People tend to use an initial piece of information as an "anchor" for their subsequent judgments. In the context of spending, this means that we may be more likely to spend more money if we are given a high starting price. For example, if we see a dress for $100, we may be more likely to buy it than if we saw the same dress for $50.

Mental accounting

People often categorize their money into different mental accounts, such as "rent money" or "fun money." This can make it easier to overspend, as we may not realize how much money we have actually spent when we are using different accounts. For example, we may spend more money on clothes if we think of it as "fun money" than if we think of it as "rent money."

Sunk costs

People often feel compelled to continue investing in something that they have already invested in, even if it is not a good investment. This is known as the "sunk cost fallacy." In the context of spending, this means that we may be more likely to continue buying something that we have already spent money on, even if it is not something we need or want. For example, we may continue to buy a magazine subscription even if we never read it, simply because we don't want to waste the money we've already spent.

Illusions of control

People often believe that they have more control over events than they actually do. This can lead to overspending, as we may believe that we can control our spending and that we will always be able to make enough money to cover our expenses. For example, we may spend more money on a vacation than we can afford, believing that we will be able to get a raise or a bonus to cover the cost.

Emotional spending

People often make purchases based on their emotions, rather than on their needs or budget. This can lead to overspending, as we may buy things that we don't need or that we can't afford in order to make ourselves feel better. For example, we may buy a new car to make ourselves feel more successful, or we may buy a new outfit to make ourselves feel more attractive.