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This is the part that’s hard to capture in data. Seeing your networth double, even if its on paper, has an impact on your spending patterns. Especially smaller
by spaceman_2020 4y ago
This is the part that’s hard to capture in data.
Seeing your networth double, even if its on paper, has an impact on your spending patterns. Especially smaller, “feel good” purchases, such as ordering takeout or buying an extra drink at the bar.
You might objectively know that you can’t sell your $1M house for its current zillow estimate, but when you’re out at the bar, its easy to justify in your head that you can “afford” that extra drink. After all, didn’t you just become a millionaire?
There is a huge psychological component to money that’s somehow never talked about.
- jjav 4y ago> Seeing your networth double, even if its on paper, has an impact on your spending patterns. Especially smaller, “feel good” purchases, such as ordering takeout or buying an extra drink at the bar. Do you know of research showing this behavior? I haven't seen research one way or the other, but anecdotally this seems very unlikely. I don't know of anyone who feels that way and we're in silicon valley so everyone we know has houses that have appreciated quite a bit. But everyone knows both objectively and emotionally that zillow zestimates are not money that can be spent. It might be money a number of decades in the future after retirement and selling the house to move, but that's way too far in time and uncertainty to have any impact on behavior today.
- harambae 4y ago> Do you know of research showing this behavior? There is extensive research on the wealth effect. Try "Analyzing the Effects of Financial and Housing Wealth on Consumption using Micro Data" (IMF)