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The Behavior Gap

Carl Richards

3.72 · Rating details · 1,389 ratings · 193 reviews

"It's not that we're dumb. We're wired to avoid pain and pursue pleasure and security. It feels right to sell when everyone around us is scared and buy when everyone feels great. It may feel right-but it's not rational."
-From The Behavior Gap

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.

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Kindle Edition, 195 pages

Published January 3rd 2012 by Portfolio

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Jul 31, 2012 Chuck Rylant rated it it was amazing · review of another edition

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 u ...more

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Jun 03, 2020 Joshua Anderson rated it really liked it · review of another edition

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 a ...more

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Jan 02, 2014 Dawn Lennon rated it it was amazing · review of another edition

Shelves: business

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 mo ...more

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Jun 06, 2017 Mehdi Hassan rated it really liked it · review of another edition

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.

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Apr 02, 2019 Sipho rated it really liked it · review of another edition

Shelves: psychology, personal-finance

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 ...more

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Jun 05, 2015 Catherine Gillespie rated it it was ok · review of another edition

Shelves: finance

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 havin ...more

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Jan 03, 2014 Casey Wheeler rated it really liked it · review of another edition

Shelves: business, self-improvement

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 deci ...more

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Mar 01, 2017 Ahmed Awami rated it really liked it

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.
...more

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Sep 04, 2018 Jp Young rated it really liked it

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. ...more

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Jan 12, 2020 Veselin Nikolov rated it it was amazing · review of another edition

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. ...more

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Feb 13, 2017 Alex Hayes rated it did not like it · review of another edition

Good advice but nothing real insightful.

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Jun 13, 2018 Lucas Westby rated it really liked it · review of another edition

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.

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Jan 19, 2014 Pam rated it really liked it · review of another edition

Recommended to Pam by: 12 books group

Shelves: finance

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, cover ...more

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Jan 12, 2016 Sean Liu rated it it was amazing · review of another edition

Shelves: all-time-favorites, the-mind

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 ...more

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Jan 08, 2015 Jeannette rated it liked it · review of another edition

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. ...more

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Jul 31, 2019 John Browning rated it really liked it

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.

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May 25, 2015 Janice rated it it was ok · review of another edition

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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Dec 07, 2020 Jon added it

I used to stop in at The Behavior Gap blog every so often, and enjoy his cocktail napkin graphs or Venn diagrams illustrating some tidbit of financial wisdom, so I was excited to see that author Carl Richards had written a book, which turns out for the most part to be a compilation of many of the subjects he wrote about on his blog. Richards is a certified financial planner and runs a capital management company in Utah, as well as writing and speaking about money, so he definitely knows his subj I used to stop in at The Behavior Gap blog every so often, and enjoy his cocktail napkin graphs or Venn diagrams illustrating some tidbit of financial wisdom, so I was excited to see that author Carl Richards had written a book, which turns out for the most part to be a compilation of many of the subjects he wrote about on his blog. Richards is a certified financial planner and runs a capital management company in Utah, as well as writing and speaking about money, so he definitely knows his subject, albeit with a twist most financial planners don't have.

The title of the book refers to the difference between the overall return on investments in the stock market and the actual return that the majority of investors get. When the market as a whole goes up, for example 10%, individual investors on average are only getting 6%, and Richards calls the difference, which is caused by irrational or emotional behavior on the part of investors, the Behavior Gap. The book attempts to help us to understand those incorrect behaviors and to quit losing money over them.

Of course, the most common mistake that people make, which I know I personally saw happening during the economic meltdown of 2008, is to buy high and sell low. When all the word on the street is exciting, and prices are going up up up! everyone wants to jump on the bandwagon and buy more stocks - at precisely the time when they should be wary, and should hold or sell, instead. Then, when the market begins its inevitable correction, people tend to be fearful and to sell everything they bought at high prices, locking in losses. When the market is down is the best time to buy, instead. However, it takes a cast iron will and a strong stomach to buck the trend and not follow the herd in these situations.

Another problem is overconfidence. In a bull market especially, investors are prone to thinking that their investment decisions are bulletproof, and will often make decisions about where to invest their money without enough analysis. Richards suggest three questions to ask yourself and to go over the answers with someone you trust before you make an investment decision, which he calls the OC (Overconfidence Conversation):
1. If I make this change, and I am right, what impact will it have on my life?
2. What impact will it have if I am wrong?
3. Have I been wrong before?
Question 3 seems a gimme, but...

I liked what he had to say about the Greater Fool of stock market lore. The most recent example was in the run up to the housing crisis recently, when it seemed everyone was speculating on the rapidly rising price of homes, either using their paper home equity as an ATM by taking out more and more loans, or buying up properties and hoping to sell them after a short period of time for a profit. I was watching all of this happening, as well as the mass migration of previously sane engineers, salesmen and others into the professions of real estate broker, mortgage broker and loan officer, and wondering how long it could go on; how people were affording homes that had skyrocketed in price past all sane loan and budget guidelines. It seems that, when you're doing something dumb, whether it's buying high priced real estate or beanie babies, the only way out is to hope someone else is dumber, and hope they'll come along and take your investment off your hands before the bubble bursts.

It's often difficult to ignore the noise, to hold a steady course with your financial plan (which Richards suggests creating with the help of a professional and then following no matter what Jim Cramer says), while the media is screaming about the end of the world or about old rules no longer applying. Richards says that people are often surprised, in conversations with him at social events, given his profession, at his lack of interest in what the stock market as a whole, or individual investments, are doing. If pressed, he tells them that he helps "people make smart decisions about money so they can build and protect their wealth over time" and that "the ability to build and protect wealth is often inversely related to knowing what's going on in the market." Very refreshing.

