GLOSSARY · BUDGETING, SPENDING & SAVING

Present bias

The tendency to give much more weight to costs and rewards today than to those in the future, even when the future ones are larger. It explains why plans to save often slip and why buying now and paying slowly on credit can feel reasonable at the moment of purchase. Automatic saving and waiting periods work because they take the decision out of the moment.

Also called: hyperbolic discounting, instant gratification

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CHAPTER · EXPENSE TRACKING & AWARENESS · FOUNDATIONSWhy You Spend the Way You Do

RELATED TERMS

Mental accounting Compound growth

SOURCES

Golden Eggs and Hyperbolic Discounting. David Laibson, Quarterly Journal of Economics, 1997.

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