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The Psychology  of Money: Ways  to Improve Your Money Mindset

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Crucial Money Psychology Concepts

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Understanding each of the money psychology concepts below will help you approach your finances more rationally.

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OPTIMISM BIAS

Optimism bias is  the natural tendency to overestimate the likeliness of positive outcomes and underestimate negative ones.

PESSIMISM BIAS

Pessimism bias, (also known as negativity bias), draws our attention away from positive circumstances and causes us to weigh negative stimuli more heavily.

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HEDONIC ADAPTATION

Human beings’ unparalleled ability to adapt to new settings and situations is one of our greatest strengths, but it can also get us into trouble with money.

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The sunk cost fallacy describes the human tendency to keep doing something we have started, even if it isn’t working out.

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Humans are social creatures, and we love social proof. So if you are considering a new microwave, it can be helpful and affirming to know that others used it too.

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“Keeping up with the Joneses” is a cliche so old that you can almost imagine it was a problem for the first people who ever had neighbors.

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