For many people, saving money isn’t just difficult; it’s a foreign concept. A recent study found that 58% of Americans do not have a formal retirement plan in place.¹ Why is even thinking about saving money so daunting to so many of us?

We spoke with Dan Ariely, professor of psychology and behavioral economics at Duke University in Durham, North Carolina. He says that many people have difficulty saving their income because our minds and our environments are not naturally suited to thinking about money in the long term. In fact, our minds are not very good at thinking about the concept of money at all. To make it easier, he says, we need to change our environments in such a way that saving money happens automatically and we never even have to think about it.

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¹“According to Deloitte’s Retirement Survey, a majority of Americans — 58 percent — do not have a formal retirement savings and income plan in place.”

Here’s my Q&A column from the WSJ this week — and if you have any questions for me, you can tweet them to @danariely with the hashtag #askariely, post a comment on my Ask Ariely Facebook page, or email them to AskAriely@wsj.com.

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Dear Dan,

I don’t care about cars, never have. But I’m a sales executive, and people tell me I should own a nice car (BMW, Mercedes, etc.) to enhance my credibility to both my customers and sales team. I can afford either but would rather save the cash and buy a Honda. Does it matter? 

—Cody 

The topic here is signaling. The large and colorful tail of the male peacock tells the female peacock about his strength and virility (if I can run around carrying this large and difficult tail, just imagine how strong I am). In the same way, we humans are concerned with the signals we send the people around us about who we are. Signaling is part of the reason we buy large homes, dress up in designer clothes and buy particular cars. So the answer to your question is yes. The car that you drive communicates something about you to the world. Does it matter? Yes again, because we are constantly reading these signals and making inferences about the senders.

But some questions remain. What kind of signal do you want to send? The BMW signal or the Prius signal? Maybe the signal that you buy American-made? Maybe you want to get a really old car and show people that you take really good care of it (a more subtle signal, but an interesting one). Another question is whether the cost of the signal (the cost of the car) is worth its signaling value. This depends on the nature of the people you deal with, how well they know you, how often you make first impressions, etc.

In the interest of full disclosure, I should say that I drive a minivan—but now that I am thinking about it, maybe I should go and stick a Porsche logo on it.

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Dear Dan,

My wife and I are in our late 30s, and we are debating whether or not to have kids. Any advice?

—Henry

The decision on whether or not to have kids is very complex. It depends on many factors, including your financial situation, your preferences and your relationship with your significant other. So, sadly, I can’t provide any direct answer to your question. Obviously, though, this is one of the most important decisions you will ever make—and given its magnitude, you should spend a substantial amount of time trying to get to the bottom of it.

The question about having kids, like many other questions, is all about what you might get from this experience and what you might have to give up. The problem is that before you have kids, it is hard to estimate both the benefits and the costs. So what should you do? You need to try to simulate the kid-experience in order to have a better understanding of what it means and how it would fit you.

For example, why don’t you move in for a week with some of your friends who have kids and observe them up close? Next, why don’t you offer to take care of some other friends’ kids for a week? Then try to expand this exercise and take care of kids of different age groups (don’t skip very young kids and teenagers). After 10 weeks of this experiment, you should be in a much better position to figure out if this is for you or not.

If this exercise seems too daunting for you, you probably fall into one of two categories: 1) You’re not really interested in an empirical answer to this question. Perhaps you’ve already made up your mind, and you’re not yet ready to admit it. 2) You’re too lazy to put the effort into figuring this out. And if that is the case, you probably should not have kids.

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Dear Dan,

I hate tax day. Is there any way to make it more pleasant?

—James

When I first starting filling out the 1040EZ form, I loved tax day. It was a day when I got to think about how much money I made, how much I gave the government (another way to think about it is to think about how much the government takes, but I prefer my framing), and what benefits I got in return from the federal and state governments.

Over the years my taxes have become more complex, and my annoyance with the complexity and ambiguity makes it harder for me to focus on taxes as part of my role and duty as a citizen of this amazing country.

So what can we do to make tax day better? The word mitzva in Hebrew means both a duty and a privilege, and one thing I try to do (not always successfully) is to think about taxes as a mitzva.

I also think that the tax code has to change if we are to experience this day as a day of citizenship and not just annoyance. The tax code needs to be much simpler, and taxes need to be more equitable. Finally, there are some nice experimental results showing that if you ask people to take an active role and vote on where a small part of their taxes goes (education, infrastructure, military, health, etc.), this improves their attitude toward taxes.

