Try This Money Mindset Experiment

Has this ever happened to you?

You’re on vacation. A really fun, sunny, tropical vacation with your family. You’re at the pool and decide to get one of those frosty beverages you’ve seen around…you know, the one with the umbrella in it. The pool bartender hands you your drink with a smile. As you sign the bill and send the drink charge to your room, you think to yourself, “$15?!? Woof. I know it has 3 cherries on top, but that seems kinda pricey for a drink! Oh well, I’m on vacation…let’s do this!” And then you’re back to floating in the lazy river…

Then….

You return from vacation. You are back to work and to your daily routines. A few colleagues have asked you to join them at the local pub after work. As you look over the bar menu and read the descriptions for the latest craft cocktails, you think to yourself, “no way am I paying $15 for some rum concoction right now! It’s Tuesday. Maybe I’ll get a beer instead…or seltzer…why am I here again?” 

Do these circumstances sound familiar? I know I’ve been there! 

I find thinking about these scenarios to be fascinating because a dollar is a dollar is a dollar, right??

Technically, yes. There’s even a term to describe the interchangeability and mutual substitution of cash: fungibility.  (I know, I know….fungibility sounds like it has to do with mushrooms growing in your closet. Finance lingo is sometimes just plain terrible.)

So, if money is fungible, then why does spending $15 drink poolside FEEL so different than when you pull out your wallet at the local watering hole? One experience was fun and exciting! The other was weighted with guilt and doubt. 

Part of the reason it feels different is because you’re using “your vacation money” – and you think about your vacation money differently than you think about your everyday money. 

Perhaps you’ve heard of the concept of mental accounting? Known within the field of behavioral economics and named by Nobel Prize winner Richard Thaler, mental accounting refers to the different values individuals place on their money based on subjective criteria. 

Many of us adopt a mental accounting system and separate our funds into different categories within our brain.  While we’re at it, we also assign specific values and meanings to each classification.  This process is how we end up with “vacation money” and why our experience with vacation money feels so different.

What are the mental accounting systems you use when thinking about your money? Do you visualize your money in distinct buckets or categories? And do you treat them differently? 

By increasing your awareness of your cognitive and behavioral tendencies, you can lean in to the ones that work for you and start to shift ones that may lead to irrational decision-making.  

A simple way to start is by paying more attention to how you actually think about money.  Once you have more awareness, you can then work on ways to govern your behavior. 

I’m a strong advocate for mindful money habits. Too often we find ourselves making decisions without much consideration.

Interested in trying a little experiment to observe your own tendencies? 

The next time you pick up a restaurant menu notice how they list their prices. Many menus today no longer include dollar signs…because they remind people they’re spending money. Observe how your brain is processing what you’re reading and assessing what to order. 

Try it out! And let me know if that choice to order a chicken salad on the menu with $$ signs feels any different than from the one without...