In divorce mediations, we examine people’s income, including their tax burden, their monthly budgets and their assets and liabilities. Inherent in all of this analysis is a study of people’s values around money and their spending patterns. And so, we found it particularly interesting that, except those with the lowest income, we all fall prey to emotional spending. That is, we assess the value of a dollar in relative terms, rather than understanding that a dollar saved has equal value regardless of the total cost of the underlying transaction. http://www.nytimes.com/2016/02/14/upshot/the-rich-can-learn-from-the-poor-in-how-to-be-frugal.html
So, for example, if there’s a $100 discount on a $2000 computer, you’re likely to go out of your way and mail in that rebate form. Similarly if there’s a $10 discount on a $200 coffee maker, you’re likely to mail in the rebate form. However, if there’s a $10 discount on that same $2000 computer, studies show that you’re likely to toss the rebate form along with the box your computer came home in. In other words, the $10 relative to the total cost – a mere .5% doesn’t seem worth your time.
This is an economic mistake. $10 in your bank account is $10 in your bank account and provides you an equal increase in wealth, regardless of the cost of whatever you purchased.
All that said, in mediation, parties often make “relative” financial decisions based on underlying values such as: sense of fairness, source of funds, feelings of obligation, a wish to be the “good guy,” etc. Rational decision-making around finances may be only one consideration and we as mediators do not foist on the parties a “right” number or outcome. Rather we help them to understand the best outcome for each given the reality and challenges they face, financially, professionally, as parents and in regard to their short- and long-term goals. This may or not mean placing a high value on the extra $10 in the bank.