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Choiceology: Season 8 Episode 4


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Despite their regularity, we don’t tend to budget well for the high frequency of unexpected events that predictably arise when it comes to our time, our diet, or our money.

Perhaps this scenario seems familiar. Let’s say you generally do a good job of sticking to your monthly budget, but a rare opportunity arises—maybe a favorite musical artist is in town, or you’ve been invited to a friend’s 25th anniversary event—and you blow past your regular spending limit. It’s all right—you’ll just have to tighten your belt a bit next month. But then your phone stops working, and you have to buy a new model. And now your car needs an expensive repair. Again, these are not ordinary expenses, so you chalk it up to life and go back to your usual budget. And then the invitation to a destination wedding arrives …

In this episode of Choiceology with Katy Milkman, we explore a common error around the way individuals and organizations categorize seemingly exceptional expenses.

Food trucks have come a long way since their humble beginnings as purveyors of meat pies and coffee for day laborers. Today, there’s a stunning variety of culinary options: from simple french fries to French haute cuisine, from ice cream to iced lattes, from Vietnamese pho to Mongolian pot stickers. And while these businesses may seem relatively straightforward to run, food trucks and small restaurants run into their fair share of unexpected costs.

You hear from two food truck entrepreneurs. Greg Golden runs the delightful Mustache Pretzels, which he built from the ground up in Phoenix, Arizona. Greg was confident in his idea and his product but quickly ran into a series of financially painful setbacks on his way to a thriving business.

Howie Jeon started his food truck business, Yumpling, with two partners and found success providing Taiwanese-inspired dumplings and other fusion fare to the lunch crowd in Manhattan. But when it came time to expand into a permanent brick-and-mortar restaurant, Howie and his partners faced a litany of challenges, not least of which was a global pandemic.

Abigail Sussman joins Katy to discuss the ways in which we tend to dismiss or miscategorize expenses that fall outside of our regular budgets. These categorization errors can have a profound impact on businesses large and small—and also on personal budgets. You’ll hear about strategies to help deal with this tendency and to better prepare for expenses that seem exceptional but are often inevitable.

Abigail Sussman is an associate professor of marketing at the University of Chicago Booth School of Business. You can read her research paper with Adam Alter titled “The Exception Is the Rule: Underestimating and Overspending on Exceptional Expenses” for more information on the phenomenon.

Choiceology is an original podcast from Charles Schwab

If you enjoy the show, please leave a rating or review on Apple Podcasts.

Click to show the transcript

Katy Milkman: In the children’s book series and TV show A Series of Unfortunate Events, the story’s heroes, the Baudelaire orphans, are confronted with a never-ending litany of dastardly deeds perpetrated by the evil Count Olaf. In every chapter and every episode, the siblings face yet another attempt by the Count to abscond with their inheritance. The adults who were supposed to be protecting the orphans, particularly the hapless Mr. Poe, are regularly fooled by Olaf. And when Olaf’s plots are eventually foiled, mostly by the children themselves, the adults figure that the problem is permanently solved and the children will live happily and safely ever after. But of course, the scheming Olaf returns in some ridiculous new guise to taunt the children once again.

In this episode of Choiceology, we’ll look at how certain expenses, events, and foods are very much like Count Olaf: surprising, seemingly rare, and cumulatively consequential—and how we tend to miscategorize them at our peril.

I’m Dr. Katy Milkman, and this is Choiceology, an original podcast from Charles Schwab. It’s a show about the psychology and economics behind our decisions. We bring you true stories involving high-stakes moments. And then we explore the latest research in behavioral science to help you make better judgments and avoid costly mistakes.

Greg Golden: I grew up in the Philly area and there was a really great little Amish market in my hometown in south Jersey that just had the best pretzels. And I think they’re still available for like 75 cents, which blows my mind.

Katy Milkman: This is Greg Golden. He owns and runs Mustache Pretzels in Phoenix, Arizona.

Greg Golden: I wanted them to taste like those pretzels at the Amish market in my hometown.

Katy Milkman: Today Mustache Pretzels is one of the most popular food trucks in Arizona. They make delightful soft pretzels in the shape of, you guessed it, handlebar mustaches. Their motto? “Great mustaches aren’t born—they’re bread.” B-R-E-A-D.

