Why Smart People Make Big Money Mistakes And How To Correct Them: Lessons From The New Science Of Behavioral Economics
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Why Smart People Make Big Money Mistakes And How To Correct Them: Lessons From The New Science Of Behavioral Economics

3.88 of 5 stars 3.88  ·  rating details  ·  336 ratings  ·  42 reviews
Why do so many otherwise smart people make foolish financial choices? Why do investors sell stocks just before they skyrocket -- and cling to others as they plummer? Why do shoppers overspend when using credit cards rather than cash? What do our habits of tipping or buying lottery tickets indicate about our relationship with money?

In this fascinating investigation of the w

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Paperback, 224 pages
Published April 6th 2000 by Simon & Schuster (first published 1999)
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Andrew Mutch
This book made for a quick yet informative read as the authors explored behavioral economics and explain why what we intuitively think is right or best for us financially isn't always so. If you've read titles like "Freakonomics", quite a bit of the material may seem familiar. But unlike "Freakonomics", the authors spent more time focusing on the basics of behavioral economics so that you can understand the key concepts that drive this field of study. First published in 1999, I was concerned tha...more
Jack Cheng
This is a great book: fun to read with lots of great information, not strictly financial advice but an exploration of behavioral economics (using psychology to explain some of the choices we make that seem at odds with our best interest). Chapters are introduced with a story and you are asked to react; the authors then explain how the situation or presentation influences your choice.

The last chapter summarizes the book. Here are the major points I took away:

-mental accounting can be good (setti...more
Mona
I found this book fascinating. So fascinating that I read it in one four hour flight with yapping seat partner.

It looks at behavioral/psychological reasons we make the choices we do with our finances. The games and quizzes illustrate just how common our decisions are and explains why we make those choices.

I learned that I'm not as different or savvy as I thought I was. Also, some great financial tips and ways to gain different perspectives to help us make wise financial choices.
Lisa
Quick read, but not enough original or thought provoking content to make it memorable. There are other more worthwhile books out there that cover similar themes. The advice was too generic to be applicable/practical and some of the more interesting concepts were given too simplistic a treatment to make them engaging. It probably would have been interesting and novel to someone who hadn't read any behavioral economics books before.
Jered Skousen
Why Smart People Make Big Money Mistakes
Gary Belsky and Thomas Gilovich

This book looks at the behavioral psychology of why people make the financial decisions they do.

Chapter 1 – Mentally categorizing money
We place different values on the same dollar amounts. Often, money that comes as a bonus, for example, we treat much different then money we earn.
This can be detrimental if we are paying high credit-card interest, and keeping money in a savings account for a rainy day – as long as the rainy da...more
Janos Fejos
It was nice to read about the common beliefs people have about their financial thinking and money management. Actually I bought this book to read more about behavioral economics. I'm kind of into that topic. I expected this book to be a little bit more investigative and to come up with more real examples to prove its point. Surely enough there are many professional terms mentioned but they're not explained in details. It's informative but for a rapid read. When I began reading some of the chapte...more
Mark
Dec 18, 2007 Mark rated it 3 of 5 stars
Shelves: money
Basic behavioral economics that cites the same studies as several other books (who knows - maybe this book distilled those studies first, but I read it later).

As a first book on the subject, it might be quite useful. There's no doubt that our own behavior can be a detriment in many ways to our desire to save money, invest wisely and spend carefully. And this book cites a good dozen or so common problems a middle class person may come up against: Allocation of assets, the real cost of debt, oppor...more
Alice
So far, this book is incredibly eye-opening. I like the simple, friendly writing style, the hypothetical questions and narrative examples, and the fact that the very basic and easy-to-follow prose still references the scholarly background of each idea so the reader can follow up in more detail on her own.

I have noticed many of my own patterns in the examples in this book, and I think I will continue to do so as I go along. THe advice is very clear, ranging from "if you do this, cut it out," to...more
Amanda
I can't recall what made me order this book from the library; it took forever to arrive. But, whatever the reason, I'm glad that I did. The book was well written, conversational, and provided sound information. Thankfully, I do not find myself making most of the common money mistakes they talk about, though I find the psychology behind it all interesting. This is definitely not a "how to" book, so if that is what you're looking for, this book is not for you. I think the best thing I'm taking awa...more
Shaun
This book was okay, but I didn't really learn anything new that I hadn't already learned when I read the book "Nudge" which I recommend. This book speaks to how we make decisions in life regarding money and how things like our mood, the weather and other factors affect how we make decisions regarding how we spend money and our money spending patterns and habits. I found it fascinating that people follow the herd regarding investment decisions, instead of buy low, sell high, people usually do the...more
Lisheng Zheng
A great that you can learn many life-long tips which definitely help you live a wiser, wealthier and better life.
Words Deeds
One of the first accessible books about the growing field of behavioral economics. It observes cognitive biases discovered by economists and tells them anecdotally for the most part. Like most of these books, however, it only explains the mistakes made, unweaving the rainbow so to speak. That said, once you learn the mistakes your brain makes, it doesn't exactly make it any easier to correct them. And rainbows are still beautiful.
Ben Edwards
I really love how this book explains the behavioral side of financial decisions. The reason I think these insights are so valuable is that if you can understand why you're making bad decisions it makes it easier to spot circumstances that might lead you to making a money mistake.

