Saving Concerns

Here are three problems most people face in behavioral finance, originally proposed by Shlomo Benarzi and put into plain English by Lione of the blog;

  1. Present bias: We know we should be saving, but we don’t do it today. We’ll make all these resolutions that we’re [going to] save more next year, next month, next week, whatever, but it never works. It’s always a lot more fun to spend more today, and put off what we know is good for tomorrow.
  2. Inertia: People are lazy. And don’t even think that you’re different from the rest of us, because you’re not. Even checking a box on a form, is way too much effort for most people, even if it means saving someone’s life. Germany has an opt-in program for organ donation where you would have to check a box if you would like to donate your organs. Contrast it to Austria, which has an opt-out program, where you would check a box if you don’t want to donate your organs. The result? 12% of Germans take up the program, while a whopping 99% of Austrians agree to donate their organs.
  3. Loss aversion: We hate losing stuff. When it comes to savings, people amazingly frame this as a loss because they have to cut their spending today.

So where does that leave us? The trick to overcoming all of these problems is to (surprise, surprise) adopt an automated system that saves on a regular basis, and whenever you have any income increases. Since saving more tomorrow is easier than saving today (present bias), we first make the commitment to save a certain percentage of our income… tomorrow. Or next month. Whatever. We then commit to it by setting it up with our bank.

Once it’s set up, that overcomes our problem of inertia, because it takes [a lot] of effort to cancel that commitment. So we’ll automatically be saving without any effort at all. And finally, by committing to save a fixed percentage of our pay rises, you’ll be taking care of loss-aversion by allowing yourself the luxury to spend part of your pay rise, while saving the other part of it.


Mariner’s Ridge Hike

Mariners RidgeView from the top of the trail  Taken 06/10/12

Mariner’s Ridge Hike is a great hike for beginners.  It is about a 1.5 miles and takes about 45 minutes one way.  Standard hiking gear is recommended; sunblock, shoes (we have seen hikers go barefoot or in slippers!), athletic shirt and shorts, a hat, and a water bottle.  The gentle incline of this hike makes it family friendly, while still providing enough incline to make you break a sweat.  During summer, we recommend trying out this hike in the early morning around 8am or in the evening around 4pm to avoid the small crowds and direct heat of the sun.

The trail features mixed terrain, from dusty rock to steady inclines covered in a thick layer of pine needles. Its path is clearly lined with pine needles and the occational boulder with a swirl mark engraved in it. The hike is comfortable because of a combination of the generous shade from tightly growing trees and the cool Hawaiian tradewinds.  On the way up, there are several places to stop to catch your breath and take in the incredible views.

Our favorite post-hike treats can be found at Kokonuts (ice cold acai bowls) and at Costco (ceaser salad and hot dogs)!