Motley Fool Money Why You Make Bad Decisions About Money
Sep 1, 2020
Ever wondered why we often make poor choices with our money? Behavioral economist Dan Ariely dives into the psychological traps that plague us all. He explains how our environment influences spending habits and reveals the dangers of immediate gratification. The discussion also touches on the allure of modern payment methods, which can lead to overspending. Get ready to rethink your financial decisions and understand the hidden factors that impact your wallet!
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The Problem of Opportunity Cost
- Money represents opportunity cost: spending on one item means forgoing another.
- We find it difficult to actively consider these trade-offs when making purchases.
Now vs. Later
- Many financial decisions involve balancing present desires with future needs.
- We are often biased towards immediate gratification, leading to poor choices.
The Pain of Paying
- Modern payment methods encourage impulsive spending by reducing the "pain of paying".
- Cash transactions, conversely, create friction that promotes more thoughtful spending.