If you can be aware of the situations that might taint your financial decision making capabilities then you can try to avoid them.

Great book!
Kevin
May 17, 2008 Kevin rated it 4 of 5 stars
Recommends it for: everyone
This was a great book and I'd recommend it to anyone who buys or sells things personally or professionally (and yes, that translates to everyone :)).

If you would by this book immediately, if I'd sell it to you for 50% off but wouldn't like to save $6.50 off the purchase of your next computer, you need to read this book.


The first chapter of this book was amazing. I think it it is a must read for everyone.
Dana Kraft
This book was published in 1999, and many of the authors' recommendations have become conventional wisdom in personal finance circles. I like how they started each section with a general theoretical concept, then grounded it with (mostly) realistic examples and "warning signs" that you may be falling victim to a specific fallacy mistake. So, I liked the book, but didn't really learn much from it.
James
Good intro on Behavioral Economics. I find this topic very interesting from the perspective of a financial advisor as I watch clients make money decisions. A very quick read so recommended to anyone who might be interested in a primer on the basics of behavioral finance. Also, since it is written for the non-finance professional, there is no lingo or advanced content to overcome.
Kara
This is a completely different take on managing your finances. The authors apply behavioral psychology to peoples' financial behavior and motivations. I am a very responsible budgeter and saver, and I still saw myself in this book. The authors sum up with a brief chapter on how you can change your wicked ways. This is a library book I plan to buy for my own bookshelf.
Dara
A fine book - the only reason I didn't rate it higher is that if you've read any of the popular literature about behavioral economics before, you will be familiar with the bulk of the book. The authors do a good job of relating those conclusions to financial matters, but knowing the "wow, people ARE irrational!" experiments removes some of the more interesting parts.
Tyler
I loved this one! If you're at all interested in cognitive science or behavioral finance, this is a great intro to the subject. Each chapter begins with a scenario where you have to choose the best course of action, then points out the process our brains go through to make these choices. You will learn a lot from this book, I highlighted stuff on every page.
Northern Credit Union
This is a fun financial read packed with fantastic tips and advice for being smart with your money. It takes a look at behavioural psychology and why we make the choices we do when it comes to money. Have you ever asked yourself, ‘Why did I just buy that?’ If the answer is ‘yes’, then you will love this book!”
Tammy Ambeault
Branch Manager, Richards Landing
Joe
This is a pretty good introduction to a tough topic. The only real bad points: their explanation of the Monty Hall solution was even more confusing than the Monty Hall problem and I didn't think they did a particularly good job resolving some of the blatant contradictions between some of their advice. Still, a quick read, and worth it.
Dej
a good book in my quest for financial education. its a Quick read, really excellently written, and mostly based in psychology. worth skipping to the end and reading the summary and also worth reading in cunjunction with Other texts. my limited learning already disagrees with some of their principles.
Erin
This is a great book to start thinking about your money. It is not over the top sophisticated and it gives the information in a format keeps you reading. Practical advice about money management and how to change a few small things to help your financial situation.
Alma
outlines faulty decision making processes behind investing decisions and, amongst other things, concludes that the majority of people would be better off investing in index funds. Future reading: "How We Know What Isn't So", Amos Tversky, Daniel Kahneman.
Brian
Good book about human errors when making decisions, focused on those regarding financial transactions, and provides strategies for coping with these limitations. A bit dated, but worthwhile insights into your everyday (expensive) habits.
Jim
Read along side Nudge. This one is geared toward enabling better personal decision making. The organization is highly structured with in depth summaries. But Freakonomics was more fun to read.
Natalie
I thought Freakanomics and Predictably Irrational were better. This is a variation on the same theme, but written at a more practical level rather than a revealing series of studies. Helpful.
Vincent
An easy-to-read introduction to the subject of behavioral economics. It doesn't cover any ground that other books on the topic omit, but it is enjoyable and accurate.
Sarah
This was like an economic Malcolm Gladwell book: lots of fascinating information that got a bit repetative in the end but still worth reading for the knowledge gained.
Brett W.
Read it multiple times! Very good insight and thought behind spending. Great book for someone looking to get a little better grasp on personal finance.
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