Happily Misbehaving

IN SUMMER 2011, a rural Illinois man named Wayne Sabaj was in his backyard picking broccoli, when something caught his eye. Half buried in the dirt, he found a sealed nylon bag. Inside was $150,000 in cash. For Sabaj, who was unemployed and had, in his words, “spent my last $10 on cigarettes,” this was a godsend.

Though it remains a mystery who had buried this particular stash of money, these sorts of finds are not uncommon. With some regularity, homeowners doing renovations unearth money buried in backyards, basements and bedroom walls. Often, the money dates back to the Depression era, when there was greater concern about the solvency of banks. But that’s not always the case: I was born long after the Great Depression—and I’ve seen cash hidden in some unusual places around homes.

While these stories are humorous, I would argue that people who squirrel away cash like this are not altogether irrational. In fact, I would go a step further and say that—as long as they don’t forget about it—these folks are actually making the right decision with their money.

Why? The reality is that many, if not most, of our financial decisions are driven by emotional goals and not by any kind of logical or numerical cost-benefit analysis. While perhaps less colorful than hiding money in the broccoli garden, we all make financial decisions that are motivated by what makes us feel good. Whether it is a $5 latte, $1,000 phone or $100,000 sports car, every one of us allocates money in ways that bring us happiness, even if our spending might seem irrational to the next person.

In my view, a cash hoard is no different. Whether it is in the garden or in the bank, if this is what provides you with happiness and security, then I would say it is, by definition, the right way to allocate your resources.

And it’s not just cash. People often struggle with financial decisions when the “right” answer from a numerical standpoint doesn’t feel like the right answer from an emotional standpoint. Consider three examples:

• Suppose you live in New York City, where the cost of living is 50% or 100% higher than it might be somewhere else. Yes, you could move and keep more money in your pocket. But you’d also be giving up a lot in terms of quality of life, so you stay.
• Let’s say you have a very low-rate, 30-year mortgage. The math would say that you shouldn’t pay down this mortgage any faster than you need to, even if you have the financial wherewithal to do so. But emotionally, you like the feeling of being debt-free, so you pay it off.
• Suppose your grandmother left you a handful of shares in a collection of companies that you don’t completely understand. Sure, you could sell them and diversify the proceeds. But each time you open your monthly statement, the shares remind you of your grandmother, so you decide to keep them.

I wouldn’t criticize any of these choices. Just because they seem like purely financial decisions doesn’t mean that they need to be decided on a purely quantitative basis. I don’t see them as being any different from the choices I mentioned earlier—to drive a fancy car, for example. All of these choices are, in fact, rational decisions in the sense that they bring the individual happiness or security. For that reason, you shouldn’t worry if you make such decisions.

I will, however, add one caveat: Decisions like this are all okay as long as they are in the context of an overall financial plan that is designed to get you where you want to go. I definitely would be concerned and would recommend a change if your excessive cash holdings, your sentimental attachment to a stock or your decision to live in a high-cost city were jeopardizing your retirement. But if a certain financial choice will bring you happiness—and it won’t greatly hurt you—then I wouldn’t be concerned. Your financial assets should bring you happiness and peace of mind. If that means burying them in the backyard, that’s okay. Just don’t forget where you put them.

Adam M. Grossman’s previous articles include Laying Claim, Proceed with Caution and Old Story. Adam is the founder of Mayport Wealth Management, a fixed-fee financial planning firm in Boston. He’s an advocate of evidence-based investing and is on a mission to lower the cost of investment advice for consumers. Follow Adam on Twitter @AdamMGrossman.

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