Greg Golden: Great mustaches aren’t born—they’re bread. So that was actually the moment at which that I realized I was going to do it because I felt like this was a great idea all along. Some people agreed and some people didn’t. But when I came up with that slogan, I felt as though I couldn’t waste it.

Katy Milkman: Back in 2010, when Greg first thought of the idea, he worked in a completely different field.

Greg Golden: I was an accountant. So my background in accounting and finance made the kind of the money side of things pretty straightforward, but I could not have missed the boat more completely than I did in terms of logistics and scheduling and what running a small business would mean on a personal level and at home. As far as assumptions about running a food truck. And this is kind of where I totally messed up. I basically ran off and joined the circus without doing nearly enough homework. And all of a sudden, I’m working nights and weekends.

Katy Milkman: Amidst the chaos of getting the business off the ground, Greg could at least lean on his accounting experience to budget for the expected costs, things like ingredients, parking, fuel, insurance, everyday business expenses, but …

Greg Golden: Some stuff early on came up that was kind of expensive. We spent a few thousand bucks. We had some fuel system issues on the truck, and we had to get our brakes done and stuff like that. Not anybody’s idea of a great time to see that kind of money walk out the business, especially when you’re making your living three or four bucks at a time. But I did have an idea that I needed to have enough cash to get me through a couple of months and also account for a few thousand bucks worth of repairs at any given time.

Katy Milkman: Greg launched Mustache Pretzels in March of 2014, and by the fall, business was booming.

Greg Golden: So by November of ‘14, we were so busy that I did make the decision to totally drop accounting and just focus on the food truck 100%. And literally within days of sending that email to my boss, the food truck’s engine and transmission both died and needed to be completely replaced. And I believe that the total for that repair came to something like $11,000. It was like a trap door fell out from under me or something like that. And it was brutal. It left us with like 57 cents in the bank and the money that I had in the cash box. And it really took the wind out of my sails because I finally felt that I was on pretty solid footing. We had just had our single biggest sales day ever. It was kind of out of that startup crazy phase where things were starting to normalize a little bit. So even though I thought I had a pretty good handle on what expenses could come up, having $11,000 go out the door was just totally unforeseen and was just brutal timing.

Katy Milkman: Fortunately, Greg’s mechanic allowed him to split the payments so he could afford the sudden repair work. Unfortunately, more unexpected expenses cropped up.

Greg Golden: In the intervening six years or seven years since we had that initial major repair come up, and we’ve actually had a few other engines die on us. We’ve been close to selling the business on more than one occasion. Not because we don’t believe in the concept or didn’t believe that there were sufficient opportunities for it to succeed, but because it’s just really, really hard. It was taking a lot out of us, out of me, at times.

Katy Milkman: And it wasn’t just mechanical issues Greg was dealing with.

Greg Golden: There’s always an event fee that winds up being a little more than you expected. You might think you had the biggest event of the year lined up, but then unexpectedly a monsoon rolls through Arizona, and it gets canceled. It doesn’t get rescheduled. And my wife’s job did move us back to the East Coast, pretty unexpectedly. And so, there were stretches where if I needed to be in town for a big event or a big string of events, or to do some business development stuff, I had to get on a plane. So it was expensive to fly across country, just to be with my business.

Katy Milkman: And while Greg had a good handle on the everyday cost of doing business, external events would have a big impact on his bottom line.

Greg Golden: There was a year where apparently there was a bad vanilla harvest in Madagascar and the cost of vanilla extract went up like 600%. It happened again this year with nitrile gloves, food prep gloves. Box of gloves that was $3.50 last year is now something like $44 or $45, just because of the coronavirus.

Katy Milkman: Greg obviously couldn’t control vanilla prices in Madagascar or the cost of food-prep gloves during a pandemic. But he was able to mitigate some of the recurring truck repair costs by establishing some fixed locations, selling pretzels at food stands rather than mobile trucks.

Greg Golden: We do have temporary seasonal locations inside a few spring training stadiums and at the Phoenix Rising soccer stadium and the Phoenix Convention Center. And that’s been a big part of how we’ve dealt with a lot of the unknowns in the food truck world is kind of diversifying away from just food truck stuff.

