No one likes “convenience fees.” These little charges often get added to online ticket purchases. Rather than list the price as the actual price, the seller can advertise a lower price and then add a bit on at the end, trusting that you won’t back out once you’re at the check out stage. They’re relying on the phenomenon that people often view money “in context.” A $8 convenience fee doesn’t seem that much stacked on top of, say, a $200 ticket order.
But this phenomenon isn’t entirely rational. If you walked into a Wawa to buy a $2 soda, went up to the counter, and found out it was actually $10, you’d probably walk out in a huff. In that context, an $8 fee would seem like highway robbery. But whether it’s part of a $200 purchase or a $2 purchase, those $8 are worth the exact same amount. Every dollar is a dollar. With money, context isn’t really a thing.
That doesn’t mean we can get out of paying “convenience fees.” But recognizing this can help with mental accounting. It might be possible to boost happiness by not viewing money in context. Negotiating hard on the big things, or cutting what seems like a small percentage from the big things, can open up space in other categories where a little bit of money can make a big difference. For instance, using a handy online mortgage calculator, we find that the monthly payment on a $300,000 30-year loan at 3.25 percent is $1305. The monthly payment with the same interest rate on a $310,000 30-year loan is $1349. The extra $44/month doesn’t seem like much in this context, nor does the $10,000 on the house. But that would be a reasonable amount in other contexts. You could take a friend out to lunch every month for 30 years. Or boost the book-buying budget by an extra 3 books per month.
In All the Money in the World, I talk about this context shifting with wedding spending. For instance, many people buy wedding flowers. This tends to be a relatively small amount of the overall wedding budget, but since wedding budgets are often big, it’s still a big number. Then people don’t buy flowers much at all after that. It’s not a budget category many of us think to create. But a $1000 floral budget could represent a $10 bouquet every other week for four straight years — which might induce a lot of smiles.
In any case, people find it “normal” to spend certain proportions on certain things, but changing the proportions can open up possibilities. A smaller house might mean more travel. An older or less flashy car means more babysitting and dinners out. Because a dollar is a dollar, everything is a trade-off, but the trade-offs can look different from the norm, and sometimes it’s fun when they do.
In other news: Do you listen to the Before Breakfast podcast? In today’s episode I discuss this same theme — “Every dollar is worth the same.”