Financial Word of the Day: Anchoring
- Larry Jones
- 8 minutes ago
- 2 min read
Ever catch yourself clinging to the first number someone throws at you—like it’s gospel truth? Welcome to the mental trap called anchoring. In the world of money, anchoring happens when we rely too heavily on one piece of information (usually the first thing we hear), and it ends up shaping every decision afterward—even if the number is completely random.
Anchoring is sneaky. It grabs our brain, plants a flag in the first number we see, and says, “Yeah… let’s build everything off that.” The problem? That number may not be logical, fair, or even remotely true. Yet we still use it as the measuring stick.
A Simple Definition of Anchoring
A behavioral bias where we fixate on an initial price, value, or piece of information and use it to make ongoing decisions—often leading to bad financial choices.
Where You’ll See Anchoring in Real Life
Buying a car: The salesperson starts with a high sticker price. You think you’re getting a deal when they knock off $2,000. Meanwhile, they anchored you into thinking the car was worth far more than it might actually be.
Salary negotiations: An employer mentions a starting range; suddenly that number becomes the benchmark, even if your experience is worth far more in the job market.
Investing: You buy a stock at $100/share. Even if it drops to $60 and the company’s outlook tanks, you keep holding because your anchor is “I’ll sell once it goes back to $100.” You’re attached to your past, not reality.
Anchoring makes you chase numbers instead of truth.
Quick Example Conversation
Friend: “This house started at $650,000, but they’re willing to sell for $600,000. What a deal!”
You: “$600,000 might still be overpriced. Its value isn’t based on where they started—it’s based on what it’s worth now.”
High five—you just escaped a financial trap.
Why Anchoring Hurts Your Money
Anchoring blinds you to:
Better alternatives.
Updated information.
True market value.
Wise decision-making.
It tricks you into comparing everything to a starting number rather than asking, “What’s this really worth?”
That’s like going to the grocery store and thinking the clearance donuts are a bargain—just because they used to be $6.99. But let’s be honest… if they’re hard enough to use as a hockey puck, you’re not saving money.
How to Outsmart Anchoring
Compare with multiple sources (not just one price or opinion).
Ignore what something “used to cost.” Focus on today’s value.
Set your own criteria before you shop or negotiate.
Use data, not feelings or price tags, to determine value.
When you walk into a negotiation, store, or investment decision with your own criteria, you’re the one holding the anchor—not them.
Final Takeaway
Anchoring wants you to believe you’re making smart choices—while it quietly manipulates your wallet. The antidote is simple: question the first number, seek real value, and set your standards before you start shopping or investing.
If you don’t set the anchor, someone else gladly will—and they won’t do it for your benefit.
Stay wise out there. Your future self will thank you.