Katy Milkman: But even that strategy was not without problems.

Greg Golden: We were the first food truck in Phoenix to get a spot in the airport. And we were all on the top of the world with that. And then actually that airport location closed. It didn’t work out. That terminal went from having three food service offerings to having something like 19 or 22. I forget. And there’s wasn’t enough business to go around. So that was another reminder to stay humble. Whatever you think is a sure thing, whatever you think is you can expect, it’s not guaranteed.

Katy Milkman: Despite the ups and downs, Greg’s business is running more smoothly today, and he’s got more than 57 cents in the bank.

Greg Golden: It’s gotten to the point where I feel as though I can do what I need to do for the business without neglecting what I need to do at home. And I could still be present as a father and as a husband.

Katy Milkman: And there’s still something special about handing a customer, a freshly baked pretzel.

Greg Golden: There’s something magic to it when somebody is at a food truck event or just happens to be where we happen to be set up that day, sees the truck, sees Mustache Pretzels, sees a picture of the pretzel and just goes, “Oh my God, this is a real thing!” And then comes up and gets a pretzel. And it’s delicious. Aside from the gimmick and the joke of it, I do take the pretzel part of it really seriously.

Katy Milkman: Today, Greg’s food truck is one of the best known in Phoenix.

Speaker 3: Can I get an original and two cinnamon sugar pretzels?

Speaker 4: I got a chicken rice bowl, edamame forbidden rice, a beef rice bowl with forbidden rice …

Howie Jeon: My name is Howie. Howie Jeon.

Katy Milkman: Howie is another food-truck entrepreneur. Though he’s at a different point in his business journey. Howie and his two partners, Christopher Yu and Jeffrey Fann, parlayed their successful food truck operation, Yumpling, into a permanent restaurant in Long Island City. Yumpling sells Taiwanese American food: think dumplings, rice bowls, and Taiwanese fried chicken.

Howie Jeon: Taiwanese food, in general, is known for its very bold flavors. You will have a Chinese food influence, Japanese influence, even Portuguese. So, at Yumpling, we try to kind of blend those Taiwanese flavors and put some American twist on them.

Katy Milkman: In 2019, Howie and his two partners decided to expand their successful food-truck business. They considered opening more trucks, but they were already paying to rent commercial kitchen space to prepare enough food for the one truck. So why not open a restaurant?

Howie Jeon: Renting commercial kitchen space in New York City is definitely not cheap, especially for the volume we were doing. So we discovered that for just a little bit more rent, we could actually open a restaurant and use those facilities to help operate our food truck. And we would also have a brick-and-mortar restaurant as a second income stream.

Katy Milkman: They budgeted for the restaurant carefully and anticipated they’d likely have to deal with unexpected costs as they popped up.

Howie Jeon: We budgeted for about, I would say, a month to a month and a half of training before we actually opened. We also budgeted for about six months of working capital. We also built in an extra 20% buffer for our entire budget for any surprise expenses.

Katy Milkman: The first surprise was that it took an entire year to find a location in Long Island City.

Howie Jeon: LIC is one of the fastest-growing neighborhoods in all of New York. And because of this, landlords only wanted to work with established restaurateurs. And around four months into the search, we were in the final stages of negotiating on a restaurant space. And that’s when, out of nowhere, Amazon announced that they were moving into the neighborhood, and just like that, the asking rent skyrocketed. So overnight, everything was out of our price range.

Katy Milkman: And they continued to pay for commercial kitchen space during this time too. In the end, Amazon did not end up moving into Long Island City.

Howie Jeon: But the rents didn’t really come back down to earth. We found our current space by going door-to-door, asking every business owner if they would consider selling us their space. We did that for several months, and that’s how we were able to get into our current space.

Katy Milkman: With a location finally secured, things were looking up—momentarily.

Howie Jeon: We were ecstatic when the search was finally over, but it was actually just the beginning of a nightmare of the whole build-out process. Towards the end of the build-outs, that’s when we discovered the previous owner had illegally installed a two-inch gas pipe inside the restaurant, even though the actual gas pipe coming in from the street level was only one inch. So, in other words, the space only had the cooking capacity of a small home kitchen.

