A client, John, has received a $10,000 bonus at work. He immediately decides to use the entire amount to purchase a new expensive watch, despite having outstanding credit card debt with a 19% interest rate. He views the bonus as 'found money' separate from his regular income. What behavioural bias is John demonstrating?

Question: A client, John, has received a $10,000 bonus at work. He immediately decides to use the entire amount to purchase a new expensive watch, despite having outstanding credit card debt with a 19% interest rate. He views the bonus as 'found money' separate from his regular income. What behavioural bias is John demonstrating?

Answer options: ✅ Mental Accounting

• Anchoring
• Recency Bias
• Loss Aversion

Correct answer: Mental Accounting

Explanation: Mental accounting refers to the tendency to treat money differently depending on its source or intended use, leading to suboptimal financial decisions. John is categorizing his bonus as 'found money' and separating it from his existing debt, preventing him from using it for the most financially beneficial purpose.