WHY IS IT SO PAINFUL TO GIVE UP P5K?

Why is it so painful to give up P5K, even when doing so could protect you from a much bigger loss?

Recently, I wondered what would happen if I lost my phone or credit card and someone racked up hundreds of thousands of pesos in unauthorized charges.

So I considered leaving my main credit card at home.

The problem? It earns me around P15K a year in cashback. The alternative was another card through Apple Pay, which is more secure.

My AI friend suggested a compromise. Most of my big recurring expenses were already on auto-charge, so I could leave the card home and still earn about P10K a year.

I’d give up just P5K a year to reduce my exposure to theft.

Perfectly reasonable.

Except I couldn’t bring myself to give up that P5K.

Here’s the funny part. If an insurer offered me fraud protection for P5K a year, I wouldn’t hesitate to pay.

Yet as cashback I’d no longer earn, the same P5K felt like a loss.

This is loss aversion: losing something hurts more than gaining the same amount feels good.

And I see the same thing with lessors.

The last tenant paid P200K a month, so the owner insists the next one should too.

The unit has now been vacant for eight months.

Say the market today will only bear P170K.

Had he accepted that from the start, he’d have collected P1.36 Mn by now. Instead, he’s collected nothing while still paying dues.

All for an extra P30K a month. At that rate, it would take almost four years to make up for eight empty months.

Yet the P30K discount feels like a loss. The P1.36 Mn he never collected doesn’t.

That’s because the P200K has become his anchor. Anything below it registers as a loss, even when the real loss is the rent he isn’t collecting.

Of course, there may be perfectly good reasons not to lower the rent. But “the last tenant paid more” isn’t necessarily one of them.

Sometimes, the hardest part of making a financial decision isn’t accepting an actual loss. It’s letting go of a gain we imagined was already ours.