Mental Accounting - Is it really a bad thing?

[Dreamweaver]

I'm actually not worried a bit. Just curious what everyone's take is on the 'mental accounting' situation. I'm actually quite pleased with the way it works for me...the whole process developed on its own and I have been saving quite a bit for some time.

I know that I am saving $$...that's a fact. But where the mental 'deception' comes in is when the only account I have that is not on autopilot reaches the low 'trigger'. Then I find myself being more frugal to be sure all my auto-pilot stuff keeps rolling. At the end of each year I take a glance at all my assets as a whole and am AMAZED at what can be saved by being on auto-pilot. I KNOW ahead of time what will be saved, but I would never have done it if not for the auto-deductions. Hope that makes sense

For what it's worth, I'm big on spreadsheets but I know it isn't for everybody. If I don't have a spreadsheet, I think back and say "where'd all my money go?". I haven't thought "wow, look how much I saved!".

If mental accounting is helping you save a lot of money though, I think that's what counts. I'd say keep it up! Saving is the name of the game, and I'm not so sure it matters how you get there.

 

[Walt34]

Hey, if the "mental accounting" works for you, go for it. DW has an aunt who does the same thing with cash in various envelopes.

We just use Quicken and a spreadsheet, although there are mental categories of "savings shall not go below $X, checking shall not go below 0" and "this much is set aside for a new vehicle", etc. I did once run the checking down to two cents (no min. balance required) but I've always been meticulous about balancing the checkbook, and I married an accountant, so if possible she's worse than me. Once the savings gets above a certain level it's skimmed off to less liquid investments, like a motorcycle.