Mental accounting, introduced by Nobel laureate Richard Thaler, is the psychological tendency to treat money differently depending on its source or intended use. While in reality money is fungible (Rp 100,000 is always Rp 100,000), we often label and spend it based on emotions or context.
For individuals, this might mean treating a work bonus as “fun money,” while for businesses, it could lead to dangerous financial decisions that threaten growth and sustainability.
In this article, we’ll explore how mental accounting impacts both personal finance and business operations, using Zetta Tech (a software agency/startup case) as an example.
Mental Accounting in Personal Finance
Most people fall into predictable patterns:
- Salary feels like “serious money” for essentials.
- Bonuses or windfalls are spent quickly on lifestyle.
- Investment gains are seen as “extra,” often cashed out prematurely.
This bias leads to poor savings discipline, emotional investing, and lifestyle inflation.
Healthy Allocation Strategy (50-30-20 Rule)
| Category | Allocation (%) | Example (Monthly Income: Rp 10 million) |
|---|---|---|
| Essentials | 50% | Rp 5 million |
| Lifestyle | 30% | Rp 3 million |
| Savings & Investments | 20% | Rp 2 million |
Lesson: By treating all income equally and sticking to structured allocations, individuals gain stability and reduce the risk of overspending.
Mental Accounting in Business
- Businesses are equally prone to biases:
- Treating revenue as profit.
- Spending investor money too freely.
- Overspending after a “big project.”
- Ignoring small operational leaks.
These behaviors can cause cashflow crises, even when profit statements look healthy.
Risks of Mental Accounting in Companies
| Risk | Negative Impact | Solution |
|---|---|---|
| Mixing personal & business money | Chaotic cashflow, tax issues | Separate accounts, fixed Owner Pay |
| Treating revenue = profit | Overspending, unpaid liabilities | Profit First allocation system |
| Spending investor funds carelessly | Burn rate too high, wasted runway | Capital allocation plan with ROI targets |
| Overvaluing big projects | Short-term hiring & over-expenses | Calculate runway, diversify income streams |
| Ignoring taxes & obligations | Legal & reputational risk | Allocate 10–15% revenue to tax account |
| Dismissing “small costs” | Accumulated leaks | Quarterly SaaS/tool cost audits |
Let’s look at two scenarios for a software agency with fluctuating project-based revenue.
Scenario 1: Bias Mental Accounting
| Month | Revenue (M Rp) | Expenses (M Rp) | Net Cashflow (M Rp) |
|---|---|---|---|
| Month 1 | 100 | 90 | +10 (healthy) |
| Month 2 | 200 | 220 | -20 (overspending after big project) |
| Month 3 | 80 | 100 | -20 (deficit) |
Scenario 2: Discipline with Profit First + DIOS
(Allocation: 10% Profit, 20% Owner Pay, 15% Tax, 55% OPEX)
| Month | Revenue (M Rp) | Profit | Owner Pay | Tax | OPEX |
|---|---|---|---|---|---|
| Month 1 | 100 | 10 | 20 | 15 | 55 |
| Month 2 | 200 | 20 | 40 | 30 | 110 |
| Month 3 | 80 | 8 | 16 | 12 | 44 |
- Key Takeaways for Business Owners
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Money is a neutral label, a mental construct.
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In business, bias leads to cash flow gaps, poor capital allocation, and missed growth opportunities.
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Adopting frameworks like Profit First and practicing DIOS (Discipline, Integrity, Optimism, Satisfaction) helps enforce rational, sustainable financial habits.
Bottom line: Mental accounting is natural, but when unmanaged, it becomes a hidden threat. Founders who recognize and systematize money flows gain not only financial resilience but also the freedom to scale with confidence.