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Terrace bias

We often debate with my friends on the topic of saving money. For one couple I know, they have made being frugal their dearest hobby. They have made hunting for offers an art form, and the tiny amount of money they spend on essentials beggars belief.

I truly admire their commitment, but I often pull my trump card and tell them that they most likely will buy the more expensive house of the two excellent options at one point in their lives. All that effort is nullified by a single choice made later on.

It is hard to intuitively say what is expensive. I like making arbitrary financial comparisons between two things. One of my favorites is what I call the terrace bias.

Let's say you want a terrace. It costs 4000e. It will bring joy in the summer evenings, have some BBQ and bask in the sun. For the money, you could also reserve a nice restaurant for two every two weeks for 2 years. Or even better, you could always choose the most expensive ice cream for the rest of your life. Or buy the best bottle of wine for 10 years straight. 

Which will bring more joy? You don't have to maintain the ice cream or the wine after those are consumed. The terrace will bug you for the rest of your life. Ah damn, I need to oil it again this summer!

A colleague of mine said that her spending was getting out of hand. She told me that small expenses kept piling up on her. She always bought some coffee and sweets after a long day on a work-related trip. She also mentioned that their house was perhaps too expensive for them. Admirably, these issues were resolved by giving up on these extra treats and restaurant trips, which also resulted in her working fewer hours a week.

Yet, this is precisely the opposite I would suggest. Those small treats will actually give one joy. In my opinion, the real culprit was indeed the too expensive a house. All that burden which a prominent place carries does nothing but brings in stress. I know this is naive, literally a child would say this, but they should definitely have gotten rid of that too expensive home and buy more artisan cheese.


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