Money 101 · Episode 21
In 2020, I made an offer on an apartment. Five hundred and fifty thousand euros. The bank said no. And sitting there, I asked myself one question I should have asked six years earlier. Whose numbers am I actually living by?
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Not financial advice. For educational purposes only. I am not a financial advisor. Always do your own research and consult a qualified advisor before making any investment decisions.
Look... in 2020 I made an offer on an apartment. Five hundred and fifty thousand euros. The bank said no. Your salary is too low. End of conversation. And sitting there, I asked myself one question I should have asked six years earlier. Whose numbers am I actually living by?
"The trap never hurt. That was the problem. Anchoring bias doesn't announce itself. It just quietly replaces your reference points while you're busy living your life."
Look... anchoring bias is one of the most documented findings in behavioural economics. First described by Kahneman and Tversky, it refers to the human tendency to rely too heavily on the first piece of information encountered when making decisions. In finance, it means that whatever number you are exposed to first becomes the reference point — the anchor — against which all future numbers are measured.
In a negotiation, the first price mentioned anchors the discussion. In investing, the price you originally paid anchors your perception of value. In everyday spending, the amounts you see your colleagues and peers spending anchor what feels normal, reasonable and affordable.
Look... I joined Big 4 in 2014. By 2016 the numbers in my head had completely changed. Colleagues talking about €400,000 apartments like they were routine purchases. Dinner out every night, sixty or seventy euros a head, without anyone flinching. Weekend trips. Business class upgrades. Premium everything.
Numbers I had never considered before my career suddenly felt like the floor, not the ceiling. Not because I had consciously decided they were appropriate for me. But because I had been surrounded by them long enough that they had become my reference point. That is anchoring bias in action — and it is the most invisible financial trap I have ever fallen into, because it never hurts. It just quietly replaces your reference points while you are busy living your life.
Look... making an offer on a €550,000 apartment felt completely reasonable at the time. The area was right. The colleagues who owned similar properties had done well. The anchor in my head — built over six years of Big 4 exposure — said this was a normal number for someone at my stage. The bank disagreed. And in the silence after the bank said no, I realised that the anchor in my head and the actual numbers in my account had drifted very far apart without me noticing.
Look... this is the question. Not "can I afford this?" but "where did the number in my head come from?" If it came from your own financial reality — your income, your savings rate, your investment goals — it is your number. If it came from your environment, your peer group, your workplace culture, or from media and social media — it is someone else's anchor that you have adopted as your own.
The exercise is simple. Before any significant financial decision, ask: if I had never been exposed to this environment, what would feel like a reasonable number to me? The gap between that answer and what currently feels normal is the anchoring bias at work.
What is anchoring bias in finance?
Anchoring bias is the tendency to rely too heavily on the first piece of information encountered when making decisions. In personal finance it causes people to evaluate prices, salary expectations and spending norms relative to whatever reference point they have been exposed to, rather than relative to their actual financial situation.
How does anchoring bias cause lifestyle creep?
When your environment consistently exposes you to higher spending norms — expensive colleagues, high-cost social circles, premium workplaces — those numbers gradually become your reference point for what is normal. Spending then anchors upward to match the environment rather than being set by your own financial goals.
How do I identify anchoring bias in my own finances?
Ask where each financial reference point in your life came from. What feels like a normal rent? A normal car? A normal restaurant bill? If the origin is your peer group or social environment rather than your own financial analysis, anchoring bias is likely influencing the number.
