While I wouldn’t term it math “anxiety” exactly, from time to time we all suffer from those mental brain farts when it comes to money. Sometimes such faux pas only costs us $1 or so when we flub our fast food order. Sometimes they cost us much more.
Over time, our own family has experienced several situations in which this so-called “math anxiety” or math-based buying decisions have hurt us financially, but we’ve learned a few things from these experiences along the way.
Bi-weekly mortgage paymentsWhen I got the letter from our bank regarding a bi-weekly mortgage payment plan, it sounded like a great option. The letter explained that such a payment plan could cut our mortgage rate by something like .75 percent and save thousands of dollars over the course of the loan…or something to that effect.
While essentially this was true, making extra payments toward our mortgage was something we easily could have done ourselves. Rather than paying a $300 application fee and then $1 for each extra bi-weekly payment deducted from our account ($26 a year), I could easily have made an additional payment (since that’s what the program essentially equated to) once a year myself for free. Their fuzzy description of the program and my failure to read up more on the program before signing up for it left us paying money for something that I could do (and eventually did do) myself for free whenever we wanted to make an extra payment toward our mortgage.
Buying our first homeBuying our first home was a learning process in itself. However, in that process, I realized one very important thing over all others. This realization was that when we were dealing with large numbers -- numbers that reached into the hundreds of thousands -- for the sale price of our homes, smaller number that we would typically have found big, didn’t seem that big anymore.
After the fact, I realized that we had ignored or brushed aside with ease certain costs that normally we would have raised an eyebrow or two at. $300 here and $500 there are amounts we typically cringe at when they hit; however, such amounts didn’t really seem like a lot when buying a home for nearly $300,000. Plus, there were so many other things to deal with in the home-buying process that it was just such a whirlwind. Therefore, when we bought our next home, I made sure that we carefully gauged, considered, and negotiated each cost whether it was the smaller fees for the real estate lawyer and home inspector, or much higher cost of the home itself.
Swimsuit issuesThe other day I was helping my wife pick out a new bathing suit. This is one of the few clothes shopping experiences that I don’t really mind, except this time it was with the kids so it wasn’t as appealing as usual. We’d gone through multiple suits in our search, eventually finding one that fit and looked great. Amazingly, it was on a “$10” rack, which for ladies swimsuits is super-duper cheap. The sales associate casually mentioned that this rack was currently half off...so the suit would be just $5! But my wife had already found a suit she liked for $60, had tried it one, and like it.
Having already made multiple laps around the store with a fussy baby, I wasn’t about to argue. But I knew that if she hadn’t found the most expensive suit first, she would have been completely content with the much cheaper and better fitting suit. My only comment to dissuade her was, “You know, even if the second suit doesn’t last as long, you could buy 11 more for the same price as the other one.”
She smiled and agreed, and then bought both, proving that sometimes when we make an initial decision, we often tend to lock it in as a “done and done” in our brains. However, this can lead to a sort of brain lockdown in which we stop considering other options, which can cost us money or lead to bad decision making in the process.
So sometimes it pays to take a moment and consider just what the numbers mean and why they are being presented in the way they are. Taking a minute to settle down and do the math could end up saving some big money in the process.
The author is not a licensed financial, mortgage or real estate professional. The information provided in this article is for informational purposes only and does not constitute advice of any kind. Any action taken by the reader due to the information provided in this article is solely at the reader’s discretion.