Mental accounting shapes financial decisions from "summary" of Thinking, Fast and Slow... in 30 Minutes by 30 Minute Expert Summary Staff
Mental accounting refers to the way people tend to categorize and compartmentalize their money in their minds. This can have a significant impact on the decisions they make regarding their finances. For example, individuals may have separate mental accounts for different sources of income, such as salary, bonuses, or gifts. They may also have different mental accounts for different types of expenses, such as bills, entertainment, or savings. These mental accounts can influence decision-making by creating a sense of scarcity or abundance in certain areas. For instance, individuals may be more willing to spend money from a "fun" account...
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