Wine & Money

An article in today's Dining section of the Times talks about whether enjoyment of wine is affected by outside factors such as the circumstances in which you drink it, or knowing how much it cost.

The researchers scanned the brains of 21 volunteer wine novices as they administered tiny tastes of wine, measuring sensations in the medial orbitofrontal cortex, the part of the brain where flavor responses apparently register. The subjects were told only the price of the wines. Without their knowledge, they tasted one wine twice, and were given two different prices for that wine. Invariably they preferred the one they thought was more expensive.

“Forget those blurbs about bouquets, body and berries,” one newspaper account crowed. “A meticulous new study found that the more people think a wine cost, the more they like it. And the less they think it cost, the less they like it.”

Big surprise. Sommeliers all over know that the hardest wine to sell in a restaurant is the cheapest bottle on the list. “Yeah, clients don’t want to be embarrassed in front of a date, so they don’t order the cheapest wines,” said Fred Dexheimer, the wine director of the BLT restaurant group. The fact is, the correlation between price and quality is so powerful that it affects not just our perception of wine but of all consumer goods.

Studies like this seem to come up every so often, so this is no big surprise. But what these studies have never taken into account, as far as I know, is the subjects' attitudes towards money. I think that a frugal-minded personal finance blogger might be more likely to enjoy a cheap wine just because it's cheap. I know I can be this way-- sometimes I probably like things just because I am so happy I got a bargain when buying them. Someone who really values saving money might not enjoy an expensive wine just because they want to believe that a cheap one is just as good.
On the other hand, someone who is very focused on attaining wealth and luxury goods and projecting a certain image of their financial status might be more likely to enjoy an expensive wine, because they believe expensive things should be better, and because they want to feel like their hard-earned money is buying them the kind of rewards they deserve. After all, if expensive things aren't better, there's no value to being rich, right?

Obviously, the answer is for some researchers to set up a study comparing the wine tastes of personal finance bloggers to those of the rest of the population at large. I hereby volunteer to be your first guinea pig!

Good, Clean, Money-Saving Fun

I had dinner the other night at Joya, a Thai restaurant in Carroll Gardens, Brooklyn. I've written before about its sister restaurant in Park Slope, called Song. Both places seem to have found a recipe for success in offering a hip atmosphere and really low prices-- they always seem to be jam-packed with a diverse crowd, people of every age, race, class, and orientation all chowing down on generously sized $7-8 entrees.

After enjoying some veggie dumplings, chicken masaman curry and a shrimp/portobello mushroom special, with a couple of drinks, all coming to about $50 for two people, I decided to stop in the bathroom on the way out. While I was, ahem, seated, I looked down and noticed a shiny quarter on the floor! As longtime readers will know, I love finding money and will stop and pick up a coin of almost any amount. A quarter is especially exciting, as it can be used for laundry.

But this quarter was on the floor in a bathroom. The bathrooms at Joya seem quite clean as New York restaurant bathrooms go, but the quarter was on the bathroom floor in a slightly puddly looking area, which was kind of sort of really near the toilet. This gave me pause. I stood there for a minute and thought, "should I just give up on this quarter? Is that too gross?" It also occurred to me that this might be one of those jokes where the quarter is super-glued to the floor and if I try to get it I'll end up on Candid Camera or YouTube as the crazy girl who's willing to scrape a quarter off a dirty bathroom floor.

But the intrepid penny pinching Madame X came through and I told myself, "@#(*&$ it, I want that quarter!" I turned on the water in the sink. I put some soap on my hands. I bent down to grab the quarter. This attempt at germ-busting then resulted in some comical slippery fumbling with the quarter (which perhaps you've already seen on YouTube, but god I hope not...). But I eventually got the quarter to the sink where I washed it and my hands thoroughly with more soap. I then dried off my prize and took it home in my coat pocket.

