Page 26 - Psychology of Money - Timeless Lessons on Wealth, Greed, and Happiness-Harriman House Limited (2020)

experiences can lead to vastly different views within topics that one side
intuitively thinks should be black and white.
COBACOBA

Every decision people make with money is justified by taking the
information they have at the moment and plugging it into their unique
mental model of how the world works.

Those people can be misinformed. They can have incomplete information.

They can be bad at math. They can be persuaded by rotten marketing. They
can have no idea what they’re doing. They can misjudge the consequences
of their actions. Oh, can they ever.

But every financial decision a person makes, makes sense to them in that
moment and checks the boxes they need to check. They tell themselves a
story about what they’re doing and why they’re doing it, and that story has
been shaped by their own unique experiences.

Take a simple example: lottery tickets.

Americans spend more on them than movies, video games, music, sporting
events, and books combined.

And who buys them? Mostly poor people.

The lowest-income households in the U.S. on average spend $412 a year on
lotto tickets, four times the amount of those in the highest income groups.
Forty percent of Americans cannot come up with $400 in an emergency.

Which is to say: Those buying $400 in lottery tickets are by and large the
same people who say they couldn’t come up with $400 in an emergency.
They are blowing their safety nets on something with a one-in-millions
chance of hitting it big.

That seems crazy to me. It probably seems crazy to you, too. But I’m not in
the lowest income group. You’re likely not, either. So it’s hard for many of
us to intuitively grasp the subconscious reasoning of low-income lottery
ticket buyers.

But strain a little, and you can imagine it going something like this: