Money Crashers: 10 Cognitive Biases in Your Brain That Are Costing You Money

A few months ago, I made a rare impulse buy at the Barnes & Noble in New Brunswick: a book called How Not to Be Wrong: The Power of Mathematical Thinking, by Jordan Ellenberg. This turned out to be a fascinating read, examining the many ways in which your instincts can lead you into wrong thinking and how understanding some basic mathematical concepts—not higher math, but stuff like probability, which applies to all kinds of real-world problems—can stop you from being wrong. What makes it so interesting is not the mathematical concepts themselves, but the stories Ellenberg uses to illustrate them, such as the one about how Abraham Wald figured out where to put armor on WWII planes (which I'd first heard as a puzzler on "Car Talk"), or the one about how a bunch of MIT students figured out how to beat the Massachusetts state lottery. And he also discusses ways to apply the same mathematical concepts to your own everyday life, such as figuring out the optimal time to leave for the airport before your plane is scheduled to take off.

This book and its ideas were still in the back of my mind when I happened across this video on YouTube, which discusses 12 common cognitive biases—the same sort of mental traps Ellenberg discusses in his book—and how to beat them. Many of the examples in the video involve mistakes people make with money. Putting this together in my head with the book, I decided the topic of cognitive biases and how they affect our finances would actually make a great article for Money Crashers.

I sifted through the cognitive biases covered in the video, along with a couple of others I'd seen discussed in Ellenberg's book and other sources, and narrowed it down to a list of ten that I thought were most likely to affect you financially. Even with just ten biases, it's a rather long article, but I think it's an interesting one—particularly since it's a topic that applies to everyone, not just folks who happen to be (for example) shopping for a mortgage or looking to save on auto insurance.

If you're at all interested in math, psychology, behavioral economics, or any similarly nerdy subject, you'll probably find this article interesting on an intellectual level. And if you aren't, but you handle money on a regular basis, you'll probably find it relevant enough to your life to be interesting on a purely practical level.

10 Cognitive Biases in Your Brain That Are Costing You Money

Money Crashers: 8 Tips on How to Improve Your Credit Score Rating

About a year ago, I published an article on Money Crashers about how to check your credit score for free. In that article, I pointed out that your credit score can have a big impact on your life, even if you have no plans to borrow money in the near future. For instance, it can affect the rate you get charged for auto insurance, as well as your chances of landing a job or an apartment. And, of course, checking your credit score regularly can alert you to errors on your credit report that could be a sign of identity theft.

So all in all, I made a pretty good case that your credit score is important, and why it's worth knowing what yours is. But what I never explained is what to do about it once you find out. Learning that your score is low - perhaps low enough to be affecting your mortgage or insurance rates - isn't very helpful if you have no idea how to make it any higher.

My latest Money Crashers article remedies that. It outlines the various factors that affect your credit score - such as whether you pay bills on time, how far you stay below your credit limit, what kind of credit you use, and how long you've been using it - and then explains how you can tweak these factors to boost your score.

If your credit score is only so-so, this article can give you a couple of useful tips on how to bump it up into the very good or even excellent range. And if your score is already at or near the top of the scale, it can tell you how to make sure it stays there.

Check it out here: 8 Tips on How to Improve Your Credit Score Rating

News from Earth

As usual, Brian and I didn't do anything terribly exciting or dramatic for Earth Day this year. Even though it fell on a Saturday this year, our town decided to hold its local Earth Day celebration on Sunday instead—possibly to accommodate our large Orthodox Jewish population, or possibly so it wouldn't conflict with the Marches for Science taking place in Washington and Trenton. We've been doing the usual array of little things—hanging laundry on the line (though we had to take it down when it started raining), shopping locally, and eating home-grown produce (some of last year's rhubarb for breakfast, and a salad of winter lettuce that we planted last year for dinner)—but nothing too major.

However, I have been pleased to read several news stories lately about other people in the world who are making major strides to help the environment. So in honor of Earth Day, I thought I'd share three stories about Earthlings who are doing their part to save their home planet.

