McGraw, assistant professor of marketing at the Leeds School of Business at CU-Boulder is an expert in a field called mental accounting – an area of study that examines how people categorize money.

A few years ago, McGraw, along with Jonathan Levav, a professor at Columbia University, got to talking about how people could, in certain circumstances, have mixed feelings about unforeseen windfalls (it might be money you won via a lottery, bingo, gifts from relatives, a 10-spot you found on the sidewalk or any money you didn’t expect). Then the two wondered how those mixed feelings might affect how people would choose to spend the money.

In a study published last year, “Emotional Accounting: How Feelings About Money Influence Consumer Choice,” the two set out to learn more. In one experiment, McGraw and Levav surprised participants with $2 for completing a task. Half were told the money came from a grant donated by a leading computer manufacturer (this is money they call “positive” money, money associated with positive feelings), and the other half were told the money came from a cigarette maker (“negative” money, linked to negative emotions). Those given the cigarette windfall were twice as likely to buy something more virtuous such as textbooks instead of something frivolous like ice cream.

McGraw says when people spend negative money it’s really about protecting their ego – they spend that money in a way that makes them feel better. And psychologists say we’re good at this – we’ve learned how to shake off bad feelings easily.

“People are highly motivated to remove negative feelings,” he says. “In psychology, it’s called affect regulation.”

McGraw, whose early interest was psychology, says marketing gradually won his affection. Still, his research mixes both, and his current work examines decision making and emotion.

“I’m interested when these two topics intersect” he says.

Adding to McGraw’s conclusions, James Gross, a Stanford University professor and a leader in the field, says people are very capable of avoiding situations that make them unhappy and employ many strategies to reinterpret situations in a more favorable light.

“If I find money that’s obviously someone else’s, this threatens my positive sense of self,” Gross says. “So I find a way to spend the money to justify my actions. I may tell myself I needed the money for an important cause, and so it was OK that I took it.”

More practically, David Adler, author of Snap Judgment, a book about avoiding money mistakes, says one implication of the study is to realize you’re more likely to spend unanticipated cash faster than anticipated money, such as a paycheck.

“With paychecks, you’ve probably already mentally decided what to do with the money,” Adler says.  “The sudden windfall is a surprise and unaccounted for, and so you spend it.”

Doug McPherson is a freelance writer in Centennial who says he rarely meets with unexpected money. But when it happens, you’ll likely find him celebrating with food that’s bad for him.

At CU, you majored in advertising, not business …

You can’t invest successfully without conducting thoughtful research — a skill I learned at the journalism school.

You retired before the age of 40 after helping build an investment firm to over $5 billion in assets. Why CU?

I moved back here, brought my family and got off the beach in California because I wanted to make a difference. I’m a parent. I have five children. Outside of being a good father, it is the best way I know to change the world: to provide more money for education. I’m drinking the Kool-Aid here. One, it’s for my alma mater. And two, I really believe in what we’re doing.

So when will the economy get better?

The economy doesn’t turn around until housing prices stop dropping. We are about 2 ¾ years into what’s historically been about a four-year cycle.

We’ve seen this movie before. You look at Sweden and Norway in the early ’90s. They went through massive bank deregulation. The banks made a lot of risky lending, housing prices inflated dramatically, banks got in trouble, housing prices dropped and there was a gradual, slow re-inflation of housing prices.

How does managing nearly a billion dollars differ from managing a smaller sum?

Since endowments live forever, we can make decisions that have a very long-term payback. So our tolerance for risk is higher. Most individuals wouldn’t invest in Australian farmland, sheep and cattle. We can because we think it’s going to have significant return over the next decade.

That’s something the CU Foundation invests in?

It is. I spent some time in China over the past year and the increase in disposable income is dramatically changing the typical diet. If you get a few more dollars in your pocket, you eat a little less rice and a little more protein. Australia has a significant export market there.

How should individuals invest their money?

Everyone should have a plan. But I tell people, ‘If it’s not your life’s work, go hire a professional.’ It’s what I do nearly all day, every day and at night, and I love it and I’ve been doing it my entire career. If you’re a doctor and you’ve spent your entire career as a doctor, you shouldn’t be expected to be a professional money manager on your nights and weekends.

Any CU anecdotes?

I collect books. Actually, books collect me. About 15 years ago I was on campus and it appeared the entire university had only a few complete sets of yearbooks. So I started collecting yearbooks to give a full set to CU. I’ve got a little over 80 volumes now.

What’s funny is I’ll get an e-mail from someone who says, “My grandfather ran track for CU in the late ’30s. Can you get a picture for me?”  And I’ll scan it and send the picture. It’s a fun way to connect people’s families.

Alumni with rare CU yearbooks can contact Chris Bittman at Chris.Bittman@cufund.org.