The Psychology Behind Money: Why We Spend, Save, And Invest The Way We Do

We all know the saying, “Money doesn’t buy happiness.” But why is that? Surely if we had more money, we could buy the things we want and need, and be happier as a result, right?


It turns out that there is a lot of psychology behind our spending, saving, and investing habits. And it explains why, even when we have more money, we don’t always end up happier.

Here’s a look at some of the key psychological factors that influence the way we handle money.

The sunk cost fallacy

One of the most important psychological factors that influences the way we spend money is what’s known as the sunk cost fallacy.

Basically, the sunk cost fallacy is the tendency to continue investing in something as long as we have already invested a lot of time or money, even if it’s clear that it’s not a good investment.

For example, let’s say you buy a new car for $30,000. After a few years, the car starts having a lot of problems and it’s clear that it’s not going to last much longer. You start looking at new cars and see that you could get a much better car for the same price.

But even though it would make financial sense to trade in your old car for a new one, you might not do it because you feel like you’ve “sunk” $30,000 into the car and you don’t want to lose that money.

Of course, the $30,000 is already gone and you can’t get it back, no matter what you do. But the sunk cost fallacy makes us think that we need to keep investing in something, even when it’s not a good investment, because we don’t want to “waste” the money we’ve already spent.

The endowment effect

Another important psychological factor that influences the way we spend money is the endowment effect.

The endowment effect is the tendency to value something more highly just because we own it.

For example, let’s say you’re considering buying a new coffee maker. You see one that you like for $100. But then you find another one that’s exactly the same, but it’s on sale for $50.

Which one are you more likely to buy?

If you’re like most people, you’ll probably buy the more expensive one. Even though it’s the same product, we tend to value it more highly just because it costs more.

The endowment effect also explains why people are often reluctant to sell things they own, even when they’re not using them.

For example, let’s say you have an old bike that you never ride anymore. Someone offers to buy it from you for $50. Even though you don’t need or want the bike, you might be reluctant to sell it because you feel like it’s worth more than $50 to you.

The anchoring effect

The anchoring effect is another important psychological factor that influences the way we spend money.

The anchoring effect is the tendency to base our decisions on a reference point, even if that reference point is not relevant.

For example, let’s say you’re buying a new car. The salesperson tells you that the car is $30,000. You start to negotiate, and eventually you agree on a price of $27,000.

You might think that you did a good job of negotiating, but you probably didn’t. The reason is that the salesperson used an anchor price of $30,000, which influenced your decision-making.

Even though $27,000 is a lower price, it’s still higher than you would have paid if the salesperson hadn’t used $30,000 as an anchor.

The bottom line

These are just a few of the key psychological factors that influence the way we spend, save, and invest our money. Understanding these factors can help you make better financial decisions and avoid making common mistakes.

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How Can You Make Sound Economic And Financial Decisions?

There are a lot of things to consider when making economic and financial decisions. You have to think about your current situation, your goals, your risk tolerance, and a host of other factors. But if you want to make sound decisions that will help you reach your financial goals, there are a few things you should keep in mind.

First, you need to have a clear understanding of your goals. What are you trying to achieve? Do you want to retire early? Save for a down payment on a house? Build up your emergency fund? Once you know your goals, you can start to develop a plan to reach them.

Second, you need to be realistic about your situation. Take a look at your income and expenses to get an idea of where you stand. Are you living within your means? Do you have any debt? If so, how much can you afford to pay each month? Answering these questions will help you develop a budget, which is an important tool for making sound financial decisions.

Third, you need to understand your risk tolerance. How much risk are you willing to take? This is important to know because it will affect your investment choices. If you’re not comfortable with risk, you may want to stick to less volatile investments, such as bonds or mutual funds. But if you’re willing to take on more risk, you may be able to earn higher returns by investing in stocks or other growth-oriented investments.

Fourth, you need to stay informed. Keep up with what’s going on in the economy and the financial markets. This will help you make better decisions about where to invest your money.

Making sound economic and financial decisions requires a bit of effort, but it’s worth it. By taking the time to understand your goals, assess your situation, and develop a plan, you can make decisions that will help you reach your financial goals.

