Historically, humans were considered rational beings when it came to financial decision-making, easily forecasting benefits and risks. However, the advent of behavioral economics has challenged this notion, revealing that people often make irrational choices when managing money. Professor Romāns Putnis highlights the concept of 'homo economicus,' which suggests that people should ideally make rational decisions. Nonetheless, he argues that human behavior does not align with this notion, as people are influenced by irrational tendencies when spending.

Behavioral economics, as a discipline, integrates psychological, emotional, and social factors into the economic decision-making process. Ieva Siliņa emphasizes that this approach looks into real human behavior rather than ideal decisions, focusing on what choices people actually make rather than what they should make. This field emerged in the 1970s and 1980s, marking a significant shift in understanding consumer behavior and economic principles.

The insights from behavioral economics have significant implications for understanding spending habits, policy-making, and financial education. By acknowledging the irrational aspects of decision-making, economists can better predict consumer behavior and suggest strategies that account for these human tendencies. This evolving understanding also raises questions about how to guide individuals toward more rational financial choices while recognizing their emotional and psychological constraints.