Story #1: Changing the Pallet
Source: Haverford alumni magazine

As an ecofrugal person, I have kind of a conflicted attitude toward shipping pallets. On the one hand, I love them, because they make an incredibly useful source of virtually free building material. For example, our compost bin, which has served us well for seven years before finally starting to come to bits, is an ultra-simple box made of pallets recovered (with permission) from a building at Rutgers. And that's only the beginning of what you can build with pallet wood. I've seen tons of pictures online of gorgeous projects involving pallet wood, from a simple hanging shelf in this bathroom makeover to an entire pallet wall that makes a stunning focal point in a living room. There's a whole website, 101 Pallet Ideas, devoted exclusively to projects you can make from pallets—patio furniture, beds, sofas, and even entire buildings.

But at the same time, I know that the only reason pallets are free and widely available is because there are so many of them being discarded after just one use. They cut down trees to make these things, ship them across the country with stuff on them, and then just throw them away because it's not cost-effective to ship them back. Clearly, that's incredibly wasteful, and salvaging a small percentage of the pallets for building purposes isn't enough to make it sustainable. From an ecofrugal perspective, it would be much better if there weren't so darn many of these things being made and tossed in the first place.

So I was pleased to read in the Haverford alumni magazine that my former classmate Adam Pener is now running a company whose sole purpose is to make eco-friendlier shipping pallets out of corrugated cardboard. These things are better than standard wood pallets in numerous ways. They weigh less (around 10 pounds, as compared to an average of 50 for a wood pallet), so they lighten the load of the trucks that carry them, thus reducing their carbon emissions. Also, it's easy to make them in custom sizes and shapes to pack those trucks more efficiently, so it takes fewer trucks to haul the same volume of goods. They're made largely from recycled paper rather than virgin wood. (The ones made by Adam's company, Green Ox, don't even use glue or staples.) And when they get to their destination, they can easily be broken down and recycled, rather than going into landfills (except for a small number that go into DIY furniture and accessories). IKEA, my favorite green business, has already opted to switch its entire supply chain to cardboard pallets, and has thereby reduced truck trips by 15 percent and cut CO2 emissions by 300,000 metric tons.

The only real downside of the corrugated pallets is that they're not quite as strong as wood. They can't hold very heavy items, and they don't hold up well in the rain. So chances are, there will always be some wood pallets around for us tightwads to scavenge. But if all the rest of them are made of cardboard, that's a good thing as far as I'm concerned.

Story #2: An island of green
Source: The Christian Science Monitor

The cover story in last week's Christian Science Monitor Weekly is "An island of green: How a group of gritty farmers turned Samsø, Denmark, into a premier global model of renewable energy." Back in the 1970s, when the environmental movement was in its infancy, this little island tucked between Jutland and Zealand was entirely dependent on fossil fuels. But when word got out that Denmark was considering building its first nuclear power plant, a vegetable farmer named Søren Hermansen became concerned that Samsø would lose control over its electrical supply to a big, centralized utility. So, along with about 20 other families, he invested in a small wind turbine to power their farms.

Over the next 15 years, he grew steadily more interested in environmental issues. He studied environmental science at college and started farming organically. And when, in 1997, the Danish government announced a competition for communities within the country to become energy independent in the space of 10 years, Hermansen convinced his fundamentally conservative fellow farmers to take up the challenge. Instead of talking in lofty terms about saving the earth, he focused on the practical benefits: the income from leasing their land for wind turbines, the jobs that would be created laying district heating pipes, the improved market value of a better-insulated house. Samsø built a network of wind turbines under community control, along with district heating plants to replace inefficient, individual oil heaters. Today, the island produces all its own energy and actually exports $3 million worth of energy each year. Its overall carbon footprint is negative 3.7 tons. By 2030, it aims to eliminate all fossil fuel use entirely.

Of course, Samsø is just one little community, with a population of "3,750 people and a few sheep." No matter how green it is, one tiny island is probably not going to make that big a dent in the world's overall energy use. But to me, Samsø's success is a proof of concept. It proves that energy independence is possible—and moreover, that it's possible using only technologies that are already available today. Hermansen acknowledges that the same systems that work for Samsø probably wouldn't work in a larger city, because cities have such complex infrastructure—but they could still draw on the same technologies to incorporate green projects throughout the city, "rooftop solar on this block and urban gardening on this one."

