Emotional Accounting: How Feelings About Money Influence Consumer Choice

Mental accounting posits that people track their expenditures using cognitive categories or "mental accounts." We propose that this cognitive process can be complemented by an approach that examines how feelings about a sum of money, or the money's "affective tag," influence its consumption. When people receive money under negative circumstances, this tag can include a negative affect component, which people aim to reduce by engaging in strategic consumption. We investigate two such strategies, laundering and hedonic avoidance, and demonstrate their effect on consumption of windfalls. We find that people avoid spending their negatively tagged money on hedonic expenditures and prefer to make utilitarian or virtuous expenditures to reduce or "launder" their negative feelings about the windfall. We call this tagging process and strategic consumption emotional accounting.