A third form of mental accounting has to do with something called ratio effects. Most people were willing to travel ten minutes to a different store to save five dollars on a 25 dollar clock radio, but they would not drive the same distance to save the same 5 dollars on a 500 dollar television set. You don't really know what five dollars should be worth in terms of your time and so you have to look to the context to try to figure that out.
Have you had a recent surprise expense? You're not alone. More than half of American households report facing an unplanned financial shock in the last year. This week, in the second part of our new "Money 2.0" series, psychologist Abigail Sussman points out our blindspots around money, and how we can be smarter about spending and saving.
If you like this show, be sure to listen to last week's episode on how our unconscious attitudes towards money influence how we manage our finances.
Also, check out our new podcast, My Unsung Hero! And if you'd like to support our work, you can do so at support.hiddenbrain.org.