Happy mitzva day.

See the original article in the Wall Street Journal here.

Here’s my Q&A column from the WSJ this week — and if you have any questions for me, you can tweet them to @danariely with the hashtag #askariely, post a comment on my Ask Ariely Facebook page, or email them to AskAriely@wsj.com.

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Dear Dan,

I am writing to you from a train in Germany, sitting on the floor. The train is crowded, and all the seats are taken. However, there is a special class of “comfort customers” who can make those already seated give up their seats. This status is given to those (like me) who travel a lot on the train. It would be nice to get a seat and, according to the rules, I deserve one. But I can’t see myself asking one of the “non-comfort customers” to give up his seat. Why is this so difficult for me?

—Frederick

Your question has to do with what we call the “identifiable victim effect.” The basic idea is that when we see one person in need, our hearts go out to them—we care and we help. But when the problem is very large or far away, or we don’t see the person who is suffering, we don’t care to the same degree—and we don’t help.

In your case, I suspect that if the train conductor were the one picking a random passenger to clear a seat for you—and especially if the conductor did it before you boarded the train—you would have been able to enjoy the seat. Taking this a step further, if you knew who that person was (for example, if the conductor pointed him or her out), you would have felt worse. Picking the person yourself is most likely the most difficult, because you would have no choice but to see the effect of your actions on the other person, as well as his or her reaction.

What’s the lesson here? It’s that direct contact with other people makes us care and act accordingly. And when the distance is great, or the actions are taken without our knowledge, we care much less. Now the question is how to get politicians, bankers, CEOs and everyone else to feel more directly the consequences of our actions on the well-being of others.

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Dear Dan,

I work for a government agency that is in the early stages of making telecommuting an option for its workforce. The idea is generating a lot of distrust among managers, and Yahoo, of course, just cracked down in this area. I know that managers are supposed to trust their workers, but it seems obvious that employees will work less from home. What is your take on working from home?

—Julisa

There are lots of possible reasons for the recent decision at Yahoo—some benevolent and some malevolent. Let me focus here on just two of them: work and attention. In terms of expected hours, those who work in an office are exposed to two different standards: the 40-hours-a-week official standard and the standard that is set by the people around them. We all know, for instance, that the social standard in the high-tech industry is much higher than the official 40 hours a week. In such cases, people who work in the office will conform to the social standard and work many more hours. For those who work from home, the 40-hour workweek is going to be a highly salient reference, and accordingly they are likely to adopt this as a reasonable commitment to work.

In terms of attention to the work, my own experience tells me that when people are together in the same room, they pay attention and focus on the task at hand with much of their cognitive capacity. But when people are at a remote site, participating via phone or video conferencing, they are not fully engaged and in many cases they even try (unsuccessfully) to multitask during important meetings.

My mother, by the way, always knows when I try to multitask while talking to her, so maybe Yahoo should hire her to monitor their online conferences and to reprimand those who aren’t focusing sufficiently.

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Dear Dan,

What is the best way to make sure Americans have sufficient funds for retirement?

—Ben

There are basically two ways to help people have enough money for retirement: getting them to save more and getting them to die younger. The easier one by far is getting people to die younger. How might you achieve this? By allowing the citizens to smoke, subsidizing sugary and fatty foods, and making it hard for them to get access to preventative health care. But, when you think about this, it seems like we’re already doing most of what we can on this front.

See the original article in the Wall Street Journal here.

You will now be able to pose questions to me for my biweekly advice column through Twitter (rather than just by emailing AskAriely@wsj.com) and Facebook. This means that everyone will get to see your questions instead of just my email inbox.

To submit through twitter, just tweet to @danariely with the hashtag #askariely.

To submit through Facebook, post a comment on my new Ask Ariely page: https://www.facebook.com/AskAriely

Looking forward to seeing your tweets and comments!

Irrationally Yours,

Dan

Watch this video about my online class on coursera, A Beginner’s Guide to Irrational Behavior. (And if you haven’t checked out the other short videos, they should also be pretty entertaining.)

If you haven’t signed up yet, do it now!

Over the last few years, I’ve had some harsh words for bankers, banks, and the culture of the industry. In truth, I could have said worse, and it would have been justified.

