Have you ever noticed that losing ₱1,000 hurts way more than winning ₱1,000 feels good?

It’s the same amount, but you feel differently. There's actually a name for that — loss aversion — and it might be behind many of your decisions than you know.

This week on Mental Models for Money: why your brain hates losing more than it loves winning, and what that's costing you.

In today’s edition, we’ll go over:

• What Loss Aversion Is

• Where This Shows Up in Your Finances And Your Life

TLDR;

The Bottom Line

In loss aversion, our brain treats losses as roughly twice as painful as gains feel good. It shows up everywhere. From holding losing stocks too long, making “safe” choices, staying in a job or relationship that stopped working, keeping clothes you never wear. The fix isn't to stop feeling the loss. It's to learn to recognize when fear of losing is the one making the decision instead of you.

The content

So What Is Loss Aversion?

In the 1970s, psychologists Daniel Kahneman and Amos Tversky studied how people make decisions and found something interesting: losses feel roughly twice as painful as gains feel good. So losing ₱1,000 registers as about twice as bad as winning ₱1,000 feels great.

Your brain isn't wired to treat gains and losses equally. Evolutionarily, this made sense because our ancestors who were more afraid of losing resources survived longer than those who chased gains recklessly (those who were more risk-averse tend to live longer because they don’t get eaten by crocodiles or bitten by some scorpion looking for more meat out in the forest). The problem is that this wiring doesn't serve us as well now when we're trying to make rational financial decisions in 2026.

Where This Shows Up in Your Finances And Your Life

• Holding on to losing investments too long.
  You buy a stock at ₱50, then it drops to ₱30. Selling means locking in the loss and making it real, so you hold on and hope it recovers. Meanwhile a better opportunity comes. In this case, loss aversion is keeping you stuck in a stale play.

• Making safe choices that aren't actually safe.
  A lot of people avoid investing entirely because the idea of losing money is scary. So the money sits in a savings account earning 0.10% annually, which when you account for inflation is its own kind of loss, albeit just a slower, less visible one.

  Loss aversion pushes us toward options that feel secure even when they're not the smartest choice.

• Staying in a job that's making you miserable.
  You know the job isn't working. The pay is stagnant, the environment is draining, and you've stopped growing. But leaving feels like giving up stability, so you stay. What loss aversion hides from you is the cost of staying — the salary you're not earning somewhere else and the years you're spending in the wrong room.

• Refusing to let go of clothes you don’t wear anymore.
  That dress you haven't touched in two years or the shoes left in the box to the dust. You keep them because "what if" you need them someday. The what-if almost never comes, but the fear of losing access to something is enough to hold on. This is loss aversion in its most low-stakes, most relatable form.

Actionable Tips for You

How to Use This Mental Model

Step 1: Name it when you feel it.
When a financial decision feels emotionally heavy, ask yourself: am I avoiding a real risk, or am I just afraid of feeling a loss? Naming it doesn't eliminate it but it creates enough distance to think more clearly.

Step 2: Reframe losses as the cost of learning.
Every investor has losing trades. Every person has financial decisions they'd take back. The question isn't whether you'll lose but whether the loss taught you something worth more than what it cost.

Step 3: Focus on the long-term picture.
Loss aversion shrinks when your time horizon expands. A stock dropping 20% this month feels catastrophic up close. Zoomed out over 10 years, it's barely a blip on a chart that trends upward.

Step 4: Make decisions on paper before you make them for real.
Write out what you're afraid of losing and what you stand to gain. Seeing the numbers side by side makes it easier to see when fear is doing the talking instead of logic.

Final Thoughts

The fear of losing is always going to be louder than the excitement of gaining. That's just the math of being human. What you can control is how much weight you give it when it's time to decide.