Katy Milkman: Not ideal for a restaurant trying to get as many dumplings out the door as possible. It can take months to get commercial gas-line issues addressed in New York.

Howie Jeon: We spent, I would say, an extra $30,000 or so to get this new gas pipe put in as quickly as possible. And then we put the finishing touches on the restaurants. We hired and trained our new staff for the opening day. We bought inventory and we were set to open on March 21st, 2020.

Governor Cuomo: So we’re going to put out an executive order today, New York state on pause.

Howie Jeon: That was a Saturday, and then literally the Tuesday before we were set to have our grand opening, New York City announced that all restaurants would be closing.

Governor Cuomo: Only essential businesses will be functioning. People can work at home.

Katy Milkman: COVID had stopped Yumpling’s grand opening in its tracks. It was crushing for the team after months of dealing with delays and unexpected costs.

Howie Jeon: By that point, we were just kind of mentally and emotionally exhausted already. So I think I remember when I heard the news, I kind of laughed just in disbelief. It was just a never-ending series of obstacle after obstacle, trying to get this restaurant open. And we basically couldn’t catch a break. We came to the conclusion, worst case would be, this would go on until the end of 2020, even past 2020. And if that were to happen, both our food truck and our restaurant would go bankrupt way before that point.

Katy Milkman: The Manhattan lunch rush was practically non-existent due to COVID. So Yumpling ended up suspending their food truck operation altogether.

Howie Jeon: I would say literally every day during the initial shutdown, we thought this might be it. We’re done for. I knew going into this, that a large number of restaurants fail in their first year of business, depending on the statistics. I think it’s like, some say, 30%, 50%. Granted, we were in a unique situation with COVID. I mean, this is a once-in-a-century, once-in-a-lifetime kind of disaster, but at the same time, if we had budgeted more conservatively, we would have had a lot more cash reserves to kind of ride out the shutdown more smoothly.

Katy Milkman: In the end, the trio decided it made more sense for them to be unemployed and use some personal savings to stay current on Yumpling rent.

Howie Jeon: We figured if we could somehow ride out this storm and restaurants were able to open again, we could pull through this.

Katy Milkman: Thankfully, Yumpling was able to ride out COVID, and the restaurant is open for business.

Howie Jeon: We’ve managed to survive through a nine-month delay in opening, a possible bankruptcy, pandemic. So me personally, I feel very lucky, very blessed every day, whenever I walk through the door.

Katy Milkman: Howie and his partners are moving into this next phase of the business with what they feel is more realistic budgeting.

Howie Jeon: We are thinking much more conservatively in terms of how much money to have on hand. Always over-budget. Six months of working capital in the beginning seems like enough, but now it seems like at the very minimum, that’s what you should have. Possibly nine months, up to 12 months, might be a lot safer. So going forward, I think we will definitely budget a lot more for future projects.

Katy Milkman: Howie Jeon is one of three co-founders of Yumpling in Long Island City. And Greg Golden is the founder of Mustache Pretzels in Phoenix. You can find links to Yumpling and Mustache Pretzels in the show notes and at

Both Greg Golden and Howie Jeon carefully thought out their budgets and did their best to predict what costs they would have to deal with. But time and time again, they encountered unexpected costs that put them in challenging positions. Unanticipated things happen in business and life. But what’s really interesting is that despite their regularity, we don’t tend to budget well for the high frequency of unexpected and unique events that predictably arise when it comes to our time, our diet, or our money.

Abby Sussman is here to talk about how people can often underestimate the cost or frequency of exceptional events. And this can produce predictable and avoidable mistakes. Abby is an associate professor of marketing at the University of Chicago’s Booth School of Business.

Hi, Abby, thank you so much for being here today.

Abigail Sussman: Katy, thank you so much for having me. I’m really excited to be here and be part of this podcast.

Katy Milkman: I want to start by asking you about a paper that I love about how the exception is the rule. Can you explain what that means?

Abigail Sussman: So basically what I’m looking at in this paper is the idea that we often have expenses or types of things, foods that we eat, for example, and these are things that we construe as being one time only, but actually they happen again and again and again. And we tend to think of these things, and we budget for them and we eat them as though it’s a one-off thing. And so they don’t really have to matter that much. But in reality, they tend to add up over time.

