The Finances of Surviving a Hurricane

A hurricane has hit much of the east coast, and people are being warned to prepare for the worst. If you live in the hurricane’s projected path, not only are you likely getting calls from worried parents telling you to stock up on water and non-perishables, but you might also be getting emails from stores trying to lure you in. Natural disasters present a big opportunity to increase spending, and businesses are not shy about using that to their advantage.

What makes natural disasters so difficult to navigate is that it is hard to assign a dollar value to your life or well-being. (Does the small chance that you might need another gallon of water justify its purchase?) Not only is it difficult to decide some value for your well-being, but it is also just uncomfortable. People don’t enjoy imagining the worst, and nobody wants to admit that, at a certain point, they might put money ahead of their well-being.

What to Watch Out for with Free Trials

Last week’s article discussed situations in which free merchandise might not actually be so free. It could, for example, contain hidden costs of your time or health, or it could lock you into purchasing other complementary items. In other words, free isn’t always so free.

Despite these hidden costs, however, marketers often use the concept of free to lure in new customers—particularly with promises of “free trials” or “money-back guarantees.” These programs can offer great opportunities to explore a product and decide if it is for you, but they aren’t really risk-free. In fact, if not used properly, free trials and money-back guarantees can wreck havoc on your decision-making.

Want to get the most out of your free trials and money-back guarantees? Here are some important tips to keep in mind:

When Free Isn’t So Free

Getting items for free can be great: there’s no apparent cost; you get to enjoy the item you receive; and your brain might even receive a small buzz from finding such a great deal. All in all, choosing to get something that is free seems like an obvious decision. If you want the item, then you use it. If you don’t, then there was no harm to the transaction—because it was free, right?

Unfortunately, free isn’t always so free. In fact, free can sometimes be downright costly. Consider this example from Dan Ariely, a professor at Duke University and whose book, Predictably Irrational, I cannot recommend highly enough:

A New York City nightclub recently promoted an event by giving out “free tattoos” with admission. Somewhat surprisingly, over 70 people signed up for these tattoos over the course of five hours. On the surface, this appears to be a great outcome: the club was able to attract customers for its event, and the customers who came out presumably had wanted to get a tattoo anyway. So what’s the big deal?

Can Certain Passwords Cause You to Spend Less?

Presh Talkwalkar of MindYourDecisions, one of my favorite sites about interesting decision-making dilemmas, had a great article recently (re-posted below) about how people's passwords could influence their rate of savings.

Although not backed with data, Presh muses that using passwords such as 'SaveforRetirement' or 'Thinkofthecollegefund' could cause people to spend less impulsively because they have to consider alternate uses for their money. I am a big fan of this approach because of the way it leverages what psychologists call priming.

Earning Money in College: Don’t Sleep on Potential Gains

I started college on the wrong foot financially.

One afternoon, I returned to my dorm and found my roommate tracking his sleep schedule on a spreadsheet. He had signed up for the university’s sleep study, he told me, and he was being paid to record his daily sleep and wake up times.

The sum was laughable: $1 a day, with a potential to earn more for streaks of compliance-—for example, an extra dollar after five consecutive days. He recommended that I, too, should sign up for the study, but I resisted. After all, was it really worth my time to track my sleep schedule for a mere dollar?

Why Your Credit Score Matters More Than You Think

Last week’s article discussed what a credit score represents and how young people can build up their scores. Now it’s time to get into a bit more detail about why your credit score is so important.

The FICO credit score—the most widely used credit score for individuals in the US, and the one discussed in the previous article—ranges from 300 to 850. Of all people, about 60% fall between 650 and 800. A fairly typical score is 720. These scores play a critical role in determining both what credit you are able to obtain and at what rate of interest. But a fair question remains: Just how important are these consequences in credit and rates?