Cognitive Bias & Taxes Review

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What is FOMO (Fear of Missing Out)?

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FOMO is a cognitive bias characterized by the anxiety that one is missing out on rewarding experiences that others are having. It often leads to feelings of inadequacy and dissatisfaction.

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What is the Sunk Cost Fallacy?

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The Sunk Cost Fallacy is a cognitive bias where individuals continue an endeavor once an investment in money, effort, or time has been made, even if they no longer want to pursue it.

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What is the Endowment Effect?

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The Endowment Effect is a cognitive bias where people assign more value to things merely because they own them, leading to irrational decision-making.

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What is Hedonic Adaptation?

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Hedonic Adaptation is the observed tendency of humans to quickly return to a relatively stable level of happiness despite major positive or negative events or life changes.

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What is Risk Loss Aversion?

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Risk Loss Aversion is a cognitive bias where individuals prefer to avoid losses rather than acquiring equivalent gains, leading to risk-averse behavior.

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What is the minimum total pay for independent contractors before a 1099 form is required?

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$600

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What is the largest portion of US taxes allocated to?

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Health

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How does social media contribute to FOMO?

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Social media can amplify FOMO by showcasing curated highlights of others' lives, leading individuals to feel inadequate or left out.

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Provide an example of the Sunk Cost Fallacy in everyday life.

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An example is continuing to watch a movie you dislike simply because you paid for the ticket.

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How can the Endowment Effect impact consumer behavior?

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Consumers may overvalue items they own, making them less likely to sell or trade them, even if they would not pay that price for the item if they were to buy it.