NarratorNow listen to part of a lecture in a psychology class.
ProfessorSo a good example of this is something that happened to me. When I was younger, I had an office job and I worked there every day during the week. And I made a regular salary from that. But also I worked as a waiter at a restaurant each weekend, so I made some money from doing that.Now, around this time, I decided I wanted to buy a house. So every time I got my regular paycheck from my job at the office, I'd save as much of the money from it as I could after I bought the basic stuff I needed. But with the money I made as a waiter that was another story. Somehow I guess that money seemed separate from the money I earned at my regular job. So I used the money I made at the restaurant to go out to dinner, to buy videos or CDs, things I didn't really need.But the thing is, it ended up taking me a really long time to save up all the money I needed to buy the house. And looking back now, I realize I could have bought the house a lot sooner if only I had saved more of the money I made working at the restaurant." "
Using the examples from the professor’s lecture, explain the concept of mental accounting.
Mental accounting is a tendency that people divide their money into different categories in their mind and therefore spend more money than they should have. The professor takes his personal experience. He used to have two jobs. He had an office job on the weekdays and got regular paycheck from it; also he worked part-time in a restaurant at weekends, which earned him some extra money. He decided to buy a house, so with the regular salary he earned from his office job, he only bought daily necessities and then put aside as much as possible. But with the money earned from the restaurant he wasn't so careful, spending it on dinner and buying unnecessary stuffs like CDs, because through mental accounting, the part-time money was separate from his regular paycheck. As a result, it took him longer time to get enough money for a house than he should have if he didn't spend the restaurant money. (158 words)