What's most encouraging to me is not just how much Samsø has achieved, but how quickly it made the transition. It went from a single wind turbine to a fully energy-independent community in the space of just ten years. This gives me hope that, when the perils of climate change finally becomes impossible for the world at large to ignore, it won't be too late to set ourselves on a sustainable path. If they could do it there, I think there's hope even for the USA.

Story #3: Bipartisan climate change solution is already in existence
Source: The Daily Targum

The final piece of positive environmental news came from an unlikely source: the Daily Targum, the official student-run newspaper of Rutgers University. I say it's unlikely because most of the stories in the Targum are, well, not exactly shining examples of journalistic achievement. It's not the material that's the problem; it's the writing. Apparently most of the students who work for the paper have never been taught even the most basic principles of how to organize a story, such as leading with a sentence that answers the five "W" questions: Who did What, When, Where and Why? Often, I'll be halfway into a story before I manage to figure out what it's actually about.

So I was both surprised and delighted to come across an editorial on the Targum's opinion page that actually made a well-constructed, well-reasoned, well-supported argument in clear, lucid prose. The author, Connor O'Brien, a second-year economics major, starts out by arguing that most of the stories about climate change in the mainstream media center around a false choice: save the earth or protect the economy. He then points out that there already exists a solution, endorsed by American leaders from both parties, that can curb carbon emissions without harming us financially: "a revenue-neutral carbon tax." The basic idea, as he succinctly explains, is to build the environmental costs of carbon emissions into their actual costs in dollar terms. Polluters would pay for each ton of CO2 they produce, giving them a strong incentive to reduce their emissions in whatever way they can. And the cash raised by the tax would go straight back to the taxpayers, effectively putting the money consumers would have to spend on higher-priced goods and services right back into their pockets.

O'Brien acknowledges that the "toxic politics" in the USA remain an obstacle to passing this eminently sensible plan. Many prominent Republicans, eager to reject anything that Democrats favor, have rejected the whole idea of global warming as nothing but a hoax (while remaining a little vague on the subject of who started this hoax, and what they had to gain by going to such vast lengths to sustain it, manufacturing reams of data and co-opting 97% of the scientists on the planet). But the fact that there is a solution that could work, and that is compelling enough to attract supporters among Republicans as well as Democrats, is at least an encouraging sign.


In short, all three of these stories express the same basic idea: change is possible. Just because things have always been done in a destructive way, that doesn't mean they always will be. With folks like Adam Pener, Søren Hermansen, and Connor O'Brien on the job—along with the countless others who marched on Washington today to stand up for reality-based policy—there may be hope for our little planet yet.

Recipe of the Month: Jap Chae

Jewish holidays just aren't that much fun. Passover, when you aren't allowed to eat any grain products, isn't nearly as bad as Yom Kippur, when you can't eat at all, but it's still a challenge, because it lasts eight whole days. And it's even more challenging if you're a near-vegetarian like me, who relies heavily on grain as a food source.

I have a few standard recipes I tend to rely on to get through this week every year, including matzo ball soup and matzagna, a recipe of my own invention that's basically a lasagna with sheets of matzo in place of the noodles. (It turns out I'm not the only person to have this idea; a quick Google search for "matzagna" turns up several recipes. But I did legitimately come up with it on my own.)

But I have learned that you have to be careful about including too much matzo in your diet. It can have, let us say, unpleasant digestive side effects. So I always make a point of including at least a few recipes in my weeklong menu that aren't matzo-based.

Usually, that means potatoes, potatoes, and more potatoes. But this year, I happened upon something at the H-Mart, just a few weeks before Passover, that looked like an interesting alternative. The package was labeled "Vermicelli Asian Style Starch Noodles," and when I flipped it around to see what that meant, it turned out that these noodles had only two ingredients: sweet potato starch and water. Both of which happen to be kosher for Passover.

Since I'd never made these before, I decided I'd just try following the recipe on the back of the package for jap chae, which is apparently a Korean dish of stir-fried noodles and veggies. The instructions for it were quite simple:

1. Boil the noodles for about 10 minutes, drain them, and toss them with some sesame oil to keep them from sticking.
2. Next, make a stir-fry of "marinated beef & various vegetables." The package suggested shredded onion, carrot, mushrooms, and green peppers; we included all of those, but left out the beef.
3. Toss the noodles and veggies together, along with some soy sauce, sesame oil, sugar, and sesame seeds. The recipe didn't specify any amounts, so Brian put in about a tablespoon of sesame oil and added soy sauce to taste. He left out the sugar, as it didn't seem to need it. The package says you can season this with "various spices," but we had no idea which ones, so we just ate it plain, and it didn't seem to suffer from their absence. 

