Remember “mental Accounting” When You Save Money on Purchases
Let’s say you made a deal for a new laptop you were planning to buy and saved $ 100. It’s human nature to tell yourself that you now have an extra $ 100 to spend as you see fit. This is called mental accounting, and with it you can spend money that you would not otherwise have spent.
The Motley Fool explains:
The reason lies in what behavioral finance researchers call “mental accounting.” Basically, we tend to keep different accounts in mind, even if all of our money is in one place. So, if you’ve just “saved” $ 100 on a new TV, your brain will probably consider it extra free money – even if you were looking for a great deal precisely because you didn’t have that money to spend. For the same reason we spend our tax returns: money is technically not free, but it seems to be free.
We’re probably all to blame for this at some point: you tell yourself you “saved” by spending less on what was originally a breeze. As Fool says: money isn’t really free, but it seems free. To combat this, they suggest not only avoiding shopping, but also transferring that money immediately into a savings account so that you won’t be tempted to think of it as free money.
Check out the rest of their post at the link below.
Never Shop Hungry and Other Savings Secrets | The motley fool through loyalty