Katy Milkman: Could you describe your favorite study of this phenomenon?

Abigail Sussman: So I have a recent paper that is coming out in JCR with Anna Paley and Adam Alter. And in this, what we look at is diet-tracking data. And so what we’re able to do in this study is we actually can code how frequently people eat foods in the context of their total diet. And so what we find in this study is that if you take foods that people eat only infrequently, that people tend first off to eat more of these foods within a given meal, which is something that might not be that surprising because maybe these meals are sort of more special in other ways. But what we also find is that then if you look at what they eat later in the day, they tend to eat more later in the day after eating these special exceptional foods at lunch. And so the intuition here is that normally if I eat a lot of food at lunchtime, let’s say, I’ll eat a smaller dinner.

But what happens in the case of exceptional foods is that people tend not to feel like they’ve overeaten. They feel like, well, I overate, but it was a cake. It was something sort of a little bit unusual. And so I don’t need to compensate at dinner. I don’t need to make up for it by eating less later in the day.

Katy Milkman: Why do we do that? Why do we underestimate and overspend on exceptional items?

Abigail Sussman: Yeah. So a lot of this has to do with the way that we categorize them, right? And so normally if you think about your budget, you can think about the fact that when I go to the grocery store, I usually spend about $100, and I can think about the fact that this is going to be a recurring expense. And so I should really care about this expense and I should anticipate that it’s going to be meaningful for my budget. And so if my overall grocery expenses were to change from $100 to $150, that would really put a big dent in my budget, right?

But if, instead, what happens is actually that the extra food that I buy at the grocery store is, let’s say, Halloween candy. Then in that case, I’m going to say, actually, it’s not really part of my grocery budget. I’m not going to put it into that category. I’m going to put it into a different category. And the category that I’m going to put it into is an ad-hoc category that basically says, this is a one-time thing. And so I don’t need to adjust my grocery budget for next week. It’s just a one-time Halloween purchase, right? So the idea is that I don’t think it really matters.

You can think about … there’s existing research on pennies a day. So this is the idea that if you have really small expenses, so if I’m just buying a cup of coffee, maybe I don’t need to care about that from my diet, because sure I have a cup of coffee every day, but it’s a really small dollar value. And so I can just write it off. I can round it down. You can think about exceptional purchases actually in very much the same way, except rather than the exceptional purchases being so small, they’re so infrequent in people’s minds, and that’s what drives this sort of behavior.

Katy Milkman: And how would you say this relates to mental accounting, which is another topic we’ve covered on the show?

Abigail Sussman: Yeah. So this is very much about mental accounting. And so you can think about, again, drawing back to this idea of categorization and how people think about money in their budget and setting budgets over time. If you have, let’s say, a food budget or a grocery budget, you might try really hard to stick to that particular budget. But in the case of exceptional budgeting, what happens is that people tend to be more willing to make exceptions.

And so they say, “Look, this isn’t part of one of the budgeted categories. And so I’m going to create a new category for it. It’s just going to be a one-time thing and it’s not going to matter.” So, in some sense, we can think about mental accounting being malleable in different ways that people sort of fudge mental accounting in order to accomplish their goals. Sometimes intentionally, sometimes not. And in this case, it’s actually, it doesn’t have to be motivated. So it’s not that I’m trying to look for a way to spend more on this particular thing. I just genuinely don’t believe it matters. And because I don’t put it into a natural category—the Halloween candy isn’t a grocery expense. Maybe I’m buying Rollerblades, and I don’t consider that part of either a sports budget or a clothing budget. And so it doesn’t fall into one of those categories.

And I just decide that the money’s just going to come from someplace else, and it’s going to be OK. I have some evidence also that you tend not to recall these expenses as well. And so budgeting requires you to be able to subtract these expenses, and to the extent that you’re not able to recall them, you’re probably not going to be tracking them as well either.

Katy Milkman: What should people do differently if they want to make better decisions, now that they know about your research on this tendency we have to underestimate and overspend on exceptional items?

