Penny foolish, pound (un)wise…

The denomination effect is a cognitive bias – one that clever marketers know well. Most of us should also know it well. Alas, we often forget. In our defense, it is, after all, a bias.

So…it turns out we have a much easier time parting with smaller amounts of currency for example (i.e $1 bills) than with larger amounts ($10 or $20 bills). The dangerous illusion is that we’re spending less, when in reality we end up spending more.

As anyone who’s ever attempted to manage a household knows, it’s the little things that add up and kill the budget. A few dollars here, a few dollars there, and by the end of the month we’ve got hundreds of dollars missing in action.

The devil is in the details indeed, and he’s a nasty little thief. It’s the little things that most often end up breaking the bank. Big expenses we avoid, little ones we often overlook. It’s always the small print, remember?

As far as our emotional well-being, the denominational effect kicks in as well. On a daily basis, we tend to overlook negativity or inaction in small doses. After all, it’s only one moment, one thought, one little action or lack thereof here and there.

Even though we try to and may successfully avoid making big mistakes, we make little ones, and lots of them. As is the case with pennies or dollars, mistakes add up, and they too can ‘break the bank’.

Wellness is a habit (just like optimism, happiness, success). Desirable states can appear spontaneously. However, in the long run, the desirable states we seek happen because we make them happen. And to make them happen, we need to work at them, in small doses, day in and day out.

I’m not suggesting becoming a control freak when it comes to money OR focusing too much on creating wellness at every step! (more on overdoing the happiness thing in another post) There is such a thing as over-management, and it does drain the joy out of everything. So let’s not go firing up Excel and mapping out every penny and breath! Spontaneity and frivolity belong in every healthy, balanced life.

But, let’s not overlook the little stuff either. We do get carried away with the illusion that only big ‘denominations’ matter, so it’s important to pay attention to what the small stuff adds up to. A bit of analysis every so often should do the trick.

One Comment Add yours

  1. Prof C Bogomil says:

    Makes cent$ to me…


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