Why It helps individuals organize their money for

Why would more individuals spend $10 on a movie ticket if they had just lost a $10 dollar bill than if they had to replace a lost movie ticket worth $10 dollars? According to the theory of mental accounting people treat money differently, depending on factors such as: the money origins and money usage. Individuals create mental tabs that categorize money; and when the money is spent they track it based on the mental account it came from. Mental accounting  suggests that spending decisions are based on utility relative only to other purchases in the relevant account. Mental accounting sounds like a good way to separate money for long term goals, however it can work against individuals.  By using mental accounting it help us create goals for money investments but also individuals justify choices that aren’t ideal. As an individual have ever been pulled into buying something online or from a commercial? Well it has happened to most individuals at some point. Individuals  believe it something they really need but when they check the price they stop to think if they really need it.  “Ouch. Really? For a handheld vacuum? As fast as I had decided I needed it, I decided that price was crazy and I was not going to buy it.” According to mental accounting people categorize money in different spots to make decision on how they spend their money. It helps individuals organize their money for “emergencies” and other purpose. When they want to buy something they stop and think if they really need the product because they don’t want to spend money that is organize for other things.  I think it’s a good way to organize money for short-term and long- term goals. Most individuals love spending money on whatever they like, and mental accounting helps them limit themselves. They create rules that  help them not frivolously spend money from their savings accounts and limit their spending to money that they can afford to spend. “You have taught yourself that each stack of money has its own goal, and comes with its own restrictions and rules: you should not spend your retirement savings on a car or a holiday; your monthly costs (e.g. housing, groceries, transport, and clothing) should be smaller than your household salary.” These rules can help individuals create limits on their spending. It’s a good way Some people decide to use some of their accounting money on unnecessary stuff when t can be used for other things. For example, people often have a special “money jar” or fund set aside for a vacation or a new home, while still carrying substantial credit debt. People spend cash differently than they use credit, they believe borrowing money is better, however it increase their debt. Some credits card reward points every time you spend a minimum amount of money. Individuals believe its a form of getting their cash back. Individuals create account money that justify choices that aren’t ideal. “I  rationally tell myself that $1.00 of credit card reward is worth no more or no less than $1.00 of earned income, but to me, it just feels different. The credit card rewards feel like found money.” individuals can rationally tell themselves that the $1.00 credit card worth isn’t really worth anything like real cash, however for them it feels really valuable. Individuals can cut down the spending of “found” money, by realizing that “found” money is no different than money that they earned by working.I don’t think we know enough to decide one way or another with enough certainty to say we’re certain. Mental accounting helps save and categorize money for long-term saving and investments, however it can also be illogical thinking. Logically speaking, money should be valuable, regardless of its origin. Treating money differently because it comes from a different source is not logical. Where the money came from should not be a factor on how and how much you should spend it. However mental accounting can be a good way of saving money since it gives individuals suggestions on what not to spend. It can create a “safe-keep” to give individuals an ideal budget, but there should be rational thinking. Even Though mental accounting happens subconsciously it should be avoid at times.