You’ve just been robbed.
Someone took $50 from your wallet, and you feel terrible about it.
$50 is a lot of money, after all. You worked hard for that, darn it.
But wait–what’s that letter there? Is that a check for $150 in your mail? Why, yes, it is.
But do you feel better now?
Though it doesn’t make a whole lot of sense, psychologists say the answer to that is a resounding “no.”
It’s called “loss aversion,” and it’s one of the things that makes our brains so screwy. It seems that according to studies, people feel much worse about losing $50 than they feel good about gaining $150. That’s because our brains are hard-wired to protect ourselves and our possessions at any cost.
And it leads to a lot of really bad decisions.
Like clinging to that extra $5,000 on the asking price of your home, while passing up a really good deal on a new one that you could only afford after you sell.
Like keeping your old car around because you’ve put so much money into it, even though it just keeps needing more repairs.
And those are just two examples. In his book The Paradox of Choice, Barry Schwartz gives lots more. He talks about, among other things, the importance of not letting your emotional aversion to loss cloud your thinking, especially when making financial decisions.
And that’s a get happy tip we could all stand to implement more often.
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