Sometimes, we think we're acting in our own best interests but are actually working against them. Do you ever compare prices on a restaurant menu, and think that you're acting favorably by ordering something that's not the most expensive entree on the menu? Of course. But your entree only seems reasonable because there's something else that costs more.
Behavioral economist Dan Ariely explains why it's important to know your budget before buying anything. He said, "When you open a menu at a restaurant, you may not realize that the prices you see affect what you're willing to pay. If the most expensive entrée is $45, you might decide $30 is an acceptable price. Should the restaurant add a $60 dish, you may be willing to pay $45. The same issue comes up when shopping for real estate. Letting a broker show you a house above the top of your range can be costly."