Abigail Sussman: So I think that the main thing to do is to make sure that whatever you’re spending on, you’re acknowledging that it’s part of a category. And so you can think about doing this in two different ways. So one is to say, “Look, the Halloween candy is part of my grocery budget. If I’m spending more on my groceries this month versus another time, then maybe what I’m going to notice is that this month I’m spending more because of Halloween candy, next week I’m spending more because it’s Thanksgiving, the following month I’m spending more because it’s Christmas, the following month, I’m spending more because it’s right, New Year’s or whatever else.”

So just the ability to look at the aggregate expense and be sure that you’re not pulling anything away is going to be really important. So you could either do that by thinking about these all those grocery expenses, or the alternative would be to say, look, I realized that there are going to be a bunch of these one-time things that come up. Sometimes they’ll sort of naturally associate with a category, but sometimes they won’t. And so maybe instead of assigning this to the closest category, a different alternative would be to say, “Let me create one budget category that’s just for these sorts of exceptional things.” And that way you have an allowance, you have the ability to track, and you have some place to put it.

Katy Milkman: How did you originally get interested in studying this topic?

Abigail Sussman: The reason actually that I became interested in this research is because in a prior life, I worked as a financial analyst in equity research, researching the airline industry. And what I learned while I was there was that from an accounting perspective, companies are supposed to be pulling these expenses out of their income statement and reporting them essentially below the line. And the intuition there is that when you’re forecasting expenses for the future, you’re not supposed to be including these one-time things in these future forecasts.

Katy Milkman: By reporting them below the line, you mean that the extraordinary expenses aren’t meant to be considered when forecasting the company’s future earnings and extrapolating based on past performance?

Abigail Sussman: Yeah. Now, in the context of the airline industry, the airline industry is in perpetual turmoil. But what I was observing was that one quarter there would be a restructuring, or one year there would be a restructuring, and we would pull that out and report it below the line. And so we would forecast expenses as though it didn’t include that particular restructuring. The next year, there was a hurricane, and that was unusual weather that caused unusual delays and problems for their income. And so we would just pull that out and assume a run rate of income, excluding something like a hurricane. And then the next year there was some other issue with grounding planes or unions or whatever it was. And so, one of the things that’s interesting is, I think, just how strong this intuition is to exclude these sorts of items, even so much that it’s actually codified in the context of these accounting principles.

Katy Milkman: That is so interesting. Is there anything that you do differently in your own life as a result of having done this research?

Abigail Sussman: I probably am better at tracking and acknowledging these things, or at least each time that I fail to track one of them, realizing that probably there will be something else that I will fail to track in the future, and that these things will add up. So I think it’s possible to change your behavior as a result of knowing this. And I think that I, rather than changing my behavior, I have become aware of my behavior, which I think is often what happens in the context of these sorts of behavioral stories. One other study that I think is worth mentioning is my paper with Adam Alter, where we look at spending on birthday presents. We look at this case of birthday presents where you’d think, well, people are constantly buying birthday presents. These aren’t unplanned, right?

So you might think about exceptions like your radiator breaks. That’s not what we’re looking at here. We’re not looking at surprises. We’re looking at sort of planned unusual expenses. And birthday presents certainly are planned. And here what we do is we basically ask people to think about buying a present for their friend’s birthday. And we asked them to pick a watch and select a watch that costs a certain … “How much would you spend on this watch?” basically, is the question. And then in a separate condition, we tell people, OK, now think about the birthday presents that you’ve bought for people over the prior year and think about how much you’ve spent on these birthday presents in the prior year. And so by doing that, what we’re doing is we’re basically getting people to group these birthday presents together as one category of expenses, to realize that actually they spend a lot of money on birthday presents over the course of the year.

And then we have a third condition which serves as an additional control, which gets them to think about transportation costs over the year, just so that they can also be thinking about, sort of, expenses. And what we find is that by just reminding people to think about all of the times in the prior year when they’ve spent money on birthday presents, this actually leads them to spend less on this focal birthday present that they’re purchasing for a friend. And one of the reasons that I think that this study is so interesting is because it takes a context where you’d think people probably would be able to draw connections across something like a birthday present, and this is something that people have experience with. It’s not something that comes as a surprise, and yet people still, even in this context, display this tendency to sort of treat these as independent events. And so I think it’s interesting that you can overlay a particular technique to sort of mitigate this effect, but it doesn’t naturally happen if you’re not explicit about it.

