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Delayed Gratification response

I found the article “Delayed Gratification” by James Surowiecki an interesting read. Thanks to the little bit of history within this article I learned Layaway was actually started in the nineteen-twenties during the Great Depression. I also found it interesting that during that time items such as refrigerators, washing machines, and furniture, had been purchased on installments. I also agreed with some of the points that were listed in this article. I found the analysis from a financial perspective to be a bit peculiar.  They believe if a credit card holder pays off the remaining balance in full they can avoid service fees that are applied while setting up a layaway plan. Just like James brought to mind, most credit card users do not adapt to this mindset as a result of the enforced credit card company’s guidelines. Most Credit card companies thrive over making the consumer irresponsible. Whether you pay off the small monthly payments or cause delay on payments, they will make money-Especially when it comes to interest rates. When you look at society, there are a vast amount of individuals who are in debt as a result of poor credit card usage. This has been a growing factor also due to high unemployment rates. I strongly agree with economist Richard Thaler ‘s mental accounting theory because I can stand as an advocate for it. Whenever I receive money I always categorize its purpose. I always break it up into the following sub categories: Travel, Food, and Bills. I also find this a common practice amongst money managers. I also believe in Sendhil Mullainathan and Eldar Shafir money spending concept to an extent. According to the article they state “Layaway is a popular way of making big purchases (like washing machines), because, if you don’t have a lot of money, the presence of a sizable sum in the house or even in the bank means that you’ll be constantly tempted to dip into it.” Even though I believe in Layway usage over making a purchase while using a credit card. I do not believe having a small stash in your house will tempt you to spend. I believe having no self-control will. When I was younger, and unemployed, I used to save a lot of money within my household and never was tempted to use it. This is why I agree with Barton Lipman and Wolfgang Pesendorfer’s concept, which states “People have a profound distaste for temptation, and are willing to go to great lengths to avoid it.” I do however believe Sendhil Mullainathan and Eldar Shafir’s point of view can be used to back up a scenario involving individuals who have no self-control when it comes to spending. Just like the article states Consumers choices are shaped by social and economical norms. It can be a very tedious scenario trying to save money in a world where spending is idolized. Especially since consumer purchases can be used as a passage for social satisfaction and gratification. It is immensely sad that we live in a capitalist society but we can be a bit wiser when it comes to our spending habits. Even though society can make this extremely hard on us.



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