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Exceeding the Endowment Effect

By: Alexandra Nicole TorresExceeding the Endowment Effect

Have you ever looked through your closet, attempted to decide what to put on, and thought, “I have nothing to wear!” I know I have, but that didn’t necessarily mean I threw out the clothes I no longer used to make room for new ones. I just bought and kept more till one day, I had a jam-packed dresser of items I don’t even remember owning.

It's easy to brush this off as a classic case of hoarding, which we already know is not just problematic but could even be a psychological disorder. However, it is not just hoarders who keep things longer than necessary. In far less extreme cases, it is fairly common to find difficulty letting go of things we acquire, and this could be due to another psychological phenomenon known as the endowment effect.

The endowment effect is when we ascribe a higher value to things that we already own, thus making it challenging for us to dispose of them. Brian Knutson of Stanford University found through a brain-scanning study that it triggers the part of the brain associated with possible loss. Thus, it is still seen as irrational behavior with potentially adverse effects because we could value things simply because we’ve possessed them, even when we had less interest in them prior to possession.

Since it is simply an evolutionary trait, our awareness of the endowment effect can empower us to overcome it, especially as the holiday season brought us gifts upon gifts that might necessitate more space in our homes (or closets).

Here are five ways to battle the endowment effect:

  1. Invest in things that truly matter.

Instead of cashing out on material things, invest in your health. Schedule for regular checkups. Enroll in a gym or a fitness class. Load up on vitamins and supplements. Get yourself insured or have investments. Start on your retirement fund. Build your capital for your dream business.

Simply put, think long-term and what would truly impact your future.

  1. Take care of your mental health.

Studies show that clutter can affect your mental health and your happiness in a myriad of ways. Having clutter around you is correlated to stress, especially in the workplace. It could also reduce your productivity because having mental clutter can slow down your information processing. At the same time, having physical clutter around your house can make you feel less at home.

Your home should embody a retreat from the outside chaos. But when your house is chaotic too, then you have less time to unwind and re-center. So try to reduce clutter in all settings and forms – your house, your office desk, and even your emails. This way, you can become even more productive and, more importantly, mentally healthy.

  1. Try minimalism.

Not only can minimalism as a way of living help you spend less, it can also improve your well-being. Minimalism is more than decluttering – taking it one step further and pursuing it is said to reduce anxiety and depression.

It is said to even increase your energy because you have less clutter to demand your attention as it reduces overstimulation. Your brain processes stimuli all around you even when you’re not aware of it. That’s why with fewer knickknacks invading your space, you can focus more on yourself and self-care.

  1. Make extra cash.

Veering away from the endowment effect also has practical perks – you can sell your preloved items and earn extra income from it. You don’t even need to put up a garage sale, as some online platforms make it possible to sell your used appliances, gadgets, and even clothes at the touch of a fingertip.

You might think that those material possessions are priceless, especially if they’re of sentimental value. But as mentioned above, if they serve no purpose, they can actually be a source of detriment to our mental health.

  1. Give than receive.

Let us remember that others can benefit from the things and possessions we no longer use. Instead of just letting them collect dust, donate them to a local charity or church. Not only will you be able to help others, research shows that being generous can make you happier. Furthermore, it was found that the amount of money or the quantity of what you give doesn't even matter. Both have the same effect on our happiness, so don’t hesitate to toss, donate, and organize.

Ultimately, it adds positively more to our lives even if it feels like something is being taken away at first. Challenge your instincts and create new and healthier habits this year. 

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