4. When Getting a Tax Refund
A tax refund may feel like free money, but it isn’t. The federal government is reimbursing you for money you overpaid throughout the year. Because your money could have been growing in a savings or investment account, you actually lost out on potential earnings.
How to Combat Temptation: Galef notes a cognitive bias called “loss aversion.” “That means that keeping $1,500 feels more important than gaining $1,500,” she explains. “So if you want to avoid spending all of your new bonus, try mentally reframing it as part of your savings—if you think of the money as something you already own, you’ll be more motivated to hang on to it.” Translation: This cash didn’t just fall out of the sky—it was already yours to begin with. Now do you want to part with it?