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The Behavior Gap: Simple Ways to Stop Doing Dumb Things with Money

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Why do we lose money? It's easy to blame the economy or the financial markets-but the real trouble lies in the decisions we make.

As a financial planner, Carl Richards grew frustrated watching people he cared about make the same mistakes over and over. They were letting emotion get in the way of smart financial decisions. He named this phenomenon-the distance between what we should do and what we actually do-"the behavior gap." Using simple drawings to explain the gap, he found that once people understood it, they started doing much better.

Richards's way with words and images has attracted a loyal following to his blog posts for The New York Times, appearances on National Public Radio, and his columns and lectures. His book will teach you how to rethink all kinds of situations where your perfectly natural instincts (for safety or success) can cost you money and peace of mind.

He'll help you to:

avoid the tendency to buy high and sell low; avoid the pitfalls of generic financial advice; invest all of your assets-time and energy as well as savings-more wisely; quit spending money and time on things that don't matter; identify your real financial goals; start meaningful conversations about money; simplify your financial life; stop losing money!

It's never too late to make a fresh financial start. As Richards writes: "We've all made mistakes, but now it's time to give yourself permission to review those mistakes, identify your personal behavior gaps, and make a plan to avoid them in the future. The goal isn't to make the 'perfect' decision about money every time, but to do the best we can and move forward. Most of the time, that's enough."

178 pages, Hardcover

First published January 3, 2012

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About the author

Carl Richards

3 books27 followers
Carl Richards is a CERTIFIED FINANCIAL PLANNER™ and the director of investor education for the BAM ALLIANCE, a community of over 130 independent wealth management firms throughout the United States. He is the creator of the weekly Sketch Guy column in the The New York Times, and is a columnist for Morningstar Advisor. Carl has also been featured on Marketplace Money, The Leonard Lopate Show, Oprah.com and Forbes.com. In addition, Carl has become a frequent keynote speaker at financial planning conferences and visual learning events around the world.

Through his simple sketches, Carl makes complex financial concepts easy to understand. His sketches also serve as the foundation for his first book, The Behavior Gap: Simple Ways to Stop Doing Dumb Things with Money (Portfolio/Penguin). Carl's art appeared in a solo show at the Kimball Art Center, in Park City, Utah. Other showings include The Parson's Gallery in New York, The Shultz Museum, and an exhibit at the Mansion House in London. His commissioned work is on display in businesses and educational institutions across the country. He lives with his family in Park City, Utah.

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5 stars
418 (24%)
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509 (29%)
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21 (1%)
Displaying 1 - 30 of 224 reviews
Profile Image for Sipho.
381 reviews45 followers
April 2, 2019
3.5 stars

This book is about how and why people typically make bad investment decisions. A very interesting read, as it doesn't fit neatly into the behavioural economics or personal finance genres but straddles both. Carl Richards won't tell you what to do with your money (as most books of this ilk would) but rather attempts to change how the reader thinks about money.

All in all, its a good read but not a 'must read'.

Key Takeaways

1. We Don’t Beat the Market, the Market Beats Us
• Aim for a balance in your investment portfolio that truly reflects your own emotional strengths and weaknesses—so that you won’t feel compelled to jump in and out of the stock market, shifting back and forth between a more aggressive (managing greed) and a more conservative (managing fear) approach
• Before you invest, ask yourself: Are you buying a particular investment because you think it’s a good investment? Or are you relying on a Greater Fool to come along?
• Have a real plan (goals) and find investments to populate your plan
• Face the fact that cash is not a solution to a crisis
• Develop a checklist of questions to ask before you make major financial decisions
• Take your time
• Incorporate new information slowly
• Focus on your own behaviour, not the market’s behaviour.

2. The Perfect Investment
• Financial products should be judged on how well they help you reach your goals
• Judge investment advice not by its outcome but by the validity of the principle it’s based on.

3. Ignore Advice, Make Fun of Forecasts
• When you come across forecasts, remember that no one knows the future. History doesn’t help except to tell us that it’s hard to forecast accurately.

