Why You Shouldn’t Buy Winter Clothes in Winter

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In our first Moneyland post we advocated a “Wait and C” strategy for big financial moves, especially spending ones. Our basic idea was that many decisions, to the extent that they’re affected by hidden biases or impulses, would be improved with even a short amount of deliberation and discussion with knowledgeable and otherwise disinterested friends (the “C” stands for consult).

Well, some not-even-on-the-presses-yet research suggests that such a strategy will save you even more money than we suspected. To explain, we must first introduce you to a concept called “projection bias,” which details the way people routinely overestimate the extent that their future desires and needs will match their current ones. That is, we think we’ll love a certain kind of product, lifestyle or activity as much tomorrow as we do today, when in fact our tastes and needs will differ, sometimes significantly. This error in judgment has much to do with our failure to grasp how much we actually change over time, but other factors certainly play their part.

Exhibit A: Tom recently attended a talk at Cornell given by U. of Chicago behavioral economist Devin Pope, who’s in the early stages of  a paper (co-authored with his brother, Brigham Young economist Jaren Pope) on the effects of projection bias in housing and car markets. It’s significant research, because much of the work done so far on the subject has focused on low- or medium-stake purchases, such as groceries and clothing. (Catalog shoppers, for example, are more likely to return cold-weather apparel if it was ordered when the local weather was especially chilly.)

(LIST: 12 Things You Should Stop Buying Now)

But it turns out that even major purchases are influenced to a greater extent than people realize by immediate circumstances and conditions. So houses with swimming pools fetch a premium when bought in the summer, while convertibles sell at a faster pace during that time. Likewise, four-wheel drive cars sell more briskly in the winter in general and during snowstorms in particular.

We know what you’re thinking: Duh! People also drink more hot chocolate in December. Well, yes, it’s natural for current conditions to affect current choices, especially when it comes to decisions with immediate consequences. But houses and cars are not impulse buys; they’re long-term investments. More crucially, if you like to swim you shouldn’t value the ability to do so in your backyard more in June than you do in February. But that’s exactly what happens, according the Popes’ research, to a degree that’s measurable and translates into real money. Similarly, you might predict that you’ll be thrilled with a rag top in springs and summers to come, but you’re less likely to imagine that will be the case if you’re pondering a car purchase in November.

(MORE: 5 Ways to Prepare for a Double Dip)

Our point here is not to chastise anyone for emotional purchases or throw a wrench into your long-term planning. Rather, we just want to offer further incentive for anyone and everyone to discuss major purchases with a trusted but disinterested party before pulling the trigger. It can’t hurt, and it could keep you from spending money you otherwise wouldn’t, or paying more for what you do buy than you otherwise would.