It makes sense to save to spend if...

The elephant and the dime.

Tess Vigeland: What it is about these Groupon coupon-boupon things that makes us all so willing to buy stuff that we might not otherwise? 'Cause plain and simple, we're suckers for a deal. And to explain that particular phenomenon, we brought back Carl Richards, founder of Prasada Capital Management in Park City, Utah and our intrepid art-on-the-radio guy.

You've seen his drawings in the New York Times Bucks column where he takes an economic term or idea, gets out a Sharpie and illustrates it on a napkin. Welcome back, Carl!

Carl Richards: Hi Tess.

Vigeland: So we have spoken to you several times now about the sketches that you've done. But I wondered if you were game to try one for us today.

Richards: Yeah, that's some serious pressure, but let's give it a shot.

Vigeland: OK. Well, you know, one of the issues that we deal with all the time on this show is the notion of "spend to save." And this can be something as big as, "Oh my goodness! Interest rates are at historic lows, so because of that, I'm going to go buy a house. I'm going to use that rationale as a decision to go and get my house now, because otherwise, I'm going to miss out." Or it can be as simple as, "They have dresses on sale today at Macy's. So, even though I don't really need a dress, I'm going to go get one, because I'm going to save money on it." Spend to save. Go!

Richards: I've had this discussion a lot with a family member who does the same thing -- "We'll buy 50 bars of chocolate, because they're on sale." Even though she doesn't need 50 bars of chocolate. And what just popped into my head would be a circle, and it's an old saying that we can just capture in a drawing. One circle, it would say "elephant," and another circle that would say "dime." And so if you think of this as a traditional Venn diagram -- I call them "circle sketches" -- and where they overlap, it would say "only a good deal if you need an elephant and you have a dime."

Vigeland laughs.

Richards: Maybe like that old statement, like "An elephant for a dime is only a good deal if you need an elephant and you have a dime." So buying a new house, because the interest-rate deduction is going to go away or interest rates are low, is only a good deal if you need a new house and you've got the money to make the mortgage payment.

Vigeland: Yeah. So, as you're drawing this, any insights as to why this is such a common behavior?

Richards: I like to think a lot about the sort of genetics. Because a lot of what we do may make perfect sense genetically, and it just may not be rational, like we're just not sort of set up. So I think maybe there's some sort of hoarding issue going on, like this idea "Hey, something's going to be gone, I better get it while it's still here."

Vigeland: Hm. So we're afraid we're going to miss out.

Richards: Yeah, sure, afraid we're going to miss out, afraid we're making a bad decision, right? The fear of regret is a big motivator. And all of us hate to look back and say, "I wish I would have done that." And that may play a huge role in it too.

Vigeland: Alright, so we've got our overlapping circles now and our elephant and our dime.

Richards: That's right.

Vigeland: Alright. Well done Carl Richards. We challenged you and you rose to the challenge.

Richards: Yeah! I don't know that could ever be repeated at home. Don't try this at home.

Vigeland: OK. Carl, thanks so much.

Richards: Thank you Tess.

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