Yes, it's possible that this quarter might still have been crawling with nasty bacteria but I didn't hang onto it for long-- the next morning I ended up giving it to a friend to use in a parking meter.

And yes, this is how far I'll go for 25 cents. I think it's a good exercise, actually, in adjusting one's financial attitude. Picking up a coin reminds me that the little things matter, and that I don't take financial issues lightly. It reminds me that money is money, and no honest way of acquiring it should be considered beneath one's dignity. But really, if you see me on YouTube, please don't forward it to all your friends.

The Wealth Gap in Relationships: Too Big? Too Small?

Here's a question I've been thinking about, regarding financial inequality in relationships: if you were going to have a partner who made more money than you, what kind of difference would you be comfortable with? If you made $75,000 a year, do you think it would be harder to be with someone who made $150,000 a year, or $1 million a year? Would the source of their income make a difference, i.e. whether they worked for it, or inherited a big nest egg? How might this change depending on the actual incomes involved? Is the difference between someone making $25,000 a year and someone making $75,000 a year going to cause more or less stress than the difference between people making $100,000 and $300,000? And does it make a difference if the relationship is gay or straight, and whether it's a man or a woman who makes the higher amount?

Let's say you were seeing someone who made more money than you. You don't know exactly how much more, but guess it is maybe two or even three times your own income, but not more than that. You want to feel like there is a balance in terms of who pays for things, but can sometimes feel like the person who makes more should pay more. But you're both considered middle-class. Maybe one of you is more upper middle class, and enjoys a few extra luxuries with that extra money, but you're both in a position where you work hard to make money, worry about saving enough to support your retirement, and feel like you are surrounded by people who make more money than you.

Then let's consider this alternative: you're seeing someone who was born into a wealthy family. They have some sort of trust fund whose income will comfortably and even luxuriously support them for the rest of their life. You yourself are solidly middle class, with some savings and a decent job, but no hope of ever inheriting any significant wealth. You might not be experiencing any financial hardship, but you know you have to be careful about money in order to stay financially secure.

In which of these situations, if either, would you feel more comfortable saying "hey, you know what? I can't afford to do X, Y and Z, and if you want us to do it together, you're going to have to pay for it." Assuming that the wealthier member of the couple is willing to say "Of course I'll pay for X, Y, and Z. Doing it with you is more important to me than the money," could you just accept that, or would you feel guilty?

And on the flip side, what if YOU are the one making more money? What kind of gap would bother you if you were seeing someone who made less money? How much more money would you have to have before you would feel comfortable paying for more than your share, or would you pay for everything without even thinking about it?

Snobby Salespeople

A tip from reader Charles led me to this article and blog post at WSJ.com, about how salespeople in high-end stores perceive potential customers.

I was talking to a Jaguar salesman last week and asked him what the hardest part of his job was.

“You can’t tell who’s rich anymore,” he said. “It used to be if someone walked in with jeans and a T-shirt I could ignore them or ask them to leave. Now that guy could be a billionaire. You have to be nice to everybody these days.”

Tim Blixseth, the billionaire timber tycoon, once told me about the time he visited a men’s clothing store near Palm Springs to buy a suit for his son. When they walked in, wearing work boots and jeans, the salesman headed them off at the door and said “I think you’d be better off at the mall.” They eventually bought a suit, but Tim made sure to drive by the front door in his Rolls Royce and wave goodbye to the salesman.

Identifying the rich used to be fairly simple: They dressed, talked and looked a certain way. They had iconic last names like Hutton or Hearst or Phipps, often with Roman numerals at the end.

Today, wealth has been democratized and individualized, and the rich come in all ages, shapes, sizes and ethnicities. People often ask me, “What do the rich wear? How can you tell by looking at someone today if they’re rich?” Such questioners are usually recalling old myths about watches and shoes, but my answer is that there is no way to tell. The rich don’t have a uniform anymore. Today, they all wear their wealth differently, from the dot-commers in T-shirts to the hedge-funders in khaki to the CEOs in classic pinstripes.

