Mental accounting

Treating money differently depending on where it came from or what it is labelled for, when money is fungible.

Investors hold a losing position separately from the rest of the portfolio, treat dividends as spendable income while refusing to sell shares, and take risks with gains they would not take with capital.

Some of it is useful. Earmarking money for a specific goal improves saving behaviour, which is why goals-based planning works despite being economically irrational.

Know when the accounting is helping and when it is hiding a decision.