That’s why the story of this bank—the Hancock Bank of Mississippi—deserves to be told, watched, and learned from. This is a case where banks play the role they are ideally meant to play, that is, they invest in the stabilization and growth of the community they’re part of, and wind up profiting in the long run from those investments.

It’s the way they did this that’s particularly remarkable—by literally laundering debris-covered dollar bills and handing them out to people in the days immediately following the Hurricane Katrina. How and why they did this is best left to the film clip; suffice it to say that Hancock gave out around $50 million in cash, with handwritten IOUs for contracts, and lost (only) about $200,000 of that when all was said and done. But in the 3 months following the storm, Hancock grew by $1.4 billion. It’s not hard to imagine that the kind of genuine investment they made in their community—both customers and not—earned so much loyalty.

Banks and their leadership have a long way to go to get out of the hole they’ve dug for themselves in the minds of most people. While disasters provide a great opportunity to show caring, I don’t think that banks need to wait for another hurricane to do something –there are many ways to show care and commitment to the community, and it’s in everyone’s interest that they start soon.

Sign up for A Beginner’s Guide to Irrational Behavior. It’s not only FREE and open to everyone, but will surely keep you amused for the next six weeks.

Every year, March Madness gives us an underdog story and millions flock to a momentary allegiance with a college they could not locate on a map. In the past it has been George Mason, Virginia Commonwealth University and Butler, and this year we eagerly await a new momentary hero.

So why do we love underdogs?

Well, no matter whether you are Republican or Democratic, work for Microsoft or Apple, or are a janitor or CEO, you most likely see yourself as somewhat of an underdog.

In America, especially compared to other countries, the underdog narrative is an honorable and respectable narrative. From the American patriots in 1776 to the George Mason Patriots in 2006, the Cinderella story, as it is specifically called in the NCAA tournament, has always been an attractive one.

So with underdogs you have 1) a narrative people like and 2) a narrative people see themselves in. Is it any wonder people want to cheer for underdogs? It’s like cheering for yourself.

These serve to energize us with the hope that people like ourselves can do anything. People like to believe that those above us aren’t that great after all, and that people like us are just as good, if not better than the people in power.

In fact, the narrative is so strong that Neeru Paharia, of the Harvard Business School, and colleagues named a psychological effect after it, simply “the underdog effect.” They found that companies gain goodwill from consumers when companies present themselves as a group that has overcame disadvantages through sheer determination. This effect was stronger for people who personally related with the narrative and stronger in cultures (e.g., America) where the narrative was more prevalent.

This narrative dominates American culture not only in sports but in all other popular media. From Luke Skywalker to Cinderella, Americans crave stories about underdogs. Even the more privileged characters in storylines, such as the elite James Bond or billionaire Tony Stark, end up in situations where they must overcome disadvantages through sheer determination.

Even politicians are forced to conform to the narrative, regardless of reality. This is a challenge that proved difficult for Mitt Romney and may have greatly have hurt his campaign.

The underdog narrative doesn’t only sell fiction, politics and sports, it also sells nonfiction books in my field of social science. The nearly unparalleled success of Malcolm Gladwell’s “Outliers” owes a lot of that success to the intuitive appeal of his “10,000 hours doctrine.” Gladwell concludes that if someone spends 10,000 hours at something they can become an expert, implying to readers (who don’t carefully read Gladwell’s other more nuanced chapters) that they can make it just by trying hard.

Hip Hop artist Macklemore of the “Thrift Shop” fame even opens his chart-topping first album with a song called “Ten Thousand Hours.” He directly references Gladwell’s name in the song, chants “Ten thousand hours, felt like thousands hands, they carry me,” and then raps “Take that system!”

Oddly enough, many political pundits on both sides of the spectrum have argued (mostly for political reasons) that such a dream is fading in America. But psychological research shows that when beliefs we value are threatened, we try to find ways to defend such beliefs and keep the belief alive. Believing that an underdog will win in Atlanta this year might be a good way to keep alive that wonderful American underdog dream.

This article was originally published in the Providence Journal and can be read here.

~Troy Campbell~

Sign up for A Beginner’s Guide to Irrational Behavior. It’s not only FREE and open to everyone, but will surely keep you amused for the next six weeks.

Sign up for A Beginner’s Guide to Irrational Behavior. It’s not only FREE and open to everyone, but will surely keep you amused for the next six weeks.