The effects of mental budgeting and pain of payment on the financial decision making of socially excluded people

• incl. mental budgeting (separation of monetary income into economic categories), labelling of income and assets, hedonic framing (evaluation of gains and loss combinations)
• violates the fungibility assumption of money: different propensities to use money depending on the source
• hampered by credit card use: decouples costs and benefits by facilitating mixing of purchases among budgeted categories and increasing temporal distance between purchases and payments (payment delayed until credit card bill is due)

• prospect theory: loss perception decreased in consumers in a low state of mental budgeting
• psychological myopia: tendency to focus on immediately relevant information (e.g., transaction fees) while ignoring relevant background information stronger for high levels of mental budgeting ➡️ lower probability of engaging in high-risk investments

• painful state of mind or psychological burden consumers experience upon purchase
• lowered by credit card and mobile payments
• bottom dollar effect: purchases using budgets close to exhaustion result in a lower customer satisfaction
• higher level of mental budgeting results in stronger pain of payment

H1: Socially excluded people have a higher preference for high-risk investment products than socially included people.

H2: For individuals with higher mental budgeting, the positive effect of social exclusion on preference for high-risk investment products will be lower.

H3: The moderating effect of mental budgeting on the impact of social exclusion on consumer preference for high risk investment is mediated by pain of payment.