Twenty euros is always twenty euros, or maybe not?

person holding U.S. dollar banknote

Have you ever received an unexpected income ? Maybe you found some money lying around on the sidewalk. Or maybe parents, grandparents or relatives gave them to you.

Or they are the result of a debt repaid only today:

In my opinion it has happened to you, at least once in your life: if you go back to that moment in your mind, you will perhaps realize that that money did not seem like all the others.

Think twice about spending those earned with the sweat of your brow, put aside with difficulty and meticulously saved and certainly do not use them for bullshit.

Perhaps you remember how much you were more likely to take away that whim with the “money that came from heaven”, perhaps at a time when you weren’t really sailing in gold and when it would have been more rational to think about saving it for unexpected events.

But isn’t a hundred euros always a hundred euros?

To find an answer, let’s rely again on Daniel Kahneman , the psychologist dedicated to behavioral finance. Together with the psychologist Adam Tversky he conducted an experiment which I summarize as follows:

  • there is talk of theater tickets to buy;
  • in the experiment, a first group of subjects is told to hypothesize that they have already bought tickets for the theater and to realize only once they arrive that they have lost them. Would they buy them back? About 40% of people answer yes.
  • A second group is instead asked to hypothesize to arrive at the theater without having taken the tickets yet and to realize once they arrive that they have lost the money intended to buy them. Would they make more money for tickets? About 80% of people said yes.


The mental compartments we didn’t know we had

How could this reasoning be explained?

According to the principle of mental accounting studied by behavioral finance, 100 euros are not always 100 euros for our mind: the destination and use we make of it depends on their origin, since we subconsciously divide our money into compartments with different labels.

In the example of the theater, in the first case, our mind attributes the money spent on lost tickets to a hypothetical drawer called ” entertainment-leisure “: for our mind we would have run out of money destined for that purpose.

In the second case, having not yet bought the tickets, that lost money ends up in the ” unforeseen ” category (after all, we also find it in the Monopoly!): For this reason, a budget would still be free to be allocated to entertainment and therefore to the theater , thus allowing us to buy tickets.

Awareness comes to our aid

This irrationality is the same as that if we win the lottery , we spend our money on something we normally think we can’t afford.

Our mind thinks by dividing money into virtual drawers , which in some cases, you think, could also be good: so we set budgets and diversify!

We do not necessarily do it in a rational and meditated and therefore correct way, I answer you.

Think about how short-sighted it is to use the “money that comes from the sky” to take a whim, when perhaps we have much more urgent and priority issues to settle: we should be the ones to decide what to do with our savings, don’t you think?

It is true that it is an unconscious mechanism and of which we are not aware most of the time. However, we can pay attention to it: do not let yourself be controlled by your mind and by what it has already decided, you label your mental drawers, you will see how much more satisfaction you will get!

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