Why are these treehuggers wasting their time?

46 Comments

I love this open letter to the UC Berkeley students who were protesting cutting down trees by living in them.

Excerpt:

(1) Consider what you are fighting for.
“How many trees does UC intend to destroy for its construction project? (Answer: 38). Is the coast live oak an endangered or threatened species? (Answer: No). Will the removal of these individual trees have any significant impact on the health of the overall population of the species? (Answer: No). Consider how many collective man-hours your campaign has devoted to saving these trees. Has it occurred to you that your time may be better spent focusing on (for example) the huge swaths of the Amazon that are cut down by loggers and developers every day? Are you choosing to protect 38 trees because you really think it is a significant, meaningful cause? I hope not–because that would be ignorant. It seems much more likely that you choose this battle because it is relatively convenient and riskless. Honestly–why don’t you sac up and take on a *real* environmental offender?”

You’ll find a lot of people doing largely meaningless things and justifying it with these 4 terrible words: “It can’t hurt, right?”

But it can. We’re cognitive misers. We only have limited attention and limited willpower. And with limited time, are you focusing on stuff that will make no difference? Or are you saving your limited attention and cognition for areas that will really make a difference?

How often do we pick things that are easy (e.g., saving money on lattes) instead of big wins? How often do we focus on things that make us feel good for the short term vs. things that will actually help us over the long term (e.g., learning how to automate your personal finances or how to make more money)?

Now, there is value in symbols. But few of us think strategically about the symbolism of our actions, while most of us (me included) simply do what’s easy and available.

Truly rich people know that they have limited resources and focus it on the things that matter. Beginners try to do everything and make an impact in very few areas at all.

* * *

2 questions for you…

What’s one area of your finances that you previously focused on…and it ended up being a big waste of time (e.g., lattes)?

On the positive side, what’s one area where you’ve had HUGE gains with a limited amount of effort (e.g., automation)?

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46 Comments

 
  1. I was keeping track of every single penny that came in or came out of my life. If I found a nickel on the ground, I’d track it and save a penny to invest later. I felt this was incredibly valuable over a 2-3 year period when I got a true feel of what yearly car expenses (emergencies included) really costed. I begin sawing the benefit of mini-savings accounts for various deductibles and gas-hedges, etc. But after 2-3 years, you get the picture and so I stopped doing it and now I’m focused on a bigger picture goal of running a business. This is a case where you need to approach finance with a bit of a dynamic approach, some activities are essential in the beginning, but then you need to adapt as you learn skills and progress to new goals.

  2. I pick doing the little easy things to save money because I don’t have any of your so-called big wins to make. You make the mistake of thinking that everybody has credit card debt and car payments or else can save big bucks by turning down their radiator in the winter. Surprise: I don’t have credit card debt (yes, I paid for a €1200 camera and macro in cash) or car payments and my utilities are bundled into my very cheap rent. This doesn’t mean that I track my pennies or use coupons or anything like that (even though I’m Asian I’m not meticulous enough to use coupons). It just means I try to spend money only on things I really care about, or things that we really need. Seeing the latest movie? Not so much. Taking our renal-failure kitty to the vet 2-3 times a year? Oh yes.

  3. I should also add that I send 10% of my paycheck plus whatever’s left over to my savings account every month (automation scares me for some reason). So it’s not as if my savings comes only from me picking generic yogurt over name-brand stuff…

  4. This will be no surprise to IWTYTBR readers, but I stopped focusing on shrinking my expenses more and more. I got to a point where I stripped down a lot of things and then I realized this couldn’t scale.

    So instead of focusing on how to cut stuff from my budget, I started to focus on increasing my earnings. Let me tell you: it’s a LOT more rewarding.

  5. I think because I’m brown, I don’t think I have any response to the first question. I can’t think of anything that ended up being a big waste of my time. I don’t drink lattes.

