--- title: The Psychology of Money description: A new book shows the many ways money makes us crazy canonical: https://time.com/3774145/money-brain-mind/ author: Jeffrey Kluger article:opinion: true article:content_tier: free article:published_time: 2015-04-07T21:04:31.000Z article:modified_time: 2026-02-22T05:45:57.930Z article:section: Ideas og:title: 7 Ways Your Mind Messes With Your Money og:description: Your brain is almost certainly lying to you og:url: https://time.com/3774145/money-brain-mind/ og:site_name: TIME og:image: https://static.time.com/v3/assets/bltea6093859af6183b/blt77976eaed2fa3f84/6987870e3c1639451f4529ac/money1.jpg?branch=production&width=3840&quality=75&auto=webp&crop=16:9 og:image:width: 1200 og:image:height: 675 og:image:alt: Mmmmmoney: Get a grip; it's just paper og:type: article twitter:card: summary_large_image twitter:title: 7 Ways Your Mind Messes With Your Money twitter:description: Your brain is almost certainly lying to you twitter:image: https://static.time.com/v3/assets/bltea6093859af6183b/blt77976eaed2fa3f84/6987870e3c1639451f4529ac/money1.jpg?branch=production&width=3840&quality=75&auto=webp&crop=16:9 ---  # 7 Ways Your Mind Messes With Your Money  by [Jeffrey Kluger](https://time.com/author/jeffrey-kluger/)  ## Jeffrey Kluger Editor at Large Apr 7, 2015 9:04 PM UTC  US Currency is seen in this January 30, 2001 image. AFP PHOTO/Karen BLEIER (Photo credit should read KAREN BLEIER/AFP/Getty Images) US Currency is seen in this January 30, 2001 image. AFP PHOTO/Karen BLEIER (Photo credit should read KAREN BLEIER/AFP/Getty Images)KAREN BLEIER; AFP/Getty Images  by [Jeffrey Kluger](https://time.com/author/jeffrey-kluger/)  ## Jeffrey Kluger Editor at Large Apr 7, 2015 9:04 PM UTC If your brain is like most brains, it’s got an awfully high opinion of itself—pretty darned sure it’s pretty darned good at a lot of things. That probably includes handling money. But on that score your brain is almost certainly lying to you. No matter how much you’re worth, no matter how deftly you think you play the market, your reasoning lobes go all to pieces when cash is on the line. That is one of many smart—and scary—points made by author and J.P. Morgan vice president Kabir Sehgal in his new book [_Coined: The Rich History of Money and How it Has Shaped Us_](http://www.amazon.com/Coined-Rich-Money-History-Shaped/dp/1455578525). Here, in no particular order, are seven reasons you should never leave your brain alone with your wallet. **Inflation? What’s that?** You’re way too smart to think that if your salary doubles but the price of everything you buy doubles too you’ve somehow come out ahead, right? Wrong. In one study, volunteers were given the opportunity to win money that they could use to buy gifts from a catalogue. In later rounds, the amount they could win went up by 50% but so did the cost of all of the catalogue items. Nonetheless, their prefrontal cortex registered greater arousal after the staged inflation—even when they were warned before the study began that the purchasing power of their money would not increase. The implication: If a corned beef sandwich and a Coke cost $15,000 you’d _still_ be thrilled to be a billionaire. **Keep yer lousy money:** Guess what! I’m going to give you $199\. Nice, right? Oh, did I forget to mention that it comes out of $1,000 someone else gave me to divide up between us any way I see fit? In multiple studies, when it’s up to one subject to apportion a fixed amount and up to the other to accept it or neither one gets paid, more than half of recipients will reject anything less than 20% of the total. In other words, you’ll turn down a free $199 to deny me my undeserved $801\. Your ego thanks you, your checking account doesn’t. **Losing feels worse than winning feels good:** Here’s something the Vegas casinos don’t tell you: That high you get from winning $10,000 at the craps table will fade a lot faster than the what-was-I-thinking self-loathing that comes when you lose the same amount. To get people to wager $20 on a coin flip, researchers have found that they typically have to be given the chance to double their money; betting $20 to win, say, $35 just doesn’t cut it. That seems like good sense—but given the realistic shot you’ve got at winning, it’s also bad math. **Simply the best:** You know that store that opened on your corner that sold nothing but artisanal beets—the one that you knew would go out of business within a month and that didn’t even last two weeks? The owner totally didn’t see that coming. That’s called the overconfidence bias. The hard fact is, about 80% of new businesses are floating upside down at the top of the aquarium within 18 to 24 months—but nearly all entrepreneurs are convinced they’re going to be in the elite 20%. We bring the same swagger to playing the market and speculating in real estate—and to dancing at a wedding after we’ve had enough drinks and are convinced we’ve got moves. Watch the video later and see how that works out. **The hunt beats the kill:** Never mind cigarettes and alcohol, if there’s one substance the government should regulate it’s dopamine—the feel-good neurotransmitter that gives you a little reward pellet of happiness when your brain decides you’ve done something good. The problem is, your brain can be an idiot. There’s far more dopamine released in its nucleus acumbens region—the reward center—when you’re anticipating some kind of payoff than when you’ve actually achieved it. That means expanding your business is more fun than running it and investing in the market is more fun than consolidating your gains. Those are great strategies—but only until the very moment they’re not. **I think therefore I win:** I have a perfect three-step plan for winning the Power Ball Lottery: 1) I buy a ticket. 2) About 175 million other people buy tickets. 3) They give me all the tickets they bought. OK, failing that, the odds are pretty good that I may not be the person on TV who gets handed that giant check. But I play anyway thanks to what’s known as the availability heuristic. I think about winning, I see commercials with people who have actually won, I fantasize about what I’ll do with the money when I do win—and pretty soon it seems crazy _not_ to play. The more available thoughts of something unlikely are, the more realistic it seems that it may actually happen. This is the reason there should always be a 48-hour cooling off period after you leave baseball fantasy camp and before you’re allowed to sell your house and try out for the Yankees’ farm club. **Fifty shades of green:** Perhaps the biggest reason we’re irrational about money is that we’ve come to fetishize not just the idea of wealth but the pieces of currency themselves. In one study, subjects counted out either actual bills or worthless pieces of paper of the same size, and then plunged their hands into 122ºF (50ºC) water. The ones who had handled real cash experienced less pain—effectively anesthetized by the Benjamins. Other studies have shown heightened brain activity when people witness money being destroyed, with the degree of neuronal excitement increasing in lockstep with the value of the currency. 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