There are a lot of factors to consider when trying to make good economic and financial decisions. You need to think about your current financial situation, your future goals, and the risks involved in any potential investment. You also need to be aware of the different economic indicators that can help you make informed decisions.

One of the most important things you can do is to develop a solid understanding of personal finance. This will give you the knowledge you need to make sound economic and financial decisions. You can learn about personal finance by taking courses, reading books, or talking to a financial advisor.

Another important factor to consider is your risk tolerance. Some people are willing to take more risks than others when it comes to their finances. This is something you need to think about when making any investment decision. You need to determine how much risk you are willing to take and then find investments that fit your risk tolerance.

When making economic and financial decisions, you also need to be aware of the different economic indicators. These indicators can help you understand the current economic conditions and make better decisions. Some of the most important indicators include gross domestic product (GDP), inflation, and unemployment.

Making sound economic and financial decisions is not always easy. However, if you take the time to educate yourself and understand the different factors involved, you can make better decisions.

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Revenue Management For Hotels: What To Look For When Hiring A Revenue Manager

As a hotelier, you know that generating revenue is essential to the success of your property. But what you may not know is that revenue management is a complex and ever-changing field, requiring specialized skills and knowledge.

Revenue management is a complex and ever-changing field, requiring specialized skills and knowledge.

When you’re ready to hire a revenue manager, there are a few things you should keep in mind. Here are four things to look for when hiring a revenue manager:

Understanding of hotel distribution

A good revenue manager should have a deep understanding of hotel distribution, including how different channels (e.g. OTAs, GDS, metasearch, etc.) work and how they impact hotel bookings. They should also be well-versed in the latest distribution technologies, such as rate shopping tools and yield management systems.

Ability to use data to make decisions

Data is critical to effective revenue management. A good revenue manager will know how to collect, analyze and interpret data to make informed decisions about pricing, inventory and other factors that impact revenue. They should also be comfortable using data visualization tools to communicate their findings.

Strong communication and collaboration skills

Revenue management is not a siloed function. A good revenue manager will be able to effectively communicate and collaborate with other departments within the hotel, such as sales, marketing and operations. They should also be able to build strong relationships with external partners, such as OTAs and GDSs.

Passion for the industry

Last but not least, a good revenue manager should have a passion for the hotel industry. They should be constantly learning about new trends and developments in the field, and they should be able to think outside the box to solve problems.

If you’re looking to hire a revenue manager, keep these four things in mind. And if you’re not sure where to start, we can help.

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The Benefits Of Mentoring Relationship –  Steps To Makes Successful

Mentoring can provide many benefits to both the mentor and the mentee. As a mentor, you can share your knowledge and experience with someone who is new to the field, and help them to develop their skills. As a mentee, you can learn from someone who has more experience than you, and gain new insights into your field.

Mentoring can also help to build relationships between people who may not otherwise have the opportunity to interact. By mentoring someone, you can help them to feel more connected to their field, and to the professionals who work in it. This can lead to a more supportive and collaborative environment, and can help to foster new ideas and approaches.

Mentoring can be a great way to develop a professional relationship with someone who can offer you advice, support and guidance. Here are some of the benefits of mentoring:

Mentors can help you to develop your career

A mentor can help you to identify your goals and develop a plan to achieve them. They can also provide advice on how to progress in your career, and introduce you to new opportunities.

Mentors can help you to develop your skills

Your mentor can help you to identify your development needs and identify ways to improve your skills. They can also provide guidance on how to make the most of your strengths.

Mentors can help you to develop your confidence

A mentor can provide support and encouragement, and help you to build your confidence. They can also help you to identify and overcome any self-doubt or negative thinking.

Mentors can help you to develop your network

Your mentor can introduce you to new people, and help you to develop your professional network. They can also provide advice on how to make the most of your existing contacts.

Mentors can help you to develop your knowledge

Your mentor can share their knowledge and experience with you, and help you to develop your understanding of your industry or profession. They can also provide advice on resources that can help you to develop your knowledge.

What makes a successful mentoring relationship?

Is it the strength of the mentor-mentee bond? Is it the quality of the advice given? Is it the ability of the mentee to take that advice and run with it?

All of those factors are important, but I would argue that the most important element of a successful mentoring relationship is trust. Trust is the foundation upon which all else is built. Without trust, the mentor-mentee relationship is nothing more than an exchange of information; with trust, it becomes a partnership.

