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Mind your money

Nov 26 2013, 12:55 IST
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Money is certainly capable of playing tricks with the human brain (AP) Money is certainly capable of playing tricks with the human brain (AP)
SummaryMost monetary decisions made by individuals are based on several psychological factors and do not take rational and logical thinking into consideration. Some common traps that must be avoided

When it comes to money management, a majority of people don’t live up to the level required for becoming rational and logical thinkers. Some decisions are taken with the flow and, often, leave people wondering about what they were thinking at that moment.

Money is certainly capable of playing tricks with the human brain. Most monetary decisions, made by individuals, are based on several psychological factors and do not take rational and logical thinking into consideration.

With the ever-increasing percentage of dependency on the psychological factors for making financial decisions, it becomes important to understand the money traps that are actually based on human emotions. Luckily, in today’s world, there are entirely different fields like behavioural economics that are fully dedicated to how and why humans behave in different ways when it comes to money.

And this brings the good news that the researchers have been able to pinpoint some ways in which humans tend to outsmart their brains when taking money related decisions. People simply need to understand these typical, psychological-financial traps and alter the manner in which they take purchasing or investing decisions.

Price comparison

This is perhaps one of the most common traps that the buyers fall prey to. They tend to compare the price tags of two or more comparable things and end up purchasing the one with the lower price tag.

In some cases, buyers are likely to make the price of the item they actually want to purchase as the base price for comparison. In others, they just stick to the first quote of the product they come across in both the online as well as the physical market as the comparison price.

One thing that should be kept in mind in such a scenario is that no matter how cheap an item is priced, it doesn’t necessarily make it of a better quality. It is the quality that requires comparison instead of prices to make a non-regrettable decision at the end.

What is free might not be good for your pocket

The word ‘free’ has something magical about it. It gives birth to an irresistible feeling in humans that drives them to make totally irrational decisions. This phrase is just another typical, old-school sales trick that tends to lure the buyers into spending money on things they do not really need and would have avoided buying otherwise. This is the reason why the word ‘free’ should

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