Sunday, September 1, 2013

Windfall spending

My wife asked me today what would happen if I went on TV and won a lot of money on a quiz show that tops out at a million dollars.  She hedged down to a couple hundred thousand.

Would we pay off the mortgage?  I explained that if we had a safe investment that could return more than the interest rate on the house plus inflation -- we'd do that if we were economically "rational".

But then I explained that even though I know this, I would instead pay off a chunk of the mortgage instead. 

Damn present bias. 

Even when you know better, you don't do better.