The texture of the vermicelli was quite interesting. They're nothing at all like wheat or rice noodles; instead they have a certain chewy quality that's odd, but not unpleasant. It's more similar to sauteed bean sprouts than anything else I can put a name to. This may be because, according to the nutrition label, they contain almost no actual starch; virtually all their calories come from sugars, even though they don't taste at all sweet.

As for their flavor, it's pretty neutral, basically just forming a base for the veggies and sauce. It's pretty much just like fried rice, only with the chewy noodles in place of rice. (Actually, the package suggested serving the dish with rice on the side, but that's obviously out during Passover, and the dish hardly seemed to need more carbs.)

On the whole, Brian and I both rather liked this dish. I'm not sure it's something we'd go out of our way to make for non-Passover use, since we can always do pretty much the same thing with rice or some other kind of noodles, which we usually have on hand. But it should make a handy addition to our file of recipes we can serve to our gluten-free friends. (Pro tip, by the way: Passover is a great time to stock up on all sorts of gluten-free ingredients, such as tapioca starch, potato starch, almond and coconut flour, and various types of treats, such as jellied fruits and macaroons. All that stuff goes on sale in early April for us Jews, so anyone who needs to eat gluten-free year round can take the opportunity to load up a cart.)

So, for all you Christians out there on the Interwebs: as you break your Lenten fast tomorrow, spare a thought for us poor Jews, who have another three days left to spend munching on matzo. And for my Jewish readers, should I have any: if you can find any of these sweet potato noodles (also known as glass noodles), give this dish a try. It's not the same as real pasta, but it'll do as a substitute until the Festival of Unleavened Bread is over.

Money Crashers: 4 Ways to Save by Spending More

Last December, my mom sent me New York Times column called, "The Financial Benefits of Buying What You Love." In it, the author argued that sometimes what looks like a wild splurge—like his purchase of a $5,000 Moots bicycle back in 2004—is actually a sound financial choice. He argued that it makes sense to spend more on something you truly love, because "If you love it, you will keep it; if you keep it, you will use it." Thus, not only has his one $5,000 bike served him for 11 years, rather than being replaced by a series of newer, cheaper bikes, but it has also inspired him to ride more.

After thinking this over for a bit, I realized that this was actually only one of several situations in which spending more can save you money in the long run. You also save when you invest in:

• High-quality products that will last, rather than cheaper ones that wear out and need to be replaced frequently. This depends on the product, of course; buying more expensive soap or toilet paper, for instance, is not a money-saver, because it gets used up just as fast (though you could make a case for it in terms of quality of life). But with items you'll have for years—like a tool, an appliance, or a good pair of shoes—buying something that's built to last can definitely save you money, as well as preventing waste.
• The best professional services. As I've argued before, if you're an ecofrugal person, you tend to do most jobs for yourself; the only time you ever pay a professional is when it's really important to you to have the job done right. And that being the case, there's no point in paying a professional to do a second-rate job. If you're paying for the service anyway, you might as well pay a little bit more to get the best results. 
• Energy efficiency. This, of course, is one of the major premises of the ecofrugal life: that when you cut back on your energy use, you save money and natural resources at the same time. And in many cases, investing more up front—for example, in LED bulbs, solar panels, or rechargeable batteries—can pay you back many times over in energy savings over time.

In my latest Money Crashers post, I talk in detail about the ways in which spending more can actually help you save money, and how to decide when to scrimp and when to splurge. Here's the full article: 4 Ways to Save Money Long-Term by Spending More Now

Money Crashers: Are Fitness Trackers Worth the Money?

I've often said that I seem to be the only person left in the country who doesn't own a smartphone. (We have a tablet, but that's not quite the same.) I don't feel quite the same way about fitness trackers, but I have been noticing more and more people wearing these little gadgets: my sister, my mom, a friend in Virginia, another friend on my Morris dancing team. And so I got to wondering: what's the big deal about these things? Do you really exercise more with them? What can they do that makes them worth spending a hundred bucks on?