    As for the second question, most definitely, without a single doubt: making more money. Now while it is not easy to start off with, it paid dividends within a few months (I went the product route and I am a software developer.) I am a few K within replacing full-time income which means I now have two full-time incomes (where one income is ~ $220K).

    That being said, I only live on about $50K/year. I quite literally do not know what to do with the excess money.

    • Now that would be a great post topic…what to do when you’re making a whole lot more money than you’re spending.

      I’m in a similar situation, and putting a lot of the money back into my business, and investing the rest in various asset classes.

      -Erica

    • If you are making a whole lot more money than you are spending, it’s time to start giving some of it away. It doesn’t matter so much who you give it to, or which cause you support. It matters that you give without expecting anything in return.

  6. I was spending a ton of time tracking things in Quicken, entering receipts from Target or Wal-Mart and splitting them up down to the penny if there was multiple spending categories. Probably 30 min a night wasted on this. I finally spent $40 and upgraded to the new version of Quicken so I could download transactions and stop all the manual data entry. Now I update about 2x a month and it takes me about the same 30 min each.

    I also realized since we put our daily expenses on a credit card, I could basically watch that balance as the month went on instead of focusing on the underlying detail. Now, if we’re over $1,500/month on the card I drill down to see what happened – but usually it’s just a one time expense that puts us over.

  7. There are a few problems with your logic, especially when you start comparing personal finance to political actions. One, people may be taking big actions as well as small, so it’s silly to say that if you’re doing one you’re necessarily not doing the other. Second, maybe people DO want something relatively riskless — and that’s ok. It can be their training ground, it can develop into something bigger, and it is better than doing nothing (the most common excuse for political apathy is the belief that you won’t be able to have any big impact anyway.) If we all wait for the BIG opportunities, then no one would campaign for local ballot propositions, no one would vote, no one would start their first business… you get the idea. Sometimes little actions inspire bigger actions, and/or all together make some impact. Finally, your idea that everyone has big wins available to them is just out of touch with reality, though maybe it makes sense for your readership.

    • I agree with Nolo. While Ramit’s point about humans having limited resources, like time, is interesting, I don’t think one can view political action in the same way as finances.

      I think political action has a much more…spiritual, or emotional, component. Getting people to care is a big part of it. Having people take action on the small things they can actually make a difference on is an important way to inspire people to (1) care, and to (2) act at all. Such local actions can make causes concrete/real to people, and can inspire people to care about larger issues.

      (Well – maybe that could apply to finances as well, to an extent. I myself know that it has taken me a lot to start paying attention to/worrying about my finances, versus not really caring at all.)

      Perhaps, if humans were machines, the most important point would be that their time would be better spent advocating for the far-off rainforest than for a few dozen trees on a campus. But people aren’t machines. You can’t ignore the highly educative side of local activism.

      Regarding whether they’re taking local action because it’s easier… I agree that I don’t think there’s anything wrong with taking certain actions because they are “easier.” At the risk of being repetitive, it’s not like the choice is only between action A and action B, because a third action is doing nothing.

    • I also agree with Nolo and AJ, I think comparing personal finances and political action are very different. There are so many benefits to keeping a small strip of trees in a urban area. For instance, it offers shade, a quiet sanctuary and a small habitats for birds (unless you only want pigeons). If you think about the amount of carbon we’re putting into the air, cutting down 38 more trees only adds issue of global warming. So in my opinion, it’s not a waste of time, it’s allowing people to have some sort of input into how their environment is altered. Even if you don’t agree with the method.

    • You might just want to give that post another read…

      There’s a quote in his book that one of his favorite things is mocking people – unless you want to end up in a post of his about dumb comments.

  8. I can’t say I specifically agree with you. I think we need to watch out for the “little things” and the “big things” both. We do watch for savings on large purchases such as vacations, but I have so many more opportunities to waste a dollar here or there which will add up.

    The small stuff also sets precedent. In your “tree hugging” example, it would also set a precedent. Sure it might “only” be 38 trees in this particular project, but what about the next one? And the next one?

