Understanding your money mindset is crucial for managing your finances effectively. The psychology of spending involves examining the emotions, beliefs, and behaviors that influence how individuals handle money.

For example, some people may have a scarcity mindset, which leads them to feel anxious about spending money, even on necessary items. This mindset can stem from past experiences of financial hardship or a fear of not having enough in the future.

On the other hand, individuals with an abundance mindset may feel more comfortable with spending and investing, believing that there will always be more opportunities to earn money.

References:

• Thaler, R. H., & Sunstein, C. R. (2008). Nudge: Improving decisions about health, wealth, and happiness. Penguin.
• Kahneman, D., & Tversky, A. (1979). Prospect theory: An analysis of decision under risk. Econometrica, 47(2), 263-292.