Understanding Mental Accounting: Avoiding Common Financial Pitfalls

In this episode of the Money Strong Personal and Behavioral Finance podcast, host Dr. Bryan Foltice introduces 'Psychological Saturday' with a deep dive into mental accounting. Learn how categorizing money in different areas can lead to both optimal and suboptimal financial decisions.

This episode covers how we categorize our investments, income, and financial events, and explores concepts from prospect theory, loss aversion, and the sunk cost fallacy.

Bryan also highlights the tendency to overweight low probabilities and offers tips on making better financial decisions. Tune in for insights that could transform your approach to personal finance.

Visit www.MoneyStrong.net and connect on social media for more financial advice and resources.

00:00 Introduction to Mental Accounting
00:59 Behavioral Finance Concepts
02:12 Categorizing Investments and Income
06:03 Categorizing Spending
11:06 Categorizing Financial Events
16:48 Overweighting Low Probabilities
18:39 Conclusion and Further Learning

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