Two things happened in January that so eerily coincided, I needed to write about it. 1) I picked up Dan Ariely's new book, Dollars and Sense, and 2) Amazon opened the first checkout-free store in Seattle called Amazon Go. Let me explain
Amazon, the leader in easily parting us with our money, made it that much easier with this new store. Once you walk in, cameras pick up who you are, more cameras follow you around and keep track of what you put in your cart. Once you are done, simply walk out the door. The computers will calculate everything you "bought" and charge your credit card. Crazy!
Here's the strange part. In the first part of Dan Ariely's new book, he talks about the Pain of Paying. What this means is you are less likely to spend gobs of money if you have to use cash and physically count it out than you are if you pay with a credit or debit card. (He goes into more detail but this sort of thing, behavioural economics, interests me and probably not you.) Regardless, in the book he uses Amazons one-click purchase as an example of removing the "pain" of paying for items since the steps amount to 1 single click. He joked that one day they may make it no-click. The future is now!
These days, with Apple Pay, Google Pay, PayPal, Amazon Go, NFC enabled phones, it is so easy to spend. Sometimes, it's so easy, we forget that we are actually spending money!
Our lack of awareness may be the scariest thing about the more sophisticated ways with which companies are seducing us into avoiding the pain of paying.
Recently, I had a meeting with a new client who immigrated from Pakistan. They couldn't figure out where their money was going. After about an hour of getting to know them and their story, I finally came across the problem. Up until they moved here, they used to write cheques for everything. They physically had to write out (twice, if you remember cheques) how much money they paid for groceries or rent or the gardener. Now, they tap their phone on a black box at checkout and walk away.
"How much was that?"
It's easy to spend money. The hard part is trying to control it. That is where Cash Flow Management comes in; one of the non-sexy parts of Financial Planning. Keeping tabs on money-in/money-out, giving all those dollars a job and still leaving a little for the occasional splurge will help future you be able to spend...whatever currency there is in the future...possibly Altarian Dollars.
Kenneth Coombs CFP CHS RRC
Ken has 13 years experience in the financial services industry, is a Registered Retirement Consultant and a Certified Financial Planner. Ken has written financial planning columns and has been a guest on financial radio and podcast programs.