Continuation of my previous essay, Spending Money.

Consumers are emotional beings. We have all at least once in our lifetime made a purchase that seemed great at the time we bought it, but in hindsight, feels like a daft decision. We realize we didn’t gain much from the purchase and whatever we did gain was too short-lived and hence not worth the price. Why do we do this?

Harvard Business School professor Gerald Zaltman says that 95% of our purchase decision-making takes place in the subconscious mind. That’s a lot! But our mental process of making a purchase decision is not that simple. We go through a cycle.

The decision to buy is made subconsciously, and these subconscious decisions are based on a deeply empirical mental processing system that follows its own logic. Our subconscious or intuitive decision to buy is then communicated to the conscious mind with an emotion. After that, the conscious mind searches for rational reasons to support our feeling and that’s how we complete the cycle: We justify our emotional signals to buy with logical reasons.

Warren Buffet recognized this profoundly “What the human being is best at doing is interpreting all new information so that their prior conclusions remain intact.”

Very few people in this world are able to truthfully say their purchasing decisions are solely based on rationale and analytics. If someone did claim that emotion doesn’t affect their buying decisions, the easiest way to verify that they are in fact telling the truth is to ask them how much they spent on their car and their bed.

Why would someone spend more than $2,000 on a bed?? Well, if we look at some numbers and variables we’ll find that it’s actually very justifiable, not on an emotional level but on a rational level. Buying a state-of-the-art bed probably won’t get you excited, but it will provide you more value than an expensive car. Let’s look into why.

The average human spends slightly less than 80 years on earth. Of those years, 26 years will be spent sleeping, and an additional 7 years will be spent trying to get to sleep. That is about two-fifths (>40%) of our life either sleeping or attempting to do so.

Unless you’re a vampire, there is no other activity that a typical mere mortal human being spends more time on than sleeping over the course of their life. Not only that, but science shows that quality sleep is one of the most important factors for your health and well-being. The quality of your sleep can affect your productivity, ability to learn and retain information, eating patterns, weight loss/gain, mental and physical health, and even your overall lifespan. If that doesn’t sound important, I don’t know what is!

Now let’s look at the value of a car. The value of owning a car varies greatly depending on where in the world you live, what you do for a living, and your circumstance in life. For example, a single person in a metropolis can live perfectly well without owning a car. Meanwhile, a large family in Texas almost needs a car in today’s world.

Regardless of your situation, owning a cheap car instead of an expensive car has very little downside for the average person. Unless you’re the president of a country and need a bespoke heavily armored vehicle, or some other special accommodations, “cheap” cars work perfectly well and sometimes just as well as luxury vehicles. Other than increased safety, additional features on an expensive car will do very little for any of your needs. And since safety is actually a big factor in a car, we can shoot down the false justification of buying a luxury car for its safety with this: According to the Insurance Institute for Highway Safety, many of the safest cars today aren’t even luxury vehicles.

Besides, what are the most common reasons for purchasing a luxury vehicle? As you can probably guess, the answer is status, self-esteem, and perceived value—all of which are emotional and a product of successful marketing.

So if we go based on pure logic and rationale, you should be spending more money on your bed than on your car^[1].

In reality, this isn’t exactly possible because cars by nature cost a lot more to build and have a lot more configuration and technology than beds do. This is why the best beds in the world today in terms of quality and value start to top off at around $2,000 and anything above that, you start to enter into the realm of overstated branded beds with expendable features.

But that’s not the point. The title was just a catchy hook to get you to read long enough to understand an important point: To spend effectively, place a higher priority and weight on things you spend a lot of time with (smartphone, eyeglasses, one good pair of sneakers, etc.), and things that affect your quality of living either directly or indirectly. Give bonus points to things that fall into both categories.

I don’t think there is anything wrong with indulging in emotionally gratifying purchases once in a while, but the importance is acknowledging that the decision to purchase was emotionally driven. This is important to recognize so that you don’t fall into the trap of confusing logic for emotion. There’s a big difference, but it’s very difficult for the purchaser and for the untrained eye to decipher in the moment.

[1] There are true car fanatics who intrinsically love cars on a deeper level. In their case, perhaps spending a lot on an expensive car is sensible. However, as Warren Buffet explained in the quote above, many people will want to buy an expensive car out of emotion and then use untruthful arguments like “I’m a car fanatic” to justify their purchase.

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