4. Life Planning
• Decide what makes you happy, and then make financial decisions that support those goals
• Money can buy happiness—up to a point. You need some money to be happy, but once the basics are covered the link fades quickly. Second, experiences matter more than objects. Third, happiness sneaks up on you.

5. Too Much Information
• Spend less time watching and worrying about money.

6. Plans are Worthless
• Once you have a general idea of your destination, the focus should shift to what you can do over the short term (the next 3 years)
• Limit your attention to things that (i) matter to you and (ii) you can influence.

7. Feelings
• Investment decisions should be made based on what you know, not how you feel.

8. You’re Responsible for Your Behavior (But You Can’t Control the Results)
• To reach your goals, look carefully at the things you’re doing that you think are helping
• Beware of making decisions for purely financial reasons. Instead, make decisions that square with your notions of virtue, wisdom, and common sense

9. Simple, not easy
• Saving money, avoiding speculative investments, and repeating that process over and over may not be sexy, but it gets the job done
• The simple options that have the largest impact on your financial success require discipline, patience, and hard work
• How can you keep more money in your wallet:
◦ Try a mandatory holding pattern
◦ Go on a multiweek buying fast
◦ Track your spending
◦ Put a price tag on your goals
◦ Take taxes into account
◦ Think about what you’d earn if you invested the money instead of spending it.
Profile Image for Chuck Rylant.
Author 8 books9 followers
August 1, 2012
I've been in the financial planning business for a quite some time and read just about everything in the industry, and The Behavior Gap is truly original thinking. Most of the books in the field are advice driven whereas this book is more about challenging your thinking about money. This forces you to think about challenging questions about how you deal with your finances.

This is a good book for both the consumer and the financial planner. I think a lot of financial advisors tend to get caught up in the nuances of financial planning such as getting a higher interest rate or saving the maximum amount on taxes, but it is really behavior that challenges most people with their money.

People usually know what to do with their money, but they don't always do it. This book addresses those topics and is an important contribution to both the public and the financial planning community.
Profile Image for فادي.
545 reviews817 followers
December 31, 2018
علاقتنا بالمال دوماً متوترة..هذا الكتاب اللطيف ليؤكد لك أنك لست بحاجة لأن تكون خبيراً مالياً حتى تأخذ قرارات سليمة.
رغم أن أغلب الأمثلة مبنية على واقع غير واقعنا العربي لكن فيه بعض الاستلهامات.
كمبدأ الادخار المبكر وكيف أنه عليك تجاهل النصائح من الغرباء وأن كثرة الخطط لا فائدة منها، وكيف أن المشاعر مكلفة حين ترتبط بالاختيار غير الموفق.
أعجبني فيه أمرين:
١- البساطة
٢- الصدق
فرغم أن المؤلف مستشار مالي وخبير تخطيط استثماري إلا أنه لم يمارس دور الخبير في النصح وقال لك بكل اختصار : السوق لا يمكن التنبؤ به أبداً.
بعض الإرشادات التي فيه تصلح للجميع واستمعت حقاً بقراءته.
Profile Image for Joshua Anderson.
34 reviews2 followers
June 3, 2020
This was a quick and easy read and the book addressed what it said it would in the title, our behavior toward money. Most of it dealt with buying stock and investing, which may or may not apply to you, but throughout the book he asks important questions about: your relationship to money, what your goals are, what you must ask yourself when making financial decisions, and more. Some of these questions may not be new or even earth-shattering but for someone who considers themself a novice in the area of finance they are useful.
Profile Image for Rajita P..
266 reviews25 followers
March 20, 2022
หนังสือเล่มนี้ อธิบายจิตวิทยาการเงินการลงทุนได้น่าสนใจและเรียบง่าย
Profile Image for Dawn Lennon.
Author 1 book30 followers
January 21, 2014
So often in sports, commentators will take note how an athlete is playing within him/herself. That's essentially the message I read in The Behavior Gap about dealing with (okay, for some even playing with) your money: Make decisions within yourself that fit your goals.

The book is refreshing in its straight-forward, conversational style; enlightening in its behavioral focus grounded in reality; and encouraging because of its "you-can-do-this" approach.