Katy Milkman: That’s really interesting. I have to admit that it reminds me of a conversation I recently had with my husband about time, which I know isn’t something you studied, but feels like it fits this model where I was apologizing for needing to run to do something and not being able to help with childcare at that moment as a result and saying, “Well, it’s just, it’s because it’s teaching semester, and I’m in the middle of this crazy period with my MBA teaching.” And he was like, “Yeah, but Katy, it’s always something, right? It’s podcast season next, or your book is coming out, or there’s always some emergency. So don’t expect it to be any calmer in the future. I’ve lived through this with you.” And it was one of those moments where I was like, “Oh yes, it always feels like an exception.”

Abigail Sussman: I completely agree. I think that in the context of mental accounting, we’re usually talking about money, but there are a lot of natural connections between how people think about their time and the tendency to mentally account for time as well as for food. And so in my own research, I like to think about these sort of three parallel resources. Most of my research focuses on the money side of things, but I’m increasingly thinking about these different connections across money, time, and time and food. And so I completely agree with you and your husband’s intuition about this.

Katy Milkman: Really, it was his, and then he debiased me. It was very helpful. I was in your experiment.

Abigail Sussman: But has that changed your behavior?

Katy Milkman: Probably not, but it’s changed my tendency to expect change. So that’s helpful. It’s good to have reasonable and realistic expectations of life. Abby, thank you so much for taking the time to talk to me about this. I really appreciate it.

Abigail Sussman: Thank you so much for having me. It’s awesome to be here.

Katy Milkman: Abigail Sussman is an associate professor of marketing at the University of Chicago’s Booth School of Business. I have a link to her paper with Adam Alter on underestimating and overspending on exceptional expenses in the show notes and at

If you’ve been an investor for any length of time, you’ve seen the stock market react to unexpected events—whether the COVID pandemic, the subprime mortgage crisis, the dot-com bubble, or myriad smaller shocks. Nevertheless, you might be inclined to dismiss the likelihood of some other unforeseen circumstance to emerge and impact your investments. On the Financial Decoder podcast, host Mark Riepe and his guests explore the ways you can help guard against such blind spots when it comes to your portfolio and financial plan. You can find it at or wherever you listen to podcasts.

While many people are good at following a budget for regularly occurring expenses, you can see how exceptional or special expenses can trip up your budget. Maybe you splurge on a special concert by a favorite artist. And the next week your phone stops working. You only buy a phone every couple of years, so you don’t think much of it and just shrug at your bad luck—another bill that was outside of your budget. Then your partner has a birthday coming up, and you realize, of course, that you need a gift. Looking at all of these expenses as part of a single category of non-recurring special expenses can help you better understand and forecast the future and budget for it effectively. And it can also help you prioritize the things you really want to spend your money on. The same applies to your time or your diet. Abby and her coauthors have proven that we have a tendency to treat things that we can label exceptional—like a busy period due to the start of school or a cake eaten at a friend’s wedding—as if they’re rare and not necessary to incorporate into our planning. But that’s a mistake because that busy period at the start of school is followed by another busy period due to a fall vacation. And then there’s the holidays, and so on. And when it comes to indulgent meals, there’s the wedding—and, sure, that’s special—but so is the office party that follows, the birthday the next week, the anniversary, and so on. When we recognize that although each exceptional event is unique, they are actually high frequency as a category, we can budget our money, our time, and our meals far more effectively.

You’ve been listening to Choiceology, an original podcast from Charles Schwab. If you’ve enjoyed the show, we’d be really grateful if you’d leave us a review on Apple Podcasts. You can also follow us for free in your favorite podcasting app. And if you want more of the kinds of insights we bring you on Choiceology about how to improve your decisions, you can order my new book, How to Change: The Science of Getting From Where You Are to Where You Want to Be, or sign up for my monthly newsletter, Milkman Delivers, at

Next time, you’ll hear about how arguing through problems helped Wilbur and Orville Wright in their quest for powered flight. And I’ll speak with my Wharton colleague Adam Grant about how constructive conflict can lead to positive outcomes. I’m Dr. Katy Milkman. Talk to you soon.

Speaker 8: For important disclosures, see the show notes or visit

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