Money is money after all. But we don’t see it that way. Depending on how we get it, we treat it differently. Money is not naked; it is wrapped in an emotional shroud.
We treat money differently which means we have received it. If we get it through working hard, we keep it secure and make expenses carefully. And if we get it through gambling, we take more risks. It leads us to take bigger risks; for this reason, many lottery winners end up worse off after they’ve cashed in their winnings. Many businesses give something free to customers and due to that free coupon, people rush to buy more.
Be careful if you win money or a business gives you something for free. Chances are you will pay it back with interest out of sheer exuberance. This is a mental accounting that only considers different ways of earning money differently and treating it differently. Our emotions under which money has wrapped are solely responsible for treating money differently from different sources.
Investment – Similar happens with bonus issues of shares. People consider it as free shares on existing shares. And they rush to buy more.
Also, when we have earned money without proper knowledge and solely on basis of luck then we keep involved in short-term thinking or luck-by-chance investment opportunities with that money.
This entire series will be reviewed with various examples from books which are “Thinking, Fast and Slow” and “The Art of Thinking Clearly“.