The Psychology of Money: Why You’re Probably Screwing Yourself Without Even Knowing It

Smart Money Moves

May 7

Most of us aren’t bad at math—we’re just emotionally deranged when it comes to money. You could have a spreadsheet tighter than your grandma’s Tupperware lid, and still blow your budget the minute Target drops a new seasonal display. That’s not about numbers. That’s behavioral finance, baby.

Welcome to the land where your brain tricks you into buying crap you don’t need, avoiding investing because it “feels risky,” and thinking $5 lattes are why you’re broke (they’re not—but that’s another rant).

Let’s break down the psychological voodoo that keeps sabotaging your wallet—and what to do about it before you end up crying in your Amazon order history.

In this article:

1. Loss Aversion: You’re More Afraid to Lose $20 Than You Are Excited to Gain $100

2. Present Bias: Future You Can Eat Ramen, I Want Starbucks Now

3. Confirmation Bias: You Only Read Stuff That Tells You You’re Right

4. Herd Mentality: Everyone’s Doing It, So You Do It Too

5. Overconfidence: You Think You’re the Exception

6. Anchoring: That $200 Sweater Was “On Sale” for $79, So You Saved Money, Right?

Stop Letting Your Brain Be the Boss of Your Bank Account

1. Loss Aversion: You’re More Afraid to Lose $20 Than You Are Excited to Gain $100

This is your lizard brain screaming: Danger! Risk! Run! when really, it should be whispering, Hey, maybe a diversified index fund isn’t a death trap.

Humans hate losing. Like, we’d rather not lose than actually win big. That’s why people stay in bad jobs, hoard savings in 0.01% interest accounts, or refuse to invest because “the market might crash.”

What to do about it:

Educate yourself. No, not with TikTok finance bros yelling about crypto. I mean actual, boring, reliable sources. Know the difference between risk and volatility. Learn history. Spoiler: the market always recovers. Your self-sabotage? Maybe not.

2. Present Bias: Future You Can Eat Ramen, I Want Starbucks Now

You prioritize the now, always. Why save for retirement when Future You seems like a totally different person who can deal with that mess?

And that’s how you end up financing a lifestyle your income can’t support, telling yourself you’ll “get it together next month.” Meanwhile, compound interest is over here doing cartwheels and you’re ignoring it like an ex with bad breath.

Fix it with:

Automation. Take your flaky, short-sighted self out of the equation. Auto-transfer to savings. Auto-invest. Make it so you don’t even see the money before it goes where it needs to go. Like child-proofing, but for your bank account.

3. Confirmation Bias: You Only Read Stuff That Tells You You’re Right

You want to believe renting is always “throwing money away,” or that you’re just “not a numbers person.” So, you look for voices that echo that, and poof, now you’re in an echo chamber of broke logic.

Challenge your brain:

Read opposing views. Watch someone smart destroy your opinion, and sit with the discomfort. The point isn’t to feel good—it’s to get better. Growth doesn’t happen in comfort zones. That applies to your budget too.

4. Herd Mentality: Everyone’s Doing It, So You Do It Too

From GameStop stock to housing bubbles to Black Friday brawls over air fryers—humans love a good financial stampede. If your friends are buying houses they can’t afford or blowing cash on MLM “businesses,” it’s easy to think you should too.

Reality check:

Most people are faking it. If someone’s flaunting wealth, odds are they’re drowning in debt or riding the edge of a financial cliff. Run your own numbers, not their lifestyle fantasy.

5. Overconfidence: You Think You’re the Exception

This one’s juicy. You think you’ll totally pay off that balance before interest hits. You’ll definitely start budgeting next week. You’re smart, right? You got this.

Except… overconfidence is how smart people make stupid financial decisions with full swagger. You’re not immune.

Combat it by:

Humility. Check yourself. Set rules you can’t override on a whim—spending limits, 24-hour wait lists for non-essential purchases, a second opinion on big financial moves. Overconfidence doesn’t mean you’re right. It just means you haven’t crashed yet.

6. Anchoring: That $200 Sweater Was “On Sale” for $79, So You Saved Money, Right?

Wrong. You just fell for psychological bait. Anchoring happens when your brain fixates on an initial number (the fake original price) and uses it as a reference point—even if it’s meaningless.

Slap it down with:

Absolute thinking. Ask: Do I need this? Can I afford this? Is this price the real value, or marketing BS? If you wouldn’t buy it at full price, don’t buy it “on sale” either.

Stop Letting Your Brain Be the Boss of Your Bank Account

Look, if you’re a parent, the stakes are even higher. Money isn’t just about you anymore—it’s about protecting your peace and your people. Kids are expensive, yes—but you know what makes them more expensive?

Emotional spending.
Guilt-buying after a long workweek.
Overcompensating with toys when you’re short on time.
Retail therapy because you’re overstimulated and under-supported.

So, skip the articles about how to “manifest abundance” and start doing the real work of learning your triggers and building systems to safeguard:

Delay purchases by 24 hours.
Auto-transfer to a high-yield savings every paycheck.
Set up automatic investing with a robo-advisor or brokerage app.
Create separate “sinking funds” for irregular but predictable stuff like school fees, birthdays, holidays, and car maintenance.
Talk to your partner before any purchase over $100 dollars. Not for permission—for accountability.

Treat your financial system like you treat your diaper bag: prepped and ready. Money is more about behavior than math. Sure, know your numbers; exactly how much is coming in and where it’s going.

But you are going to keep spinning your wheels if you let your emotions, exhaustion, and old money baggage drive the bus. You can change habits. You can rewire your thinking. But only if you’re brutally honest about how your brain is currently screwing you.

Resources:

Chen, J. (2023, December 3). Behavioral finance. Investopedia. https://www.investopedia.com/terms/b/behavioralfinance.asp

Felicia Roberts

Felicia Roberts founded Mama Needs a Village, a parenting platform focused on practical, judgment-free support for overwhelmed moms.

She holds a B.A. in Psychology and a M.S. in Healthcare Management, and her career spans psychiatric crisis units, hospitals, and school settings where she worked with both children and adults facing mental health and developmental challenges.

Her writing combines professional insight with real-world parenting experience, especially around issues like maternal burnout, parenting without support, and managing the mental load.

https://mamaneedsavillage.com