plenty to one of anxiety.

A reasonable hypothesis is that as the U.S. has gotten into a recession and more people have making ends meet on their mind, we are actually becoming less productive, less intelligent, with lower self-control. How would we treat austerity and recessions if we knew they were hurting our mental capacity?

Along with your work on scarcity, you’ve studied financial advice a lot. People often worry whether they can trust their adviser. Can they?

You can trust some of them some of the time. But a lot of advisers have financial incentives to sell specific products, which gets them to push funds that invest heavily in a particular stock or sector.

In a study I co-authored, we hired actors who pretended to seek financial advice. When some of them told advisers they already had their money in a good low-cost index fund, a significant majority of advisers tried to convince them to switch to some undiversified high-load fund. That was especially depressing.

So how can people avoid that trap?

For many people, target life-cycle funds can do a lot of work: They adjust the riskiness of your portfolio over time. All you need to do is to pick your retirement age.

You can also go to advisers that charge you by the hour and don’t make money by selling you products. But you need to be self-aware too: We all have this urge to be told what we already want to hear.

In a study that Antoinette Schoar of MIT just finished, she found this striking problem in the demand for advice: If one adviser says, “Look, you can’t beat the market; the best thing you can do is be in a low-cost diversified fund,” and another adviser says, “I think that the tech sector is ready to rebound, and I’ve got a fund that would be good for that,” people find the second adviser more knowledgeable and trustworthy.

It’s like going to two doctors and preferring the doctor who offers you snake oil — and giving him an incentive to dispense snake oil. So you should make clear to your adviser that you are okay with being contradicted — that you are comfortable hearing perspectives at odds with your own.

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