Treat All of Your Dollars, Not Just the Ones Your Earn, with the Same Respect

My ex-husband couldn’t part with any object he’d repaired.

The labor he invested made it priceless in his eyes. This is “The IKEA Effect”. We place a high value (up to 63% more!) on objects we’ve laid hands on with effort (like building IKEA furniture).

We do the same with money.

We treat our salary, derived from daily toil, differently than we do a windfall. This holds true even if that windfall is our annual bonus. We just don’t value windfall or lump sum dollars as highly as “effortful” money, and we’re more likely to squander them.

But a dollar is a greenback is a buck.

Whether you worked hard for it or scratched off the right lottery ticket, a dollar received should be treated with the same respect. We treat windfalls like they’re too much responsibility or too much trouble to figure out what to do with them, so we spend the problem.

Easy come, easy go.

Don’t fall into that trap. Have a plan for unexpected income. Earmark it for something specific. Then when you do make bank, there’s no cognitive load and no giving in to random temptation, because you already know what to do.

Enjoy your windfall, though.

Choose a % or $ amount to do something fun or frivolous for yourself. When you know there’s a reward ahead of time, you have something to look forward to and you won’t resent putting your windfall to work. Enjoy your money when you have some to spare.

Life is short.

Photo credit: Waldemar Brandt on Unsplash