For what it’s worth , what is your idea of a lot of money?
Casino’s try to reduce the sense of loss or gain by using chips and terms like credit.
Credits are what you see on slot machines. You put $1.00 in a Penny
slot you have 100 credit. You put $1.00 in a 2 cent slot machine you
have 50 credits, and so on. Just like credits, chips have a value
per chip and the color and markings on them show their
The purpose is psychological. We have an emotional relationship
with our money. We tend to find it emotionally difficult to just hand
over our cash to someone. To let go of a five dollar bill to someone
tends to have an effect upon us. And degree of that effect depends on what we think, our perception of what we have compared to what we do or will have left.
Suppose, you were asked to loan or give someone $5.00 And also suppose you had $25 cash in your wallet. Our perception of money is also visual. And our decision to had over that $5.00 could be affected by the following:
If that $25 in our wallet consists of two TENS and ONE FIVE DOLLAR BILL, we find it harder to give up the Five Dollar Bill. Why, because we have three pieces of paper in our wallet and when we give up on we only have two left.
However, if we had 25 one dollar bills it would be easier to give up
five be cause we have 20 pieces of paper left. In either case both combinations of $25 represent 25 one dollar credits.
Yet since they are what we identify with value, earnings, profit, loss, and our
self-worth we have much more emotion invested in the green pieces of
paper. And more visual that is the more we feel we have.
Just take a stack of 100 One Dollar Bills and a stack of 100 100 dollar bills and wrap both in brown wrapping paper. Place on in one in each had of another person and tell them these are two stacks of 100 bills. Ask them which one they choose. The emotional response is most likely excitement and confusion.
When the results of thier decision is revealed the chooser my exhibit excitement or disappointment.
Now place 100 crumpled up one dollar bills in a paper bag, and place 1 single 100 dollar bill in a paper bag. Ask the other person to hold one bag in one hand and the other in the other had. Let the person feel each bag. Then ask what they choose. The automatic response is to go for the bag that feels as if it has more. But, the idea of mistrust might influence their decision. The point here is, that each and every one of use will “automatically” WANT to choose the bag that feels as if it has more in it.
Checking accounts, savings accounts, investments combined with profit
and loss tend to have a tad bit less of an effect on our emotions, but we still
consider those numbers a representation of the our total worth.
Parting with money via checks and debit cards hurts, but not as much as handing over actual cash. Reason? Because we can’t see the real cash amount we have or will have left after we spend some.
So what happens if we should need to borrow some money? Say we are
going to get a loan. We check around for the interest rate which will tell us how much it will cost us to borrow a sum of money.
So, for this purpose, let say some bank is have a sale (like that will ever happen) and will loan you $250 at 2% interest.
Wow ! Today only you can borrow $250 and only have to pay back
$255. Not a bad deal, as long as it’s a straight 2% on the loan amount
and no other factors involved. (again, like that will ever happen) Only $5.00 to borrow $250!! Doesn’t seem like much does it?
So what is your idea or perception of “a lot of money”? And at what point does 2% of a sum of money cause your emotions to say … “That’s a
lost of money”. We all have our “WOW” as well as our “OH SHIT”Factor.
Lets check it out.
You have six sums of money invested in various investment forms. Each
is equally affected by the economy and each looses or gains the same
percentage rate equally .
Today you took a hit and lost 2% on each investment. Which one of the
following causes you to go …. OH SHIT!
Your investments are as follows: The Investment Amount, followed by the Amount Remaining after your 2% loss , followed by the Amount of your Loss.
Remember this is a one day 2% loss:
Investment Remain after Loss Loss
$2.50 $2.45 $0.05
$25.00 $24.50 $0.50
$250.00 $245.00 $5.00
$2500.00 $2,450.00 $50.00
$25,000.00 $24,500.00 $500.00
$250,000.00 $245,000.00 $5000.00
Which on of the of the one day 2% losses starts to gets your – oh shit
Now flip it. Let’s say instead, you had a one day gain of 2%
Investment Amount After Gain Gain
$2.50 $2.55 $0.05
$25.00 $25.50 $0.50
$250.00 $255.00 $5.00
$2500.00 $2550.00 $50.00
$25,000.00 $25,500.00 $500.00
$250,000.00 $255,000.00 $5000.00
At which point amount does your “WOW” feeling kick in?
So if I came up to you and you had one of these initial amounts, in
cash, at what amounts would you donate 2% for my cause and at which point would cause an automatic NO!
When you decided at which amount you would not give me 2%, ask
yourself why. 2% is 2% ! And after all, it’s just Federal Reserve
And ask your self this. Would you take a job that paid you by
presenting you with a copy of what you produce. If you were a
Administrative Assistant would you accept a copy of all the documents you typed for the past week? If you were a lab assistant would you accept payment in the form of a copy of the past weeks lab results? If you were a software developer would you accept payment of a copy of the software you produced? What would that be worth to you and what effect would that have on the emotional value of what you earned for your labor?
The reason I ask this that there are some people whose emotional relationship with money is much different. I read a copy of the medias interview with an engraver at the US Mint. He stated that it was just plain strange to
be paid for his work by receiving his payment in printed copies of
My Goal (not really but it’s fun to think about it.) Get the US Government to consider scrapping our present monetary system and replacing the dollar and cents system with “TREE LEAVES”. Not the green ones on the trees, but the multi colored ones that have fallen on the ground in the fall.
Different colors and sizes would equal different denominations.
All you would have to do to earn it is to Plant trees to help the
environment, and RAKE YOU YARD IN THE FALL!
Then we could really say … That Money Grows on Trees!
And what do we do with the present money in circulation. We could use
to fuel our fire places. Because then
We would have money to burn.