I've seen people get tied up in knots over money they had or didn't have. I've seen them puff themselves up like fat cats although they were small players. I've heard them moan over the economy, Wall Street, and their losses, albeit temporary. And Carl Richards has too and much more.

That's part of the beauty of this book--Richards' first-hand experience over the years witnessing terrible money decisions and attempting (sometimes without success) to help people reboot their money thinking.

Most readers will see themselves in this book. I did, both in ways that stung and in many ways that reinforced a great many decisions I'd made, in spite of the trends.

The books is simple to read as is the advice. But as Richard writes, the behavior change actions needed aren't easy. He includes a wonderful collection of back-of-the-napkin illustrations that give the reader visuals that help his advice stick.

In all, it's a wonderful book, even an essential one, for most, if not all of us, no matter where we are financially.
154 reviews16 followers
June 6, 2017
a short book on mass mentality about money. different perspective to preaching frugality and goal based investing. nothing absolutely unique except for some interesting anecdote. fun leisurely read.
May 29, 2021
Ето такива книги за финанси искам да чета. Б��ше ми омръзнало от дървени финансисти, които обясняват как единственият начин да забогатеем е да инвестираме в активи, които няма как да не разпознаем веднага, ако имаме добра финансова култура. Пълни глупости! В "Поведенческата бездна" авторът признава, че перфектната инвестиция не съществува и забогатяването за един ден се дължи по-скоро на късмета отколкото на уменията ни. Според него няма най-добра инвестиция, но има най-добро решение. В книгата не се дават напразни надежди да станете следващия Илън Мъск или Марк Зукърбърг. По простата причина, че вероятно изобщо не се занимавате с неща от тяхната област. Съветите са съвсем основателни, целите са съвсем реалистични. Уроците са валидни както за финансите, така и за поведението ви по принцип.
Profile Image for Catherine Gillespie.
759 reviews40 followers
June 5, 2015
The Behavior Gap: Simple Ways to Stop Doing Dumb Things with Money is a personal finance book geared toward people with investments. At the moment we aren’t very heavily investing and we aren't skittish about investing in general, so I found myself saying “yeah, yeah, OK” a lot as I read. However, if you are nervous about the stock market, the book contains a lot of solid advice.

One helpful section offers advice on how to talk about money. Richards points out that often when we think we’re having the same old tense discussions about money, we’re really talking about something else. If you can take a step back and consider what you’re really afraid of or hurt by or frustrated about, you can talk through that issue and then get to the money problem more effectively. Richards also describes ways couples frequently miscommunicate about money and ways that parents can inadvertently freak their kids out about money.

Overall, The Behavior Gap is a quick and easy read, with several helpful points that apply to everyone even if you’re not a skittish investor.

{Read my full review of this book on A Spirited Mind}
Profile Image for Casey Wheeler.
926 reviews39 followers
January 19, 2014
As a matter of disclosure I received this book as part of the 12 Books group with the expectation that I would participate in the discussion on Goodreads and post a review on that site, Amazon and my blog.

I found author Carl Richards book to be an easy to read and insightful. The chapters are concise and do not drift in to overkill on any of the subjects he discusses. The premise for the book is about being smarter with your money, but I found that it also translates into making useful life decisions. This actually resonated more with me as I am older and have followed a conservative investment strategy of being in it for the long haul rather than trying to guess what is going to happen in the market and taking a bath as a result.

In addition, I really enjoyed the diagrams throughout the book. Some of which were on napkins like they were developed during a conversation over drinks. The one following this paragraph was my favorite.

I strongly recommend this book, especially for those who are in the beginning stages of their life journey, to anyone who is looking for a practical guide to making better decisions regarding your financial future and life in general.
Profile Image for Glenn.
78 reviews
January 10, 2019
TLDR - A financial planner trying to explain human behaviour regarding money.

The irony - Carl writes about avoiding advice from unsubstantiated sources e.g. the brother in law who has a hot stock tip, and yet if you want to know about human behaviour, you should really source that information from psychologist rather than certified financial planner. (Alternatively, try reading 'You are not so smart' by David McRaney, who, although not a psychologist, actually compiles and lists a bibliography of sources and legitimate studies & trials for his claims.)