Why is trust so important? Because it allows the mentor to give honest, constructive feedback without fear of offending the mentee. It allows the mentee to be open about his or her goals and aspirations, without worry that the mentor will judge or ridicule them. Trust creates an environment in which both parties feel comfortable taking risks and trying new things.

So how do you build trust in a mentoring relationship? It starts with communication. The mentor must be clear about her expectations and the mentee must be honest about his needs. Both parties must be willing to listen to each other and to give and receive feedback openly.

It also takes time. Trust is not something that can be built overnight; it takes patience and effort from both parties. But the rewards are well worth the investment. A mentoring relationship built on trust can help you reach your goals, achieve your dreams, and become the best that you can be.

There are many factors that contribute to a successful mentoring relationship. The most important factor is the connection between the mentor and mentee. The mentor should be someone who the mentee can look up to and respect. The mentor should also be someone who is willing to listen to the mentee and offer advice and guidance.

Another important factor is communication. Both the mentor and mentee need to be able to communicate openly and honestly with each other. The mentor should be able to provide feedback to the mentee, and the mentee should be able to ask questions and express concerns.

Finally, the mentor and mentee should be committed to the relationship. The mentor should be willing to put in the time and effort to help the mentee, and the mentee should be willing to listen to the mentor and follow their advice.

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Is Cash Trash?

Many people are loathe to increase their cash reserves when the rate of return on cash accounts is miniscule. Yet cash may be the exact asset to bolster when markets are frothy and the economy is sputtering. Here are some recent articles that underscore the importance of having a stash of some cash.

Having at least 6 months of living expenses is very important to protect you and your family from an unexpected event like a job loss, disability, medical emergency or even divorce. Although money market and checking accounts are yielding close to nothing, you can research on line savings accounts. Current yields are roughly 0.9% (9-14). You can compare rates, restrictions, bank ratings and other factors at bankrate.com.

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Conveycing quotes in UK can be easily found out but the condition is that you should know where to look and what is the right choice. If you are thinking to buy yourself some kind of property or most important if you are planning to a get a new house for yourself then you should make sure that the property conveyancing is performed in right way. The most important thing that you should keep in mind is that the conveyancingQuotes should be absolutely genuine.

The fees that will be incurred in conveyancingdepend on various types of factors and most importantly it depends upon the amount of work to be performed. If it is your first consultation with your property buying solicitor, then it is absolutely necessary that you should ask for complete breakdown of the fees. It is advised to take at least three quotes from various companies. The expenses that you will have to pay are divided into two parts: the conveycing fees and legal costs.

The legal cost is associated with the conveyances and it basically depends upon the amount of time that these conveyances would take in order to go through all your legal do[censored] ents and attending the whole conveyancing process. However the charges vary from conveners to conveners, some charge according to the hours spent and some ask for fixed charges.

So it is very important that you compare the conveyencing fees spent in this process before making any payments. There are many companies that help you to compare conveyancing quotes with just a push of the button. And the Conveyancing Quote UK offers this opportunity as well. The solicitors that you will find on these companies will be absolutely genuine and they would have positive feedbacks front the actual customers. In fact the solicitors here are supposed to sign legal agreements to ensure that the quotes that they charge are all inclusive without any kind of hidden charges. In short this means that the price that you quote will be the price that you will have to pay. An efficient and genuine service is the one, that follows the below mentioned features

• The Solicitors should be of extremely high quality

• There should be no hidden charges

• They should not ask for any move or any kind of
legal fee

• The solicitors should have genuine customer feedback
Above all the charges, there is an indemnity fees as well.

The conveyancer sometimes states that in case of any kind of unforeseen problems, these problems will be dealt only by paying an extra charge. However most of the conveyners ask for charges of land registry in advance. The conveyancing that one has to deal in case of residential property is not as complex as the commercial conveyancing and it is for most of the times calculated on a fixed amount. There are some other factors too on which the conveyancingfees depend, for example the fees depends on whether the property is freehold or leasehold. Leasehold properties generally cost more.

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With a crying baby or a two-year-old throwing a tantrum you may feel ready to retire on some days! You may also have a hard time conceptualizing the relaxing vision of your “Retirement.” Alas, the day will come when our little ones have grown up, and we will all be enjoying a new kind of independence—-one that will hopefully last a long time! The question is, “Will you be ready?”

