THE IMPACT OF MENTAL ACCOUNTING ON FINANCIAL DECISIONS

LUCHIAN, Ivan; FILIP, Angela

doi:10.65672/jfme.2025.1.10

THE IMPACT OF MENTAL ACCOUNTING ON FINANCIAL DECISIONS

Authors

LUCHIAN, Ivan — Moldova State University, Str. Alexei Mateevici 60, Chisinau, Republic of Moldova
FILIP, Angela — Moldova State University, Str. Alexei Mateevici 60, Chisinau, Republic of Moldova

Landing page: https://www.icfm.ro/jfme.icfm.ro/articles/vol13i1p117-127.html

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DOI: 10.65672/jfme.2025.1.10

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Abstract

Mental accounting is a concept in which individuals categorize, evaluate, and manage money in various mental accounts without taking into account the fungibility of money. The purpose of this article is to present the methods, consequences and impact of mental accounting on financial decision-making. The study examined expert opinions on the topic, that were published on the Internet. Mental accounting refers to the way individuals perceive and categorize their money based on its source and intended purpose. Mental accounting's impact can be categorized as primary and secondary. Individuals divide monetary means into personal and public, owned and borrowed, obtained in a planned and unexpected manner. People tend to focus excessively on one account without considering the full spectrum of financial activities, which is caused by irrational financial decision-making as a secondary impact. Mental accounting manifests itself in various areas of finance, such as personal, corporate, public, and investment. Examining the effects of mental accounting helps to fully explain the dysfunctions of financial mechanisms.

JEL Classification

D91; E71; G41

Keywords

mental accounting, financial decision, money

How to cite

LUCHIAN, Ivan; FILIP, Angela (2025). THE IMPACT OF MENTAL ACCOUNTING ON FINANCIAL DECISIONS. Journal of Financial Management and Economics, 13(1), 117-127. DOI: 10.65672/jfme.2025.1.10.

RePEc record

Handle: Repec:vls:rojfme:v:13:y:2025:i:1:p:117-127