You tend to worry more about losses than you care about the gains. This is one form of excessive self-regard. Even though you worry more about losses, you tend to be optimistic about having fewer possible risks than others. You believe that other people suffer more from unemployment, bad break-ups, and bad illnesses. The availability of possible risks changes the way you see them. You do not have to suffer from these incidents yourself. You just have to see them happening to someone else. If you lose something, your risk level rises to get it back. Overreaction to these incidents is a normal human trait. It protected your ancestors from irreversible harm. Today´s world is different.
The ratio of hurting more from losses than enjoy gains is about two to one. 200$ gain feels as good as 100$ losses feel bad. This fact leads to many irrational decisions. It can have bad effects on the outcomes of your life. This does not mean you should always choose the option of getting larger gains than avoid losses. You can do this when losses do not cause you any bad damage. For example, it is smart not to bet your last 1000$ if you can win 1500$ and chances are 50%. But you can bet your 1000$ to win 1500$ when chances are the same if you have a significant amount of extra money. In the long run, you have to use these possibilities to your advantage if you want to have a life you deserve. Constant choices for avoiding losses are not the best way to live your life.
Losses and gains produce some other irrationalities in your life. One thing that makes the difference is the total amount of your gains and losses. This applies not only to the sums of money but to how many times you lose or gain something. It s more painful for you to lose 100$ twice than losing 200$ once. When this happens to you in the sum of gains, winning 100$ twice feels better than winning 200$ once. There are limits to the effects of gains and losses. Losses feel less painful after a certain point. For example, if you have 1000$ and you lose 100$, it feels less painful than if you have 500$ and you lose 100$. The same applies to gains. For example, gaining 100$ when you have 1000$ feels less good than having 500$ and winning 100$. This applies to your wellbeing too. After a certain point, your wellbeing doesn´t increase when you get more money than you felt before.
Possessions
Anything you own is more valuable to you than before you owned it. If you pay 100$ for an item, its value to you increases. This applies not only to your possessions but the effort you put to get them. IKEA furniture is a good example of this effect. When you buy something from the store, you have to assemble it. Putting screws, using a hammer, and other efforts to put pieces together increase the value of the items. When you put these two things together, your items become much more valuable than you paid for them. Your emotional attachment to your possessions grows when the time goes by. The more you use them or the more available they are to you, the more valuable they become as their availability in your mind grows. Riots and revolutions usually happen after something are taken away from people. They do not happen when people never had anything. Even small possessions that are taken away destroy governments.
Framing losses and gains differently
Framing losses and gains differently can help you get what you want. Frame all the undesirable things in a way that they feel like losses. For example, risks with negative expected value can be framed to feel like losses. For example, frame lottery tickets as losses of the money you pay for them, not to the opportunities to gain millions. Risks with positive expected value can be framed in ways that not doing them feels like losses. For example, not accepting a coin toss to win 1500$ and lose 1000 will be a loss of 250$ of expected value. There is a certain way to make gains feel better and losses feel less bad. Always bundle your losses and separate your gains. Separating gains and losses is a bad idea when the gains are bigger. Talk about investments, not losses.
Valuing possessions
Avoid most pay later to get something now deals. You will feel like an owner before you have paid anything. This possession may feel more valuable than they are. Do not underestimate the value of ownership. If you cannot afford something, do not even try it. Be realistic about your possessions. Most of them are not so valuable to others than they are to you. Do not overprice things you own if you have to sell them. Ask experts about their real value. Most and for all, understand the value of your currency. The dollar is a dollar and pound is a pound, no matter how much effort you have put to your possessions and how available they are in your mind.
-TT
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