While “ready” can come with many emotional factors such as the empty nest and exiting the social network of the workplace, as a financial planner, I will focus on the financial aspects of “ready.”

First, let me define retirement. You may immediately think of the outdated images of older people sitting in Adirondack chairs reading books and wistfully gazing at the sea. We’ve all seen this picture in any number of advertisements targeted to retirees. Ahhh….how peaceful.

In reality, though, as we consider our generation, we have had our children later, we are living longer, and we will likely want to lead very active lives as we continue to age. When I talk about retirement, I really just mean that time when you are going to rely upon — and draw upon —- your accrued savings whether that is from a 401K, your IRAs, or just money from a brokerage or savings account that you have invested.

To know if you are “ready,” you have work to do before you get to the money part. Do you know what you want from this time that society calls retirement? Have you painted this picture in your mind? I challenge you to ponder what you might want for your future. If you have read my column in the past, you know that I am a strong proponent of creating a vision —- that is, really setting aside time in a serene place to feel and envision what you want to create. I recommend that you and your spouse do this separately — and then compare your answers about what your retirement will look like. It makes for very lively date night conversation!!

Once you know from a lifestyle perspective what you want to do, feel, and “have,” the next part of being “ready” is to attach costs to this vision. The purpose of doing this exercise is ultimately to answer the question, “How much money will I need for retirement?”

This question alone keeps many financial planners in business since the art of calculating this need is not easy. And, the resulting numbers are astronomical (think Millions). The list of factors and considerations that impact the amount is long. A few questions you will need to be able to answer before any planner can help you are:

What age to you anticipate you want to retire? Do you have a goal of retiring at age 50 or do expect to keep working through until your mid-sixties or beyond? Again, this is the age where you would start to rely on your assets accumulated.

How much income do you want? This is hard to get your head around, so start with your income today. Are you comfortable? I will guess that you will want at least as much as you make now, if not more. While you may reduce your expenses in retirement (home costs may be eliminated, you may relocate to a less expensive area, you no longer have to save for your children), you will have much higher health insurance costs, and you will probably want to travel or do other exciting activities that require cash.

Will you have additional income? What is your confidence level in the existence of a social security system? Do you envision yourself working part-time or starting a business? Do you have cash flow from other investments such as real estate? Are you fortunate enough to have a pension? Are you confident it will still be available when you retire?

As you can see, getting “ready” to retire is a process you can start right now. While your idea of retirement will probably change many times as you have more birthdays, the practice of creating the vision, assigning value and ensuring you are contributing enough money toward your goal is one that will serve you well in any area of your financial plan. Make sure you get ready now.

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Best Ways to Improve Your Credit Score Quickly

Bankruptcy. Debt collections. Foreclosures. These things can do serious damage to a person’s credit score. The damage can be long-lasting. But it’s not always permanent.

There are certain things you can do to repair the damage caused by a negative event, such as bankruptcy. In this article, you’ll learn the best ways to improve a credit score quickly.

7 Things That Can Ruin Your Credit

Before we go any further, we need to discuss the reasons your score might have dropped in the first place. Here’s a quick rundown of the most harmful items:

Filing for personal bankruptcy (Chapter 7 or 13)
Having your home foreclosed upon
Missing payments, or making late payments, on a credit card or loan
Having an account “charged off” by a creditor or lender
Defaulting on a loan
Having a debt sent to a collection agency
Maxing out your credit card limits

Below, you’ll learn the best ways to improve a credit score after any of these negative events. The damage done by these things will vary, depending on several factors. For example, a single late payment on a credit account could lower your FICO score anywhere from 50 to 100 points. So it’s hard to assign exact numbers to these events. Just know that the steps outlined below have the potential to restore your credit quickly.

The Best Ways to Improve Your Score

No matter how bad your credit is right now, there’s always a light at the end of the tunnel. I can’t say exactly how long it will take you to rebuild your credit rating — nobody can. There are too many variables for such a prediction. But I can tell you the even that most significant damage can be ameliorated over time. I have personally seen someone go from a 550 FICO score to a 720 in just over a year’s time. Below, we will discuss some of the steps she took to improve her credit rating so quickly.

