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Not Enough Meaning

We simplify probabilities and numbers to make them easier to think about

Mental accounting

Description

The tendency for people to divide their money into separate accounts based on subjective criteria, like the source of the money or its intended use.

Mental accounting in business decision

An employee might be more willing to spend a year-end bonus (seen as "windfall" money) on luxury items than they would be with money from their regular salary, even though all money is fungible.

Mental accounting in personal life decision

You treat a tax refund as "extra" money to spend freely instead of part of your total income.