In her Journal column today, Christina Binkley takes a stroll down Rodeo Drive to do an “emotional audit” of salespeople — i.e., to find out how nice and welcoming they were. A woman at jeweler Van Cleef “sent us out the door with little more than her scowl,” she writes, while a woman at Yves Saint Laurent didn’t offer a smile but a “single upturned corner” of her mouth. In other words: not welcoming.

The articles and comments get at a key issue frequently discussed in the personal finance blogosphere, namely that the more you spend on "looking wealthy" the less actual wealth you are likely to have.
One issue that doesn't really get mentioned much, though, is that of the snobby salespeople themselves-- except in the comments. Here's a couple of outtakes:

[An investment banker says] I care my clients see me as an economic equal. But, I couldn't really give a rats ass what some two -bit clerk at Bloomies thinks of me.

Many sales people in high-end stores are lower middle-class strivers with serious adequacy issues.

If sales people were so wealthy, they wouldn’t be salespeople selling luxury goods. They would be BUYING the goods from these stores. Never understood why sales people at upscale stores have attitudes. They are the ones who need to be working to get by (most of the time) - not the people shopping in the stores.

I'll echo what many of the other commenters said-- if you are working in any kind of store, you should treat everyone in a friendly, courteous manner. Yes, you may be working on commission and not want to waste your time, but it's a mistake to make assumptions about anyone's spending potential based on their appearance.
But that said, I've been on both sides of the counter. I worked in a clothing store when I was in college-- trendy but not high-end. What I learned from that job is that most customers treat salespeople like dirt. The NY Times "Class Matters" interactive graphic on class components puts retail salespeople at the 42nd percentile-- I was surprised it was even that high, as sales jobs are not usually thought to be very prestigious.
When I had that job, I didn't work on commission, so I didn't really have a stake in trying to latch onto rich customers. Most of the time, I was friendly because it just seemed to be the right thing to do. But other times, if I was tired or having a bad day, I didn't smile at people and I probably looked like I had an attitude sometimes. And I kind of did! I was barely making more than minimum wage and the job kind of sucked. Whenever a customer really talked down to me, it was some small comfort to think that I'd be going back to my fancy college where I'd be preparing myself to, I don't know, rule the world someday.
The point is, if people think they are being looked down upon, they may feel like looking down on others is their only defense. And as the comments and article showed, both sales people and customers seem to look down on anyone who doesn't, or doesn't seem to have money.

When Do You Appreciate Your Money the Most?

Do you ever stop to appreciate what money can buy? We all have times where we think "I'd love to have XXXXX, and if I had more money, I could afford it." But aside from idle dreams of luxuries we may never be able to afford, when do we really find ourselves appreciating the money we have? Valuing it?
I ask because it is a beautiful evening in Brooklyn. I came home, ate dinner on my balcony, and sat out there for a while with a glass of wine, talking on the phone to a friend while watching the twilight deepen. The moon is out, you can see Venus, and every couple of minutes a plane goes by overhead on its landing path into LaGuardia. There's a soft hum of traffic noise, but otherwise it's quiet and dark, and no one is out except the local cat who likes to thread his way through everyone's fences.
Those of you who live in suburban houses might not appreciate this, but in New York City, where almost all of us live in cramped quarters with limited windows, and often no outdoor space, being able to have a quiet, solitary moment outdoors on a warm evening, while simultaneously being in the comfort of one's own home, well, it's just extraordinary. At least that is how it feels to me.
And this makes me so happy that I was able to buy this apartment. It took money to do that-- money I earned through work, and money that has grown from good investments. I spend my money on lots of things, and sometimes I wonder how worthwhile they really are. But tonight is one moment where I feel like the career rat race, the budgeting spreadsheets, the bank balances: they're all worth something. This may still just be materialism in some form-- it's not like I'm saving the world or curing cancer. I'm just enjoying a moment of peace that I wouldn't have in quite the same way if I'd made other financial choices in my life. But sometimes, I think, that's enough.
Do you ever feel this way?

