Gifted Or Earned, It’s Your Money

We often tend to splurge money we receive as a gift, and spend judiciously when it is earned. But money is just a tool and is not supposed to have labels attached to it I met a family travelling abroad for a month, and the cost of their trip is coming to Rs 9 lakh. They told me that they had sold some property and invested the money, and this was the interest on the amount they had invested (after paying tax). While it is completely their business, and I am certainly glad to see people use their money to enjoy their life, I instantly spotted the behavioural bias we refer to as mental accounting. This is when we assign subjective value to our money. We perceive it differently depending on the source and ease at which it came into our possession.Before I define it in detail, let me share a few examples. Economist Richard Thaler narrates this story to describe mental accounting. A couple...