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Mental Accounting: Why a Tax Refund Feels Different From a Paycheck, Even Though Money Isn't

Behavioral Finance • Beginner Investing • 6 min

Money is fungible — a dollar from your paycheck, a dollar from a tax refund, and a dollar won at a casino all have identical real economic value and purchasing power. And yet almost nobody actually treats those dollars the same way. A tax refund often gets spent more freely, treated as "found money" or a bonus, while an equivalent amount from a regular paycheck gets budgeted more carefully. This mental sorting of…

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