We Want to Be Alone

I was thinking about how much our economy and technological development seems to be driven by the desire not to physically interact with other people. Think about it: we have gone from being entertained by plays and movies in theaters, to having TV sets in our living rooms, to watching video iPods. And with music: from concerts, to radios and stereos in the home, to Walkmans to iPods. Telephones used to have party lines, and there used to be more phone booths-- now we have cell phones. Now the internet gives us so many reasons to do things from the comfort and privacy of our own homes rather than among other people: shopping, dating, education...
Of course cars are a big one-- we've developed this American dream of having your own car, not taking public transportation. And the wealthier people get, the more they isolate themselves: owning yachts instead of going on cruise lines, taking private jets instead of flying commercial, building houses with pools and fitness rooms so they don't have to go to a gym.

Sometimes I feel pretty anti-social myself. Now that I have bought this apartment with outdoor space, I find myself wanting to stay home and enjoy it. I'm also keenly aware of needing to stay on my budget. So every weekend, I have this little inner debate: should I go out to a café for breakfast, or should I stay in and make my own coffee to save a few dollars? But even when I do go out to the café, it's not all that interactive, or even particularly interesting just for people-watching: everyone's just sitting there hunched over their laptops, with iPods on!

Rule #16: Who Do You Think You Are?

• Don't be too sure.

We all see ourselves as part of a community-- or usually, many communities. We draw circles around ourselves, including some people and excluding others-- sometimes they're big circles, sometimes they're small. We see others as like us, or different from us, and these comparisons inform the way we live. It's a lot like those Venn diagrams you probably learned about in grade school:
In this example, the black dot in the middle is me. Some "communities," or groups, to which I belong, are the large group of all residents of New York City, the smaller group of upper middle class Ivy League graduates, and the very small group of people who live on my block. (Obviously the sizes of the circles aren't intended to be exactly proportionate to the real numbers of people represented.)
Depending on the situation, I might think of myself as identified with these groups to varying degrees. Most days, I don't feel like I have a whole lot in common with the group "New Yorkers." New Yorkers are a pretty diverse bunch, and most of us feel no need to smile at each other on the subway and say "Hey, you live in this city too! Howya doin'!" But if I was in a small town in Uruguay and overheard someone saying they were from New York, I might say "Wow, I'm also from New York!" Of course I don't always consider myself "from" New York, or I might downplay that identification, for instance if I was with family in New England who were all watching a Red Sox game.
We all have these shifting hierarchies of identity. We are citizens of the world, our country, our city, our apartment, or even just our corner of the room. So how does this relate to our financial lives?
For every identification we make with some group, we position ourselves within that group by our income, our consumption, our possessions. We like to know where we stand against others-- are we richer or poorer, is our house bigger, is our car newer, do we have more or less saved for retirement. And we think things like, "well everyone around me in this community that I belong to goes on vacation every year, so I should be able to do that too." And studies have been done that show that people often feel happy or unhappy not so much because of their own financial status per se, but because it is higher (happy) or lower (unhappy) than that of the people around them.

I try to think about these issues a lot. In this blog, I often say things like "I pay $80 for a haircut, but that's not that bad by New York standards." Or "I love my tiny studio apartment but my friends can't believe I live in such a small space." Or "publishing is an underpaid industry." These are all "true" in some ways, but if you shift the context, they seem all wrong. Someone in Africa could live for months on what I pay for a haircut. And they probably live in far less space than my old studio apartment... but someone in London might think my studio was actually relatively luxurious for the price, given that housing is even more expensive there than it is in New York. And someone who works at McDonalds or Walmart would probably be thrilled to make a publishing salary. What about the fact that my net worth is much higher than the average American's? Does that mean I can just relax and say I'm doing well? What if I compare my net worth to those Ivy League grads? Suddenly it looks like I'm way behind.

