Where your emotions can really get you into trouble
In one study, participants were shown one of three short video clips before being asked to make several choices between receiving cash today and larger amounts at points in the future, ranging from one week to six months. They were told that some of them would actually be given the rewards they chose, so they should choose carefully.
One of the videos depicted the death of a boy’s mentor, another concerned an unsanitary toilet, and the third was about the Great Barrier Reef.
If participants in the sad condition always take less money for nearer events than further, it suggests that they don’t want to wait for future events.
However, if they only take less money for immediate rewards but not for those where two weeks is the nearer event, it would suggest that sad people are biased to get something right now.
Sad participants settled for $37 today rather than $85 in three months’ time, but neutral participants demanded $56 today to give up a claim the same future pay-out. The same phenomenon was evident in follow up studies.
For the most part, sad people, it seems, wanted to get a reward right now, even if it meant giving up much more money in the future.
We move into “present bias” when we want an immediate payoff — in the case of sadness we want to feel better — so we become impatient and ignore the greater benefits that come when we settle down and wait awhile.
You might, for instance, opt for a lump-sum payment today rather than a better pension down the road after a sudden job loss. But too much discounting of the future says more much about your emotional state, where you're behaving as if there's no tomorrow, than you may realize.
Do you think you've made some 'sad' decisions when it comes to money? Have things changed over time?
By Gordon Powers, MSN Money
Posted by: karra | Feb 27, 2022 3:33:03 PM
I had a bunch of cash in March 2003, the Americans were invading Iraq, the news was bad and there
was nonstop bad weather stopping me going outside. The markets had tanked badly. What the hell, I thought, it can't get any worse than this, so what if I lose it all, the world's probably coming to an end anyway, so I went on-line, did some research and bought a whole load of stocks. Guess what, that was the bottom.
Fast forward to March 2009, huge crash, depressing weather and news. Took all the cash out of money markets and bought stocks. The only 2 times in my life I was successful investing was when everything was gloomy and I got fatalistic. Too bad the sums of money involved weren't bigger or I'd be rich. Guess I'm the delayed gratification type.