Five years ago when my wife and I got married (hence, she is now my wife), we received a greeting card with 100 Australian dollars from a friend of my mother who lives in Australia.
Cornelia (my wife) and I never converted those 100 AUD in Euros and kept them in a safe place either as a last resort fund or, at the time naively, thinking that we will someday go to Australia and spend them there.
A year and a half ago we moved from The Netherlands to the USA. As any international move, it was no walk in the park and since we were moving to a smaller apartment, we decided to ship some of our stuff to Romania (where our parents live). Moreover, after leaving The Netherlands, we made a longer visit to Romania before moving to the US.
When we arrived in the US and settled in our new apartment, the 100 AUD were among our last concerns. We actually forgot that we had them.
In July this year, when our September trip to Australia was confirmed, we remembered that we had that Australian money and now we could spend it in Australia.
But, where was the money?
We looked for the cash in the usual places, but couldn’t find it. I asked my parents to search for it in the stuff we left at their house in Bucharest. They did so… twice and couldn’t find the two 50 AUD bills.
We resigned and accepted that the gift from my parent’s friends had been lost in our trans-continental move from Europe to America. We even rationalized the loss of the Australian cash that we never incorporated in our mental accounting.
After all, what is 100 AUD when you’re spending about 10.000 AUD? (contrast effect in action)
Two weeks ago, I spoke with my father over the phone and he reminded me that he searched everywhere for the Australian money, except for my coins and banknotes collection (a reasonably large one).
Eighteen months ago the prospect of spending the Australian money was nonexistent and it made sense that I have added the exotic bills to my collection. I asked him to search there, as well. It was more of a last hope approach.
The next day, my father emailed me and said that he found only a 5 AUD bill in my collection. Right after reading this email, I realized that if I brought the 100 AUD to the US they would have been in the same place as our documents and wedding photos (which I transported in the hand luggage). Since I didn’t find the money where we keep our documents, I decided to look for them where we keep our wedding pictures.
(Happy) Surprise: I found the 100 AUD in an envelope alongside some doubles of pictures from the wedding.
In short: in 2010 we received a wedding gift of 100 AUD. Between 2010 and 2015 we kept it as a last resort fund and had it mostly written off from our regular mental accounts. Between 2015 and summer of 2016 we completely forgot about “this” money. In early summer this year, we remembered we had the 100 AUD and then accepted that we lost it (written it off entirely from our mental accounts). In late August 2016 we re-found the Australian cash, thus we are now 100 AUD richer than we were a couple of months ago, even if the actual cash never moved from where it was “safely” placed.
The moral of the story: even if I (you) know a lot about shortcomings of human judgment and decision-making, it doesn’t mean that I am (you are) immune.
Mental accounting is a wonderful adaptation for resource (incl. money) management, even if sometimes it leads to economically irrational behavior.