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BUSINESS Monday 23 deceMber 2019
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Liz Weston: How to make your money biases work for you

Associated Press example, or to be more you’ve changed, but you
The way our brains work careful spending cash than also probably think that
can cost us a lot of money. using credit. the person you are today is
But some of our mental You can turn this mental pretty much who you’ll be
quirks can be turned to our accounting to good use by from now on.
advantage. Cognitive bi- creating multiple savings Regardless of their age,
ases are the faulty ways of accounts, each labeled adults consistently under-
thinking that can persuade with your goal for the mon- estimate how much they’ll
us to run up debt, save ey. For example, you could change in the future, ac-
too little and make stupid create accounts called cording to research by
investment decisions. The “vacation,” “car repair psychologists Jordi Quoid-
bandwagon effect, for ex- fund,” “home down pay- bach, Daniel T. Gilbert and
ample, entices us to buy ment” and so on. Online Timothy D. Wilson, who
the hot stock everyone’s banks and credit unions dubbed this phenomenon
talking about, rather than typically make this easy the “end of history illusion.”
the mutual fund that makes by allowing you to create This illusion leads to the tat-
more sense for our long- and name numerous sub- too, mortgage or marriage
term goals. Or we sign up accounts without minimum you later regret. But the
for a too-large mortgage balance requirements or end-of-history illusion could
because of optimism bias fees. be beneficial if you use it to
(“I’ll figure out a way to Labeling and segregat- give your future self more,
make the payments, some- ing money could help you rather than fewer, options.
how!”). We can try to be keep your hands off of it. Here’s an example: People
more rational, but some- While you might dip into a who save for retirement of-
times it makes sense to general savings account ten anticipate the freedom
exploit our faulty wiring in- for a questionable pur- and leisure they’ll enjoy
stead. Here are three mon- chase, you may resist the one day when they can
ey biases that you could urge if you can envision quit work. They can’t imag-
put to work for yourself: having less money for your ine they’ll feel differently
MENTAL ACCOUNTING vacation or not being able later. As they get closer to
Money is fungible, which to pay for a needed car re- retirement, though, some
means every dollar has the pair. realize they want to keep
same value regardless of ‘END-OF-HISTORY ILLUSION’ working at least part time This undated photo provided by NerdWallet shows Liz Weston, a
how we get it or store it. But Think of the person you for the extra money, the columnist for personal finance website NerdWallet.com.
our brains didn’t get that were a decade ago — intellectual stimulation, the Associated Press
memo, so we treat differ- what you thought was im- social benefits.
ent types of money differ- portant, what you liked and With sufficient savings, you part time, work full time, ness. If you haven’t saved,
ently. We’re tempted to disliked, how you behaved. typically have more op- take a break and return to you may have little choice
splurge with windfalls, for If you’re like most people, tions: You could quit, work work or start your own busi- but to keep working.q

Germany says new rule requiring receipts fights tax fraud

Associated Press But Finance Minister Olaf Germany's standard rate
BERLIN (AP) — Germany's Scholz, a center-left Social of value-added tax is 19%,
finance minister is defend- Democrat who is also vice though a reduced rate of
ing a new rule taking effect chancellor, has stood firmly 7% applies to some items
Jan. 1 that will require shops by the legislation. He ar- such as groceries.q
to provide a receipt for ev- gues that the receipts don't
ery purchase, a change necessarily have to be
that critics fear will result in printed but could be sent
vast amounts of paper be- as an email.
ing wasted. "This is about sales tax fraud
The rule aims to combat in the billions, every year
the evasion of value-add- — sales tax that the cus-
ed taxes but some envi- tomer pays but some trad-
ronmental activists worry ers or restaurateurs don't
they will produce piles of pass on to the state," Scholz
unwanted receipts, printed was quoted Sunday as tell-
on paper that can't be re- ing the Funke newspaper
cycled. group. German Chancellor Angela Merkel, right, arrives with Vice
Economy Minister Peter The legislation requires tam- Chancellor and Finance Minister Olaf Scholz, left, for the weekly
cabinet meeting of the German government at the chancellery
Altmaier, a member of per-proof cash tills, he said. in Berlin, Germany, Wednesday, Dec. 11, 2019.
Chancellor Angela Merkel's "We wanted to ensure Associated Press
conservative party, re- that every sale is booked,"
cently called for changes Scholz added. "For this, The legislation was drawn Wednesday when her gov-
so not every tiny purchase there has to be a receipt up in 2016. ernment would scrap man-
requires a receipt. He said - either on paper or as an Opponents of the new rule datory receipts, Merkel
when he is given one, he email. All concerned had a probably won't get much pointed to the effects of
usually leaves it — like 90% very long time to get ready help from the chancellor. tax evasion and replied:
of Germans. for the new law." Asked in parliament on "Not at all, I fear."