Positives - The diagrams are simple and thought provoking.
Profile Image for Ahmed Awami.
22 reviews7 followers
March 1, 2017
I wished the book was going to dig deeper into behavioral economics and why we behave the way we do. But it turned out to be a beginner's level mainstream book.
In chapter 4 he got philosophical and talked about how capitalistic societies evolved to pursue wealth and falsely equate wealth to happiness and success.

3-stars book, but chapter 4 was excellent and hence the 4 stars.
Profile Image for Abeer Alamri.
207 reviews53 followers
January 26, 2018
الكتاب باختصار ذكر هالنقاط:
-لا تستثمر فلوسك في الاسواق الاستثماريه
- لا تشتري وتبيع لما الناس يبدون يشترون شي ويبيعونه، استثمر فلوسك بشي يناسبك انت مو الناس
- المستشارين الماليين لا تثق فيهم
- الادخار البسيط المضمون افضل من الاستثمار ، كل ماكان العائد اكبر كل ماكانت الخطوره اكبر

عيوب الكتاب:
-التكرار الممل جدا جدا خصوصا من الفصول الاول للخامس
- اتوقع لو وضع هالكلام بمقال افضل من لو وضعه بكتاب لان اغلبه حشو وتكرار منفر.
3 reviews1 follower
September 4, 2018
Anecdotally (and to some degree, analytically) introduces the concept of a "behavior gap," which befalls all of us - frequently in our investments, we act on emotion rather than rationality, costing us incalculable amounts of money, time, anxiety, and freedom in the long run. Interesting graphics combined with a bit of wit and humor makes it extremely approachable, even for those without finance backgrounds.
Profile Image for Veselin Nikolov.
25 reviews2 followers
January 12, 2020
What's the role of money in your life?
This book does not contain the answers. But it sure contains a lot of erroneous perceptions about money, investing and the usual conversations around them. Included you will find several "vectors" of thinking about money, than can help you find the answer that is correct for you. So glad that I was able to read it.
Profile Image for Adam Davis.
62 reviews1 follower
December 28, 2022
I really enjoyed this book - more than I anticipated. I'm still new to the world of investing and I thought the points were expressed clearly and in a concise manner that really helped them hit home. I highlighted so many points throughout. Would definitely recommend.
Profile Image for Vadim.
191 reviews26 followers
September 14, 2020
Простая, но важная для собственного понимания и составления личного финансового плана книга.
Profile Image for Lucas Westby.
2 reviews
June 13, 2018
Carl is a master at packing a punch with simple concepts. This is a must read for those looking to gain a self awareness of self-destructive tendencies in financial decision making.
Profile Image for Egor Gurev.
43 reviews1 follower
June 16, 2021
Просто обалденно полезная книга, наверное лучшая что я находил про то, что стоит делать с деньгами и как стоит думать про них. Уоррен Баффет даже близко не писал про это. Всем читать и применять на практике.
33 reviews6 followers
January 20, 2014
I got a kick out of this book because Carl has it down pretty good. I believe I have made just about every mistake he spoke of in the Behavior Gap.

Got "Financial foundation" plans from more than one adviser, day traded in 2000+, bought high and sold low regularly, bought gold bouillon, bought a stock at a high and watched it go to zero, and the list goes on not only in financial matters, but life matters as well.

I read lots of finance books, Bogel, Bernstein, Malkiel, Buffet, the Gardners, covering topics like Modern Portfolio Theory, Efficient Market Hypothesis,the Efficient Frontier, and of course Index Funds. Add a healthy dose of self improvement books, yet the behavior gap persists. Richards suggests as a reason that we assume what we know is more important than what we don't know. On the contrary, I regularly say I don't know what I don't know, so how can I fix it in advance?

If I could go back in time and add The Behavior Gap to my reading list in 1998, would it all have been different? Would I have seen the light and not made any of these mistakes? Unfortunately, I doubt it. Why? Because there will always be decisions to make and emotions that get in the way no matter how many books I read and try to change it.