    Similarly, it might be a $4 latte at Starbucks versus a 25 cent coffee from home. Its just a one-time thing. But if I get accustomed to it being the norm, it adds up hugely.

    All this to say – the little things are significant.

  9. You only think that they are wasting their time because you are only looking at their stated aim, to save the trees, and overlooking the unstated, that it is a really cool excuse to hang out with other people with similar views and possible find a chance to mate. Try going to the Amazon and doing that with the Yanomami!

  10. I tracked my expenses for a couple months, and it wasn’t quite a waste of time- I got a really good sense of where money does go- I didn’t feel the need to continue once I got a nice couple-month average on most of my expenses. Now I only go back over them if there’s some sort of glaring inconsistency, or if it’s been a while and things have changed (working from home = lower take-out totals; higher grocery bill), I’ll try and figure out the new averages.

    The hugest personal gain for me has been automation (ha! i am such an apple polisher). I don’t have a weekly salary, so i divvy up my checks percentage-wise as they come in. Currently my %s are: 33% to tax fund (freelancers don’t have their taxes withheld, learned this the hard way), 10% to a fund to pay off my credit card debt, and 10% to savings (occasionally an extra 10% to my wedding fund specifically, getting hitched next year and have to step it up in that area). So far it’s prevented me from burning through those precious, precious freelance checks, not worrying at all about taxes, having some actual money to pay CC bills instead of just tears, and have a little set aside.
    I’m actually almost all the way to saving up for my fiancee’s wedding ring, which I am really super duper proud of :) I’m not used to buying things with cash in hand, just extended credit lines- so I’m very glad to have actually saved up enough money for this big expenditure.

  11. You’re picking on college students, who are notorious for their “let’s be overly idealistic” mindset, especially at UCBerkeley. Having just graduated from that campus, I’m actually pretty impressed that those folks fought that fight rather than getting drunk every night at frat row, which is just down the street from those trees. :)

    That said, you still have a good point. Most adults choose to do the easy stuff because they can feel like they’re making progress. That’s fine if you’re using that as motivation to get the big stuff done but not so good if you’re using it as a way to avoid the big stuff.

  12. Ramit, you are so right. The bigger wins will come from bigger actions. A lot of the small things we do in finance make a small impact but do take up a lot of resources (time+energy=money). Instead of inventing our own brilliant (in our own minds) money-saving techniques. There are many tested, proven strategies that make a big impact on our wallets. Sometimes, it’s just easier to take a page out of the book of the wealthy who already have the results that we want.

  13. By focusing on unimportant things the cost of opportunity might be really huge. While you are focusing on minor things, you are actually wasting your valuaable time losing the opportunity to make more important things. Eg, saving not so-valuable trees here and wasting your time in not doing more important things for the important one in the Amazonas.
    Great point to remember it, Ramit!

  14. I’m fairly certain those were not UC Berkeley students in the trees. I believe they were Berkeley residents with nothing better to do. Cal students today aren’t like they were in the 60′s.

  15. I stopped overly tracking expenses at staring at monthly budget of those expenses. Once I set up a monthly budget on Mint I just watch for alerts and not really care otherwise. Most of the time I get alerts it is not due to my own frivolous spending, it is due to external forces that boost spending: gas prices going up, large purchases like a grill or my father practically living with us for 3 months.

    Yeah, automation made huge gains for me. Also, learning when and how to negotiate on some of my monthly expenses (cable, insurance, etc…) saved me thousands in the last two years.

  16. I love the use of a meaningless political action as a metaphor for meaningless actions in the realm of personal finance. It highlights the importance of prioritization in all aspects of life.

    My favorite personal experience of this effect is on the “making money” rather than the “saving money” side. One of my businesses is a direct marketer of products to restaurants. We send tons of catalogs out each year. There are infinite details involved in designing catalogs, including the layout of the products, the fonts, the colors, the photography, and the text describing all the products. You can spend tons of hours tweaking all this stuff, and we did. After all that time, we saw virtually no increase in orders.