So I took the opportunity to research that question and write up the answer for Money Crashers. In the article, I address such points as:

• What fitness trackers actually do, and how they do it. (For instance, their most famous feature, counting the number of steps you take in a day, is accomplished with an accelerometer. Some of them also have fancy features like a heart rate monitor or a sleep tracker, though it appears these don't always work very well.)
• How much they really change your habits. (Studies on the subject show mixed results; some find people exercise more with them, though only by a modest amount, while others report no change. But they can be useful for other things, like tracking your progress toward a specific fitness goal.)
• What they cost. (Recommended models range from $60 for a modest clip-on to $220 for a pimped-out watch for hardcore athletes.)
• What the alternatives are. (For instance, if you are one of the 318,899,999 people in the U.S. who does own a smartphone, there are apps that can do a lot of what a fitness tracker does for $5 or less. Or you can spend $30 on a simple pedometer, which is more accurate for counting steps.)
• How to decide whether a tracker is for you, and if so, which one to get.

Based on my findings, I've decided that I don't really need one of these little gizmos. I think I probably get at least 7,000 steps a day anyway, and that's more than a study of other women my age found they were getting with fitness trackers, so I suspect the benefits would be minimal. But your mileage (on foot) may vary, so check out the full article to get the skinny:

Are Fitness Activity Trackers & Watches Worth the Money?

DIY garden bed frames

Last week, we started the process of tearing out our old, rotted garden bed frames and installing new ones. As you can see from these pics, the old ones really were in pretty bad shape. When Brian mentioned to his folks on the phone that he was planning to tear out the old beds that weekend, his dad asked "Got a sledgehammer?" and Brian confidently predicted, "I won't need one."

And sure enough, all he had to do was give that old, rotted trellis a good kick and pretty much the whole thing came tumbling over. He pulled out the rest of the boards with his bare hands—some of them literally crumbling in his fingers—and was left with a clean, bare patch of dirt to be re-framed.

But while pulling out the old beds wasn't too hard, building the new ones and getting them into place posed more of a challenge. Fortunately, we were able to do the replacements one at a time, as the beds are staying the same size, 8 feet by 3 feet. That's slightly smaller than the 8-by-4 size recommended in most gardening books, but it has a couple of advantages for us. First of all, the narrower bed allows my short arms to reach all the way into the middle from either side, while still being wide enough to accommodate a big zucchini plant. And second, the smaller size allows us to squeeze four beds into the fenced-in garden area we had in the back yard when we moved in. We could have just expanded the fenced area to accommodate larger beds, but it was easier at the time to work with what we had—and it meant we didn't need as much material to replace the old fence with a proper groundhog fence around the area. (We're still making use of the extra space in front of the fenced area with beds for rhubarb and asparagus, which the groundhogs don't eat, so it isn't going to waste.)

We're using the same basic design for the frames that Brian used for our old ones, with a couple of modifications. They're built entirely out of 2-by-4s, which have several perks as a building material. They're thicker, and therefore sturdier, than a standard wooden boards, and much lighter than a heftier wooden plank, which makes them easier to carry from store to car to house. Also, they're quite a bit cheaper. This raised-bed design from Sunset magazine, which is built out of 2-by-12s, has a cost estimate of $120 for a single 4-by-8-foot bed—and that's for a basic box with no trellis, made from untreated lumber. By contrast, the materials we bought for all four of our beds—a total of 96 square feet of garden space—cost just $250, trellises and all. Plus, ours are made of pressure-treated lumber, which means—we hope—that they'll last considerably longer than the first set. That means we'll also save money by not having to replace them in another nine years.

So Brian's 2-by-4 design had clear advantages to start with, and he's improved on it for this go-round. When he constructed the first set of garden bed frames nine years back, he built the boxes by themselves, and later, when we started getting into vertical growing, he grafted the trellises on—a rather awkward, kludgey process. This time, he decided to incorporate the trellises right into the design of the boxes, which gives them extra structural stability—though it also makes the whole unit very bulky and awkward to handle. So building them this way, or at least moving them into place, is definitely a two-person job.

