Knowing how you rationalize can help you spend money wisely

Hundred dollar bills

I have a new pair of earrings. A jeweler in San Francisco made them out of 18-karat gold, and they're beautiful and dangly and make me feel happy.

Besides, my jewelry is really the only thing I vary about my work outfits.

When I'm meeting someone for work, I wear a sort of uniform: black skirt or black pants -- I have multiples in the same brand, style and size -- plus a blouse or jacket.

A different pair of earrings helps me change things up, so my clients won't assume that my professional success is so meager that I can afford only one outfit.

Can you spot the difference between those preceding two paragraphs?

The first one is true. The second is a rationalization, a partially true story that helps me feel good about spending money on something I want.

I can rationalize nearly any spending decision, and I'll bet you can, too. Understanding what you're doing and why can help you make better decisions.

There are a variety of reasons that people rationalize.

Maybe you rationalize because you don't have time to research all the options. You investigate a few, pick one that seems good, then invent reasons that it's the best of all possibilities.

This leaves open the possibility of an unpleasant surprise when you discover that a better option existed, but your research didn't find it.

Or you might rationalize to add a veneer of logic to your emotional desires.

Let's say you want to buy a house in a certain neighborhood.

The real reason?

You remember admiring friends who lived there years ago, friends who seemed cosmopolitan and sophisticated. You want to be like them, and buying a house in their old neighborhood seems like a good start.

Rather than admit that to yourself, you come up with reasons that seem less self-indulgent.

It's a good school district, home values there are solid, it's near your office.

Unfortunately, emotional rationalizations often omit facts that would argue against the emotionally attractive purchase.

Some people tell themselves they're not spending -- they're investing. Those pretty teapots are a collection, and they're worth big money to other collectors.

That might be true. But it's only an investment if you plan to sell it. Most collectors have no intention of selling their loot.

The best investments are liquid, meaning they're easy to value and sell. A collection can be tricky to sell, and its worth can depend greatly on the emotional value another person places on it.

Even those who avoid these rationalizations can fall victim to the purchase that promises to save money.

Perhaps you'd like a hybrid car, mostly because you love the idea of a hybrid car. These cars are cool, you think, even though they're a good bit more expensive than standard automobiles.

The story you tell yourself, though, is that you should buy a hybrid because you'll save money on gas.

But at current gas prices and for the six or so years that most people keep a car, many of the hybrids on the road today (with the exception of the Toyota Prius and the Lincoln MKZ) won't save you any money, a recent study by the New York Times and found.

Should you definitely avoid buying that hybrid? Not necessarily.

There are other solid, environmentally friendly reasons to buy one.

For that matter, there are plenty of good reasons to buy a house or start a collection, from loving a neighborhood to continuing a family tradition. It's entirely legitimate to value some facts in your personal calculus (the house is near my office) over others (the roof needs replacing).

It's even fine to buy something just because you want it, as long the purchase doesn't mean you'll go without rent, groceries or something else you've made a higher priority.

I certainly don't regret my earrings. They're beautiful, and that's important to me.

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