    You know what did increase orders? Changing the offer from a free gift to a free trial of our product. Now we spend most of our time thinking about what matters – the offer – and much less time tweaking the design.

  17. Great post, Ramit. That’s part of what I loved so much about Earn 1K – deciding what not to do and jumping right in to the stuff that really matters.

    Here’s my post on the same subject which I think you would definitely be interested in (if I do say so myself):
    http://www.brettbolkowy.com/2010/02/trying-harder-vs-trying-better.html

    And here’s one from Seth Godin:
    http://sethgodin.typepad.com/seths_blog/2010/03/try-different.html

    This post exemplifies what I said about I Will Teach Yo To Be Rich being a psychology blog whose practical application is personal finance.

  18. Correction: the Berkeley tree-sitters are not UC Berkeley students. The letter doesn’t refer to them as students.

  19. Three things in my business were big ticket items.
    1) Created systems that provided free, high quality referrals. Saved thousands on poor quality, high $ per phone call paid advertisement.
    2) Renegotiated lease and saved $2000 per month.
    3) Changed the number on my debit card. This forced me to re-think all my recurring, automatic expenses and decide if I wanted to give them the new number and keep the service. I made decisions that saved another $1000 per month.
    Tim

  20. Question 1) Putting in extra effort working. All that seemed to do was to result in more work. Focusing on only one thing in general seems to be fairly detrimental if not just a risky strategy.

    Question 2) Cutting away things like lattes, (i)pods/pads/phones, oversized cars and houses, … it adds up, tremendously. By investing those savings, it makes it possible to avoid working for money. That’s been a huge return on effort.

  21. My answers:
    1) Setting a budget. It was hard to stick to it, and when firing on all cylinders (which rarely did it ever) maybe saved me $150/month
    2) Finding a new higher paying job. Granted, I did my search in 2008 when the recession was really bad and it took a long time (almost a year?). But the payout was huge, tens of thousands of dollars. It was well worth the time and effort, especially considering in the new job it’s not only higher pay, but the people are better, the working conditions are way better, and I’m much happier. It’s not just a big win, it’s a HUGE win.

  22. My key takeaways: don’t sweat the small stuff, and focus on the big picture!

  23. Time Wasters:

    -Tracking every penny I earned/spent
    -Spending too much time trying to find “a good deal.” I spent 4 months deciding whether or not to get the Droid, and ALMOST a year on a TV. If I had automated saving I could have just gotten what I wanted (within reason) and not gotten caught up in “feature creep” or pinching pennies to afford it.

    Time Savers:
    -Automated deductions from direct deposit-checking account funneling money where it’s needed.
    -Automated billpay for car/student loan, cell phone bill etc.

  24. Ramit –

    What a great post. I love how you combine the notion of big wins with environmentalism. So many people follow green tips, when they could be having such a bigger, long term impact. In fact, I wrote a post that IWTBR readers will like: how to apply the strategies in your book to leading a greener lifestyle.

    All of you can check it out here:
    http://smartercontext.com/how-to-cut-your-carbon-footprint-by-50-what-we-can-learn-from-ramit-sethi-and-personal-finance-%e2%80%93-part-2/

  25. Above I noted my best business wins, here’s my best personal win. This happened by accident but will have a greater impact on your finances, stress level, and time then you can imagine.

    Two years ago, we moved to a house that is less than a mile to our business because we wanted to be closer to our business. My daily commute is 3 minutes if I hit the red traffic light on the way, less if I hit a green light.

    For years, I tried to justify an 1/2 to an hour commute by saying that I make enough money to afford it. There’s a lot of hidden costs to that daily commune. You can find many commute calculators on line ~ http://www.commutesolutions.org/calc.htm. Some of the hidden costs are risk of an accidents, wear and tear on vehicle, gas, higher insurance, that morning breakfast that you buy on your way because you don’t have enough time in the morning to eat before you leave, Not to mention that extra one to two hours in your car per day and the high stress level of driving.

