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Psychology of Money

When I tell people that I graduated with 2 majors, one in psychology and one in economics, I typically get a funny look and a remark such as "could you have chosen two more opposites sides of the spectrum?!" My answer to them, however, is NO! These two subjects have a whole lot more in common than we allow ourselves to believe. Every decison we make involving money has an element of emotion surrounding it. Think about money decisons that you make; what are the reasons you choose to spend, save, invest, donate, etc.? Every action we take with money has a corresponding reason behind it--whether we are consciously aware of it or not. (I will admit that I've done my fair share of 'buying without thinking'.) What we need to begin to  realize is that even though I might have thought I wasn't thinking in those money moments, my brain was actually running wild. 



Psychology is the study of the human psyche. Economics is the study of the economy and money. If these two topics had a would be called Behavioral Economics! This is the study of how our behaviors affect our money decisions. Studies show that our emotions and behaviors are the backbone to our decisions involving money. Contrary to what traditional economics would suggest, we are not perfectly rational beings- meaning that we would base our decisions solely on the most rational choices to get the most rational outcomes. Instead, we rely heavily on our emotions to base our decisons. If we were perfectly rational, no one would ever make a mistake and we would probably all be billionaires by now--too bad that isn't our reality. The cool thing though, is that if we can grasp the concept that our behaviors shape our decisions, we can find a way to correct those behaviors...and maybe we CAN be perfect billionaires!


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