Masters Week – I Rented My House! Let’s Go Spent The Money
One of the neat traditions of the Masters week is renting your house to a tournament visitor. I’ve never done it, but I have a number of friends who have.
These rentals pump millions of dollars into the Augusta economy. That’s right. I said millions.
In fact, there is a cottage industry devoted to linking up renters and visitors during the week of the Masters. Here’s one of the many sites. Check it out. You’ll see what I’m talking about. http://www.mastershousing.com/).
A house rental can be as little as $500.00 or over $15,000. These numbers can be much larger if tickets and badges, food, transportation, and maid service are included.
For some, rental money from their Masters week rental is a significant part of their annual income.
This is where human nature gets in the way. For many, this money is “found” or “play” money. And their feeling brain plays games with the money to short circuit “rational” spending.
When the money hits your account (actually way before that) your brain starts to do some creative mental accounting. It puts the money into special categories and treats each pot of money differently.
To a traditional economist, this is irrational behavior. Money is money. It’s what we call a fungible asset. Money is interchangeable and is freely exchanged or replaced.
The “rational spender” should look at their net worth and make spending choices accordingly. However, this is hard to do. Your feeling brains don’t like to work this hard. It’s easier to create categories or pots of money with special labels – college saving fund, car fund, vacations fund – and rationalize your spending.
Here’s where everything gets interesting. The Masters week money arrives. Your feeling brain nonconsciously takes the “found” money and immediately puts it in the “I can’t believe someone actually gave me $15,000 to rent my house!” and says, “Let’s spend it.”
Because this is “special” money. And it was so easy to get – “I really didn’t work for it.” It’s so easy to spend.
I see this happen all the time around here. The feeling brain is in charge. “What the heck, let’s go on a cruise, take a vacation, buy a jet ski, have some fun, buy . . . buy . . . spend it all. We’ll get more next year.”
What should you do with “found” money? Simple. You should analyze your current economic situation. Review your financial goals. Pay off some credit cards, save some of it, maybe invest a bit, and it’s even okay to spend a little. BORING . . .
We’re human. So the default is to act human. That means spend it… but before you do, count to ten and engage your thinking brain.
If you have money in a savings account earning 0.5 percent interest and a credit-card balance you never pay off at 21 percent interest. You are a mental accountant.