http://en.wikipedia.org/wiki/Satisficing

cres,

It seems to be a way to make decisions. I've actually heard of this word. Like say you need to buy some glue to fix a chair. You want something that holds the pieces together. You don't need the best glue or the most cost optimal glue. You merely just want something that meets the criterion for holding the pieces together.

I have my own work to get to tonight, but I'll find time in the coming days to respond to the difference between happiness and utility. It's a natural way to look at it, but there's been thousands of pages of ink (mostly in philosophy) spilled on why there's really a big difference.

Haha. This might be why I don't view it this way. I reviewed the economic stuff and still the modeling typically will use them as substitutes.

I read the wiki link. From a philosophical point, this could be debated for ever. But in this thread, how does this concept apply to purchasing decisions or personal debt issues? There was a story on how grocers are devoting more shelf space to house generic brands of foodstuffs, but that won't stop the name brand goods from dominating their respective markets. People in general don't make rational purchasing decisions. The feel good factor is always present.

I don't know. Decision theory is something I have no experience in.

Don't thumb your nose at philosophy...it's usually at the forefront of what laypeople (and trained people who should know better, but don't) consider to be important. Decision theory basically started in philosophy...so did many things. If not 'in' philosophy, it got quickly integrated and got spit out with a tonne of investigations into the consequences of concepts.

The funny thing about decision theory is that it's one of the most inter-disciplinary topics out there, but way too often the various groups aren't working together...but when they do, really neat stuff comes out.

If you want to know how to make good decisions, it's surprising that you wouldn't have gone out and looked into decision theory. It's one of the areas that I specialize in.

Cres: that's EXACTLY what philosophers in decision theory care about. But, fortunately, the good ones among us realize that cognitive psych (and other areas) are necessary for really understanding what's going on....Just because we may never decide on the 'ultimate' issue doesn't mean that talking about it won't produce really important and interesting results. When we start heavily analyzing concepts, we improve our understanding of the world...that's what philosophers do.

Almost all of the decisions I make and worry about are ones regarding money. And they all almost basically boil down to +EG ~ +EU.

Well, that's not what neuroeconomics says about how you 'should' do it

Haha. Now we're getting a little esoteric even for my tastes.

You're not coming off obnoxious at all. Invoice on this car was $22k (employee pricing - I was a Ford employee when I leased it). The lease-end value is about $12.5K and the book value on the car is currently $10K (will probably be $8-$9K in May at lease end considering it will be a model year older), so I disagree that the lease made money.

It is very reasonable to assume one can buy a late-model used car (maybe 4-5 years old) and not have $2k in annual repairs. When repairs do arise, however, the absence of debt payments makes those expenses easily handled with normal cash flow or with usage of the emergency fund.

I don't recall the "praying to God" piece of the book, but that certainly is not what the focus of the program is. Yes, he believes the giving component is important, even necessary, for ultimatel financial peace. IMO, that is for each individual to decide. I'm not a regular church-goer and do not consider myself overly "spiritual" either; however, I do feel good when I can donate time/money to my daughter's school, or the Human Society, or other charities of the like. Freedom from debt would allow me to be more comfortable giving and that would make me feel just as good as not having payments.

Don't take offense to this statement, but when you make a comment like "he misses the mark on many issues," it is generally good form to give an example or two and why you think the mark was missed. (Incidentally, I agree that there are probably minor details that could swing either way, but it's the overall concept of the program that I believe works.)

I should clarify. He is writing for non-rational people. Rika made a comment about how you spend 16-18% more with a CC. I don't know these people, but they aren't me. I make a list, I go to the store. I buy it. I pay with a CC. I don't carry money since 1) its -EV for purchases 2) a hassle 3) I don't have the same protection as I do with a CC. The example of not using a CC is just wrong if you want to save the most money possible. The car buying advice is wrong as well. I'll leaf through the book I have of his and try to get some page numbers for reference.

But it isn't just about Ramsey, the whole "personal finance" field is like this. But perhaps it is the optimal approach for their intended audience.

1) What is -EV about using cash for purchases? Unless you refer to 3) below
2) Hassle - agreed
3) Protection - agreed by and large but you can still get satisfaction if there was a problem with a cash purchase if you try hard enough
4) What was wrong about the car buying advice?

Ugh...Thremp...these people are rational when they're purchasing 16-18% more with their CC...it's just that it's soooo natural to do it that it's flying under their conscious control. Your methods are absolutely in the minority and you need to appreciate that (in terms of how you shouldn't be the metric of "normal").

Unless paying with cash gets you a discount vs credit card, credit cards that offer rewards (that outweigh costs, if any) are more EV. I get 1% back, but I should look for a better deal.

1) Durka covered it.
2) Word.
3) I can dispute things on my CC that I can't satisfy otherwise. Much like Paypal. Its especially useful when buying things online.
4) Its not the way to save the most money. Everytime someone buys a car, the dealership is paid in cash. If you finance it, they still get theirs. Its much like when you buy a house. If you get a loan from a bank, from a friend, or pay straight cash, I still get cash at closing (Unless I finance it or blah blah blah). There is a pretty good thread where I get pozzed on this in this forum. Basically it involves financing it with a freebie early pay option, riding out the no financing period and then cutting a check for the balance.

Can you link this or post the thread title?

The ability to TRACK purchases is also very good about CCs vs cash. But, the ability to dispute is so so important to me. I hired some movers, paid the deposit, they never showed up...and within seconds/minutes of talking to Visa, the charge was reversed. Cash/cheque/debit would've required court.

I have "Financial Peace Revisited" by Dave Ramsey.

Chapter 4 is titled "Understand the Spiritual Aspects of Money". I'm not going to quote all of his jibber jabber about how finance is not a mathematical science. It it wasn't you wouldn't need a budget. The chapter is also rife with quotations from the Bible, and I like the Bible as much as the next guy. But to date, I have had exactly no bills paid by God, in fact he's the worst panhandler that I've ever encountered.

However, he does kind of dance around the issue that most of the people with financial issues are weak willed and lack discipline or self control. I'd like his book more if he erased this chapter and wrote, "You're a bitch. You're a bitch because you can't control yourself. Grow some spine you ****ing pussy and stop buying **** you can't afford." But perhaps he would sell less books. He is an author after all, and probably quite skilled at marketing.

Oh dear god... I was leafing through and this is just AIDs. Downright horrid. Like you should kill yourself for writing something this bad: "On the average, the single family home increases in value over the five- to ten-year haul; that is the real estate's track record. We get our comfort from a track record, not a gurantee. Mutual funds can be selected in the same way. (p147) WTF? WTF? WTF? DIE DIE DIE DIE.

Ugh. That whole section is just cancer. If that silliness was reasonable, he'd be managing the greatest fund of funds ever and we'd be starting threads: "Dave Ramsey: Miser?!?" instead of on Buffett.

It was a long time ago. And I don't have a very skilled use of the search function.

Yeah, this thread can either be about good strategies for debt/spending...or on how stupid this actual 'guru' is. Either is fine...I find the former more interesting :P

I prefer to just meander about a subject. I just did some actual work. So I can sit and play for a bit.

lol

No. Each generation is less talented and less willing to work but feels more entitled to live an extraordinary life. Credit allows them to do that temporarily. Unless credit itself is restricted the vast majority won't stop using it irresponsibly.

Which is why I have a lot of mixed feelings about Ramsey. Never read any of his books or any book on personal finance but I use to have KLIF on 24/7 so would catch Ramsey's radio show. His program works but it is so plainly obvious that I would seriously question the competency of anyone who needs to read a book to learn any of that.

Henry,

Welcome to the real world. It is full of idiots. Grats.