Each bed uses ten 2-by-4s, each 8 feet long. Four of these are used for the sides and four for the trellises, so they don't need to be cut. The remaining two get cut up into four 3-foot lengths for the ends of the beds and four 1-foot lengths to make three feet on the front of the bed. If you're counting, you'll notice that this leaves an extra 1-foot piece left over from each frame, but I'm sure we'll find a use for them.

Once he had all the pieces cut, Brian began to assemble the box. He started by building one corner: one 8-foot piece on the x-axis, a 3-foot piece on the y-axis, and a 1-foot piece on the z-axis. (The other pieces of wood you see in the picture are shims to keep everything level, since our patio isn't perfectly flat.) He attached these with 2.5-inch stainless-steel screws, since they needed to go all the way through one 2-by-4 and most of the way into a second one without poking out the other side. Two screws connect the end piece to the long side, and a third attaches the end to the 1-foot leg piece.

With this corner as an anchor, he continued around building the whole first layer of the box: 8-foot pieces on the sides and 3-foot pieces on the ends.

Then, he added a second layer of 2-by-4s, long and short, on top of the first, attaching the pieces the same way. He also installed a second 1-foot piece at the opposite end of the box and a third one in the center between them (not attached yet in this picture). These "feet" would serve to anchor that side of the box in the dirt. He didn't add any short pieces to the other side of the box, because the feet on that side would be formed by the ends of the trellis pieces.

Once the box was complete, he turned it up on its side to start attaching the trellis to the back. In this picture, you can see the first of the long trellis sides running down through the box and coming out the bottom to form a foot on that side. 

At this point, he got wrapped up in the construction process and forgot to take any more pictures for a while, so you can't really see the trellis coming together. But once the whole thing was done, he let me come in for a close-up to show how he had attached the trellis pieces to the boards of the box with screws in the same spots as the ones that hold the short feet.

And here's the entire bed with the trellis attached. As you can see, there's one long vertical piece running up each side and one in the middle, with one long horizontal piece connecting them across the top.

Then came the really hard part: getting it into the garden. Brian's initial idea was that once he had the whole thing built, the two of us could just heft it as a unit right over the garden fence. I had my doubts about this plan, and as the entire thing took shape under his hands, Brian came to agree with me that it wasn't going to work. So he removed several screws and took the whole thing apart into two pieces: the front of the box with the feet and sides, and the back side with the trellis attached.

But before we could even move these two smaller pieces, Brian had to do a little work in the garden bed itself to prepare the ground. He scooped all the dirt from around the edges of the bed and piled it high in the middle (first throwing a tarp down on the opposite side from where he was digging to catch any that spilled over). Then he dug extra deep in the corners to make room for the support posts.

At this point the two of us hauled the box down to the garden, maneuvered it into the back corner, and dropped it into place. That part wasn't too difficult, but with the trellis side removed, the 2-by-4s that made up the ends of the bed were sort of free-floating and didn't stay quite aligned. So the new box was slightly uneven and had to be realigned before it could be reattached to the trellis.

Then we went back and, with great effort, fetched the trellis piece and carried it into the garden...confirming my suspicious that we'd never have been able to do it with the box attached. I then held the trellis in place while Brian carefully lined it up with the ends of the box so he could reinsert the screws. He ended up having to lie flat on the ground to get the drill in place to insert the bottom-most set of screws, but eventually we managed to get the entire unit assembled in its new home.

We noticed that the level of the dirt in the new bed seemed to be a lot higher than it had been in the old one. Maybe the dirt had just become compacted, and we'd fluffed it up some in the process of digging, or maybe all that extra dirt Brian had dug out from around the edges contributed to the whole. Whatever the reason, we ended up having to scoop out a shovelful or two of dirt and transfer it to a neighboring bed before adding a couple of buckets of our homemade compost to the bed to prepare it for planting.

Then we just raked that all down nice and flat, and we were finally able to get our peas into the ground—about a week late, but with the chilly weather we've been having, it probably didn't make that much difference.

So that's one bed in, and we still have three more to do. Brian's out there now working on the second one, and we figure we'll be putting up one more every weekend until we're done. Fortunately the deadline's not quite as tight at this point, since the next batch of crops to go in the ground—parsley, scallions, leeks, and our first plantings of lettuce and arugula—are all scheduled to go in just two beds, and one of those is the one we've already got. After that, there's nothing new to add until the second week in May, so that's our hard deadline for having all four beds done.