Richards cautions against making decisions purely for financial reasons and suggests instead we should make decisions that square with our notions of virtue, wisdom, and common sense. Great advice, and I'd venture to say that most think they already do.

I'm giving a copy of this book to my kids who are in their 20's. I'm hoping they can skip "the gap".
Profile Image for Sean Liu.
103 reviews92 followers
January 15, 2016
This book is about money, but it's really about human psychology when we are at our most primal state—that is, when we're thinking about money.

When it comes to money, people are notoriously bad. We do things we KNOW are illogical and silly just because our brains are wired to tell us to do them (i.e. becoming interested in stocks when they become expensive [because they become expensive] and then selling off when they become dirt cheap). The media knows this and everyone and their dog claims to know more about what's happening in the markets because they profit from it, either from actual money (i.e. ad revenue or commissions), or just feeling superior (pompous jerks at dinner parties). In other words, just about everyone will try and sell you financial "advice". This book is the only advice worth reading because it tells you to ignore all the pundits and so-called experts, and stick to your plan (once you figure out what your financial [read: life] goals are).

Richards is your clear-headed and disciplined smart friend who stays calm when everyone else is freaking out. Listen to him. Read this book.
Profile Image for Kara.
504 reviews11 followers
February 26, 2018
3.5 stars. This short book (>200 pages) is a very fast read, and speeds along even more quickly due to the high number of illustrations/napkin diagrams. Richards focuses mostly on investing as opposed to other aspects of personal finance such as such saving money or paying off debt. I wish he had gone deeper into the research; as it stands now, the book stays pretty surface level and reads like a collection of conversation advice from your neighbor (granted, a neighbor who has spent decades in the financial planning industry, but still). A lot of this advice is common sense, such as the fact that you shouldn't trust specific finance advice unless the person giving it knows the details of your situation — although considering how many people gobble up books by finance "experts" they've never talked to (Dave Ramsey, Suze Orman, etc.) more people need to take this advice to heart. Not a particularly insightful book for me personally given where I'm at in my life, but I can see how others would find it very helpful, especially if you don't know much about behavioral economics.
Profile Image for Emily.
23 reviews4 followers
June 21, 2017
An interesting read. I was looking for a book more geared towards buying and spending habits rather than stock investments. The last few chapters hit on some of this, but it felt like a winding road to get there. I wish he would have given better real life examples -- most seemed only half thought out. This book is memorable though -- his biggest advice is not to trust "experts" completely, as they often have different motivations than you. He is an expert, so by the end, he's telling you not to completely trust his advice.
Profile Image for Alain.
25 reviews
March 12, 2022
Decent book but from the title I had slightly wrong expectations. The major part of the book tries to teach basics about the stock market (Don't try to predict the future or beat the market, don't buy high and sell low, don't let emotions take over your decision-making, etc). I expected some more general content (related to "stop doing dumb things with money").

All in all the book is ok but I think the cover/title is misleading
Profile Image for Jeannette.
780 reviews17 followers
January 9, 2015
A quick easy read about reducing your fears about money and trying to make realistic choices about your financial situation. It's a pretty slim book and there's not a lot of meat - just general common sense advice, and a lot of napkin doodles, but it's a good starting place.
Profile Image for Brian Weisz.
280 reviews7 followers
July 2, 2017
I thought it was kind of simplistic. The information is true, as far as it goes. Richards suggests financial health is more about financial behavior than financial knowledge - and I agree with that - but he doesn't really address behavior or knowledge in this book.
Profile Image for John Browning.
110 reviews2 followers
July 31, 2019
Quick read full of simple truths we all need to be reminded of. As someone who works in this field I have seen that these simple truths are easier said than done. The benefits are tremendous if you can consistently apply the ideas held within these pages.
Profile Image for Nuttawat Kalapat.
616 reviews38 followers
July 26, 2021
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Profile Image for Janice.
542 reviews
July 15, 2015
Skimmed. The research data behind some of the choices and behaviors that we make regarding money was interesting. The general pointers were not really new information.
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