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GOBankingRates
GOBankingRates
Jamie Stone

4 Signs You’re Falling Into the ‘Wealth Effect’ Trap

pixdeluxe / Getty Images

When your home’s Zillow estimate climbs or your 401(k) balance hits new highs, it’s natural to feel richer — even if you haven’t sold a single asset.

This psychological phenomenon, known as the “wealth effect,” drives people to spend more based on paper gains rather than actual cash. While this can fuel economic growth, it also creates a dangerous trap that can derail your financial stability.

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