So part of this rule comes down to

• Judge yourself against your own standards and goals rather than comparing yourself to other people.

If my net worth and savings are on track to be able to pay for my kind of intended retirement lifestyle, it doesn't matter how it compares to anyone else. But that doesn't mean I shouldn't keep those comparisons in mind. It's important to

• Have a social conscience.

It's a no-brainer that all Americans are fortunate in relation to others in the world, and some Americans are more fortunate than other Americans, and we should all keep that in perspective.
Then there's that

• Don't worry about keeping up with the Joneses

thing. Again, it's pretty much a no-brainer that you shouldn't just try to do or buy everything your neighbors do. But sometimes it's not the neighbors you need to worry about, it's your own inner Jones!

• What you spend does not determine who you are; who you are doesn't have to determine what you spend.

That is the best way I can think of to put it. Don't box yourself in with your own notions of where you fit into the world. This doesn't mean you have to break all the usual rules, but don't let yourself feel too trapped by them. Realistically, this can be quite hard! I was brought up in a certain environment, reinforced by school and work amongst many other people brought up in similar or wealthier environments. I'm not just suddenly going to change all my standards. Am I going to wear rags and live in a camper van on the street just because it would save me money? I can comfortably answer "NO, because people like me just don't do that!" "People like me" being at least some of the inner circles below:

But what about some less extreme examples? Maybe "people like me," i.e. well-educated, somewhat tech savvy, employed in media field, financially secure bloggers, tend to replace their computers more often than every 10 years. Should I? Maybe "people like me" have cable TV. Should I? Do "people like me" have weddings that cost $10,000? Or $30,000? Or $500? Do we go skiing for a week every winter? Do we only buy our clothes at certain stores? Do we send our children to private school? Do we only live in certain neighborhoods? Do we pick up used furniture off the street? Do we have full sets of matching glasses and plates and silverware?

Everyone will have a different perspective on these questions, but I think we can all challenge ourselves to expand the definition of "people like me" to include "people who have less than me" rather than "people who have more than me," and spend less money by eliminating at least one thing in our lives that we think we "should" have, but don't really need.

Rule #7: The Now or Later Rule

Many people will tell you that before you spend a dollar, you should think about the future value of that dollar if you invest it. The thinking is that if you save money now, it will grow via investments, and then someday you'll have more money to do the things you want to do, and presumably, more time to do them when you're retired. This is not bad advice. I expect to live until I'm well into my 90s based on my family history, and I want to have resources to enjoy that part of my life.
But on the other hand, you can't save everything for a rainy day. Sometimes I ask myself this question:

• If I don't buy/do this now, will I still be able to enjoy what I'm buying/doing later?

It depends on what I'm spending the money on. Here are some examples:

Having a big house: postpone it, I can enjoy that when I'm retired
Elegant furniture: postpone it until I'm old and need to spend a lot of time sitting down or in bed
A car: postpone it, I'll have more of a need for it later, at least until I start to really lose my faculties, or get osteoporosis and turn into one of those little old ladies who can’t see over the steering wheel.
Travel: hmm, I might not enjoy mountain hikes and swimming with wild dolphins when I'm arthritic and decrepit. Better do it now.
Sailing: again, I might not be physically able to do it later, so I should do it now.
Gym membership: there may be cheaper ways to stay fit but if I even want to make it to old age, I don't think I should skimp on exercising.
Education: sure, do it now because it's an investment in the future anyway and I might have Alzheimer's later.
Clothes: who knows, maybe when I'm 80 I'll be rocking Miu Miu instead of muu-muu, but I think it's a better bet to enjoy wearing nice clothes now while I'm still young and slender!

I certainly don't make all my decisions using the "a bus could run over me tomorrow" argument: I do think you should plan for the rainy day. But I also think you should make hay while the sun shines, or at least before your knees give out.