6 Ways Your Brain Misleads You While Handling Money

4. Earn less interest and pay more interest

Fixed deposits, PPF or savings account cash, many consider them to be 'safe money' and go for loans rather spend the money they already have. They fail to realize the fact that they will be spending more money to pay off loan interests than what they will be earning as their savings and FD interest returns. For example, if a person has Rs.8 lakhs in his savings account and still prefers to go for Rs.6 lakhs loan instead of spending it from the money he already has. Ultimately he will end up paying more loan interest than he will be earning from his savings.

5. Safe Money/ Risky Money, Once Gone Is Gone

Human brain always tends to divide things into categories of 'safe' and 'risky' make our decisions based on them. For example, a person has Rs.10 lakhs in his savings account, plus Rs.2 lakhs in hand. He termed the savings account money as the 'safe' money when the rest Rs.2 lakhs as 'risky money'. If the person incurs loss after investing Rs.1 lakh out of the 'risky' money, he will not be affected that much as he beforehand considered the option incurring loss. Here aging out brain controls our decision to see what we consider important.

6. Treating Unexpected Money in a Different Way

Money is money may it come from what ever means. Often people indulge more on expending the money which doesn't come from the regular source of income. Here the value of the unexpected money decreases and thus people do not consider giving a thought of saving it even. For example, a person receiving tax returns worth Rs.5, 000 considers it as an extra income does not hesitate to spend at all.

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