    I determined over time that I am saving about $8000 – $10,000 per year in extra costs for the half hour. The hour commute, I did, would cost me about $16,000 – 20,000 per year. This may sound high but most people forget to add the cost of the new car in their calculations. I did so few miles last year that I didn’t need to pay for emission testing and my cars will last two to three times as long. If you don’t believe me, check one of the commute calculators.

    When the cost of gas went up to over $4 per gallon, everyone went crazy and went out a brought fuel efficient. When you live really close to your work, this increase in gas prices news gives you a ho-hum response because it doesn’t effect you.

  26. Ramit’s talking economics! Yep, trade-offs apply to everything, whether it’s political action or playing with your dog.

    If you’re playing with you’re dog right now, you’re not making a sandwich.

  27. I’d like to second the idea that making more money is usually the biggest win for young, smart, enterprising people. I just spent three months looking for the best deal on a netbook, when all netbooks are basically between $300 and $350. I wish stuff like that didn’t matter to me, and I could just make up the difference in an hour of extra work.

  28. A lot has been said about tracking every penny and how that is a waste of time. I now have my expenses automated but it wasn’t always that way. I had to go through the evolution of tracking every penny in order to get to know how I spent money. Because I tracked my spending so rigorously, I was able to identify the wasteful spending and get into the habit of buy things that really matter to me. And I think that is the true value of tracking every penny spent, developing a habit of better spending. Once that is accomplished then one generally moves on, like I did, to automation of the finances. I am now looking for opportunities to increase my income in my current field of work.

  29. My biggest financial time-waster was trying to share expenses exactly fairly with my then-boyfriend (now husband). Keeping track of each household expense and who contributed how much just annoyed us both, causing more fights & resentment than it prevented. Instead, I now automate my savings, accept a fixed monthly amount from him for major household expenses, and don’t sweat the small stuff.

  30. Right on about analyzing the real impact of one’s available resources – it becomes especially important when considering emotional subjects like philanthropy… or lattes.

    Study the ethics of altruism and you’ll find that it’s not always as black/white as you’d expect. Take the old lawyer/politician conundrum: Dude wants to “give back to the community” (he says) so he takes an entire day to help build a house. Rather, he could have worked those hours at his $200/hr and then donated the money, allowing to pay for multiple $35/hr workers to do a greater amount of “good”. Ah, but where’s the mushy feel-goodness in that?

    As for lattes, Dan Ariely (author of The Upside of Irrationality) has a good column in the June issue of Money mag (“Spend Smarter, Be Happier” pg.22, can’t find online). It gives a great portrait of the emotional economics around spending on luxury items and “splurges” vs. status buying and the ‘hedonic treadmill’. Reminds me a bit of the “are you a money hater or a money lover” from Your Money or Your Life.

  31. When I first got married and took over our combined finances, I would be super picky and make sure every single transaction was in Quicken every day. I was probably spending 15-20 minutes every day. Now, I still track every transaction to keep our budget in line, but I only look at it once a week. And I’m not nearly as stressed out about our finances anymore. If I miss one or two little transactions it is no big deal. Enter an adjustment and move on.

  32. for the record, the morons in the trees weren’t berkeley students. they were just hippies who lived in berkeley.

  33. One thing missing in your analysis: there are two different dimensions at play – big/little and earning/save.

    Many of the people who focus on the “save” half of things do so because when they focus on earning, the things that come to mind are so little that saving actually does measure up better.

    For instance: I have an ongoing freelance gig that brings in over $1,000 per month. Because it sometimes results in a long day, I have no problem doing the work over a sandwich rather than working and then cooking. $10 meal/$300 session of work.

    The friends who find this wasteful aren’t thinking of that scenario. They’re thinking about doing a $15 an hour shift someplace: $45. So, they’d rather cook at home and save the $10 than earn $45.