Let’s take a look at the five primary factors that influence your FICO score. We also need to talk about the relative strength they have, in terms of helping or harming your credit.

This chart shows five categories of information that can affect your FICO credit score. But I want to direct your attention to two of the categories in particular. You’ll notice that the dark-blue and red slices of the pie, when combined, account for 65% of your score. You’ll also notice that the next-largest slice (yellow) is determined by the length of your credit history, which is something you can’t really control.

What does all of this mean? It means that if you want to see quick results, you should focus your energy on the blue and red sections. Those are the best ways to improve your credit score quickly. So let’s talk more about those two areas:

1. Bill Payments — Steady as She Goes!

Your payment history can make or break your score, all on its own. Earlier I mentioned that a single late payment of 90 days could lower your FICO rating by more than 100 points. That’s a significant amount of damage for a single negative event. That’s why it’s critical that you make all of your payments on time.

In this context, I am primarily referring to the types of accounts that show up on your credit reports. These include retail charge cards, car loans, credit cards and the like. If you haven’t done so already, you should get copies of your reports. AnnualCreditReport.com is the official website for this purpose.

2. Amounts Owed — Pay Down Those Balances!

I know, it’s often easier said than done. But if you can pay down your credit card balances (or any other form of revolving debt that you have), you’ll be able to improve your score more quickly. It’s okay to have balances on one or more cards. In fact, this can help you improve your score over time. But the key is to maintain low balances, relative to the card’s limit.

This is referred to as your utilization ratio. A higher ratio will result in a lower FICO score. Create a payment plan that allows you to reduce your balances over time. It’s one of the best ways to improve your credit score quickly.

These are certainly not the only things that affect your rating. But they are two of the most important factors. You can clearly see this when you look at the pie chart presented above. Remember, this strategy is intended to help you rebuild your score as fast as possible.

If you want to see some significant changes in months, as opposed to years, you need to start with the “Big 2″ items described above. There is no getting around this. Stay on top of your bills — don’t let a single bill become delinquent. And do whatever you can to reduce the balances on your existing credit accounts.

I’d like to move on to talk about another strategy you can use to boost your credit rating. It actually piggybacks on the “payment history” concept mentioned earlier.
How Long Does it Take?

No one can tell you how long it will take to improve your credit score. If somebody claims to know this information, they are probably trying to sell you something. Even the people who developed the FICO scoring model admit that it’s impossible to make such predictions. Earlier, I said I knew someone who boosted her score from 550 to 720 in just over a year. This is true. But her situation may be much different from yours.

Here’s one thing we know: It generally takes longer to recover from a history of negative events, as opposed to an isolated event. If I have a bankruptcy filing on my credit record, but it’s the only negative entry on my reports, I’ll probably recover much faster than somebody with a dozen negative entries.

The speed with which you implement these strategies will also play a role. For instance, consider the reduction of credit card balances we talked about earlier. You’ll probably be able to rebuild your credit rating faster if you reduce your balances quickly, as opposed to “chipping away” at them over a period of months. In the latter scenario, you are improving your credit-utilization ratio much more slowly. So the results will also be more gradual in nature.

When you consider how long things can stay on your credit reports, you might be discouraged:

“Why should I even try to rebuild my credit history, if a single late payment can stay on my report for up to seven years? What’s the point? Can I make any improvements in the meantime?”

Yes, a negative entry can stay on your report for a long time. But you can actually boost your FICO score even while those negative items remain. They tend to have less impact over time. So it’s certainly worth the effort. Start with the strategies listed above — it’s the best way to improve your credit quickly.

In all honesty, it might take several years to fully recover from a catastrophic event such as bankruptcy. But you can still benefit from the incremental improvements you’ll make along the way. For instance, if you can boost your score by 50 points or so in the short term, you’ll qualify for better interest rates on loans, credit cards, etc. And the sooner you start your campaign to rebuild your credit, the sooner you’ll reach the finish line — regardless of how far away it might seem.

Important Notes: Every financial situation is different. The tips offered in this article applies to most credit situations. But there are exceptions to every rule. This information has been provided for educational purposes and should not be viewed as financial advice. I strongly encourage you to continue your research beyond this article.

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