Expectations and Your Money

I started wrapping my gifts in old newspaper years ago. I know. It sounds so cheap it’s almost bah, humbug! Please don’t roll your eyes and stop reading now. Wait!

I started doing it because I couldn’t stand the silliness of it all. Most Christmases I wrapped my gifts hours before they were opened, often late at night on Christmas Eve. I’d have a bag full of those huge wrapping paper rolls — I’d obsessed over finding the best ones, as I like a beautifully-wrapped gift, and I have a rather snotty aesthetic — and I’d have spools of fancy ribbon (one year, before I had kids, I spent $50 at a specialty ribbon supplier — my parents still re-use that ribbon on gifts to me).

And I’d sit there, eyes drooping, frantically wrapping my gifts so beautifully so my little boys could wake up at the crack of dawn and rip them open. Usually I couldn’t even recycle it, because it was foil paper or something equally expensive. One year, we were really broke and it snowed right before Christmas. I didn’t want to go out and spend my dwindling pile of Christmas cash on whatever wrapping paper could be found within walking distance. Instead, I started looking through the pile of newspapers and found a few “home and garden” and “travel” sections with lovely full-color photos. The presents still looked great, and a tradition was born.

Set expectations low-ish
Little did I know that I wasn’t just being environmentally conscious and frugal: I was smartly setting expectations low for my gifts. A professor at Yale University’s Center for Customer Insights conducted a study in which he discovered that pretty packaging raises the receiver’s expectations — and decreases the receiver’s pleasure with the contents of the package. In an interview on American Public Media’s Marketplace program, Nathan Novemsky summarized:

“…one of the interesting findings was that if you wrap a gift, you raised people’s expectations and the liking of the same gift goes down. If you wrap a gift that, you know, is really just meant to be a little something, it might behoove you not to wrap it — or if you are going to wrap it, to not wrap it so nicely.”

The principal at work here, that I’m calling expectation bias, is not just appropriate for Christmas gifts, but for just about anything that involves an initial impression of an experience. Professor Novemsky used the example of a nice, complimentary glass of champagne that a fancy restaurant brings you before the meal. “If you’re setting expectations high and you’re not delivering on them,” he says, “you’re going to be worse off than if you hadn’t tried to set expectations at all.”

Lower your expectations, increase your happiness.

The prettiest package
I found this at work at a recent food swap. Inspired by a frugal friend, I’ve been attending these for awhile now, and I love analyzing the items that “sell” and those that are the last to go. There’s always a trend item (this month it was drinking vinegar and caramels; in the summer it was jewel-colored jellies and raw milk ice cream) that will find its dance card overflowing with eager swappers. And then there’s the prettiest package.

Assisted by my sister-in-law, I found pretty little bottles for my pine syrup (pine needles chopped and simmered in honey and water), tying them with twine and including handwritten card stock tags along with my photo business cards. Honestly, this was the first time I’ve ever made pine syrup, and it was a total experiment. I had no idea if it would actually, as I hoped, be a great mixer for cocktails. (Think of pine syrup and gin and soda! Pine syrup and cranberry-infused vodka!) It was too early in the day to test.

But everyone was so eager to exchange whatever I wanted for my simple little syrup because it looked fantastic. I went home with lots of caramels and a delicious pear blossom drinking vinegar. I found it really hard to unload the super-crumbly rosemary tangerine shortbread, though I was positive it was delicious, because it just looked lumpy and messy. I fear that the packaging on my syrup set their expectations too high; my swap partners may just have been disappointed. I’ll never know.

Make this work for you and your money
The key takeaway is that you need to make sure the experience — the gift, the restaurant meal, the shortbread — is roughly equivalent to the presentation. Or, if you’re just not sure, have the experience equal the presentation; don’t wrap the gift, serve your guests a meal without a fancy first course or menu cards or beautiful table settings.

You also can use this as a receiver and a consumer in to save money and relationships. The following are some examples to illustrate what I mean:

  • Think about your expectations as you receive a gift, year-end bonus, job offer, or negotiation opening. Have you decided the gift is surely a four-carat diamond ring because of its package and the glow in your boyfriend’s eye? Dial down that expectation before opening it so you won’t look crushed when you open the lovely opal pendant. (Maybe you’ll be surprised!) Are you sure your year-end bonus will be six figures because your boss gave you such glowing praise in your review? Think about all the other factors that could affect your bonus — company performance, the economy, office politics, your boss’s tendency to gush — before you go into the review meeting and find a nice-but-very-small check. If you’re aware of your expectations, it will be easier to manage your reaction when they’re met, or not met at all. (And please, don’t spend that bonus until the check is in your hand!)
  • Going into holidays and other classic gift-receiving occasions with modest expectations can save you from that desire to treat yourself afterward. I see the advertising starting Christmas Day at about noon (or earlier if you’ve opened the Christmas paper with breakfast): “Get what was missing under the tree!” I’ve felt the desire myself to go out and spend when my parents/boyfriend/husband failed to get me the moon. In the past few years, with my husband overseas for Christmas, I’ve known what I was getting as soon as I got his big box of gifts to wrap for me and the boys (international customs is terrible for surprises). Instead of ruining the moment, it allowed me to pretend delight when I opened the gifts along with the boys — and in knowing what I was opening, I actually felt delight. And I had no desire to shop on “Boxing Day,” nor the day afterward.
  • Associate with people who expect the same things you do. If the expectation amongst your group of friends is that everyone goes out to a four-star restaurant on New Year’s Eve, followed by tickets to a concert and visit to a bar where you’ll toast one another, buying rounds of pricey Scotch, well, you’ll always be disappointed if you can’t afford it. If your friends expect that you all will send your kids to private school, you’ll feel that you’re a failure if you can’t (or don’t want to) spend your money that way.

I’ve come to hang out with friends who expect to go shopping at thrift stores together and meet for coffee at my dining room table (way cheaper than the coffee shop!). I’m thinking about inviting some families over for a fondue party for New Year’s. We’ll toast with apple cider. Cheers!

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About the Author: Get Rich Slowly

Get Rich Slowly — recently named most inspiring money blog by Money magazine — is devoted to sensible personal finance.

You will not find any get-rich-quick schemes here. Nor will you find multi-level marketing fads or hot stock tips. I am not pitching any product or book. Instead, you’ll find daily information about personal finance and related topics.

I share stories about debt elimination, saving money, and practical investing. I also post occasional reviews of books, magazines, and software. And, of course, I scour the web for the latest personal finance tools and articles.

Please note that I am not a financial professional. I’m just an average guy who found himself deep in debt. When it finally became too overwhelming, I began reading personal finance books, hoping to find answers. I wanted swift solutions to my problems. My research revealed that few people get rich quickly, but almost anyone can get rich slowly by patiently following some simple rules.