This book is a quick, accessible and interesting read. There are lots of his sketches, helping to make what seems complicated very simple, scattered throughout the book. Even if you know nothing about the stock market or about investing, it will all make perfect sense. ...more

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Dec 06, 2019 Kaustav Banerjee added it

Well,
With a lots of hope, I started reading this book but somehow, unfortunately my expectations got hurt. It turned out completely investment's book wheres I was seeking for something other stuff. Moreover Richards has exaggerated to explain a simple idea unnecessarily which doesn't make any sense in the book. Really confused whether it is supposed to be given the icon of a good book or not because there are lots of great are flagging you up if you are really interested in investing. Yes it ca ...more

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Mar 19, 2017 Julie Bestry rated it really liked it · review of another edition

This isn't an exciting book -- and that's the point. Richards' main point to get across to readers is that there's no magic wand, there's no shortcut, there's no one perfect tip from a broker or CNBC or The Economist or your brother-in-law that's going to get you rich. And that's OK.

Instead, this slim volume is designed to tell those who don't, deep-down, already know the foregoing, and to remind the rest of us who do know, and he digs into a layman's (not a therapist's) approach to the psycholo This isn't an exciting book -- and that's the point. Richards' main point to get across to readers is that there's no magic wand, there's no shortcut, there's no one perfect tip from a broker or CNBC or The Economist or your brother-in-law that's going to get you rich. And that's OK.

Instead, this slim volume is designed to tell those who don't, deep-down, already know the foregoing, and to remind the rest of us who do know, and he digs into a layman's (not a therapist's) approach to the psychology behind why we do look for the quick fix or the bass-ackwards behavior, and why we shouldn't. One lesson we have to learn over and over, whether it's with work, or our health, or our finances: "We often resist simple solutions because they require us to change our behavior." Simple truths that we all resist -- these are the points of Richards' book, and yes, simple truths can be disappointing when we want a magic wand instead of un-sexy, boring, plodding, saving more and spending less.

He also covers why feeling alone, or lonely, makes one feel unsafe, so it's easy to make choices that make one feel safer, which may mean being part of a community, and buying what everyone else has or wears or drives might yield that feeling of safety. But Richards notes, "In the end, you won't feel less alone. Meanwhile, you may sacrifice your real financial security in your half-conscious attempts to a achieve emotional security."

The conceit of little back-of-the-napkin graphs and sketches every page or so makes for each reading, and Richards' conversational style, peppered with anecdotes keeps the reader from getting bogged down. Had this book followed up on its promise to cover Simple Ways to Stop Doing Dumb Things With Your Money and actually talked about specific categories of financial management (rather than very generalized overviews of investment as part of financial planning), it would have been far more interesting and useful for me, personally. What I expected the whole book to be about was covered solely on pages 168 and 169. I expected, and would have preferred, a book that covered more than investing -- things like why we stick with a cell phone or cable plan when there are better plans out there.

Richards talks about what he knows -- financial planning with a focus on investing -- but doesn't really talk about any of the specifics because, as he wisely notes, specific advice needs to be applicable to the individual, because he doesn't know us personally, he says "I can't give you specific advice about your individual behavior gaps." But I wish he had found a middle ground -- given us more meat, because most people can't even imagine what areas exist where their behavior lags their logic. More practicality would have made this a much more useful book.

That said, this might be a good primer for novice investors, even for young adults just out of college. ...more

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Aug 23, 2018 Akshat Solanki rated it liked it

Mind

Mind your behavior.

This is what this book wants to tell you, this is what the author wants to tell you.
Carl has written about human behavior when it comes to financial planning, investing, trading, shorting the stocks, going long and how it affects, how it benefits. He has written some useful and important things that we should mind whenever we're trading.
There are many things that you need to forego in the short term to achieve your long-term plan.
Carl, again and again, insists on investing ...more

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May 27, 2018 Lara rated it really liked it

Shelves: z-2018, finances

I listened to the audiobook through my library and found the book interesting. Not having read much of a description, it wasn't quite what I expected, but the author made some good points about people's behavior around their finances. He also makes some really good points about the lack of value of paying close attention to the stock market (for most of us) and how so many act based on emotion and what others are doing rather than using their goals to guide their decisions. While I know that we ...more

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Feb 26, 2018 Kara rated it liked it

Shelves: nonfiction, money

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 t ...more

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May 21, 2017 Rob Price rated it it was ok

Useful for non investors, novices or those who haven't paid much attention to the importance of behaviourial finance. I think about these things a lot but nevertheless it's always good to be reminded of numerous investing pitfalls. Richards places a lot of emphasis on understanding each individuals personal conditions and the investment journey that's relevant for them. It's a critical point that every individual probably needs to grapple with (both advanced, novice and all investors in between) ...more

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Dec 16, 2017 Greg Weaver rated it it was amazing

Oftentimes the simplest advice is the most effective if taken to mind and put into practice. But, of course, it takes coming across the advice in the first place for one to even have the ability to take the first steps in making mental shifts that adhere to that advice.

'The Behavior Gap' is a sage. The simple (yet not necessarily easy) lessons therein will seem elementary to some, yet most - if people are mindfully open to Mr. Richards's words - will notice the door to sound financial behaviors ...more

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Nov 22, 2020 Chris Boutté rated it it was amazing · review of another edition

I've always been terrible with money. I have two parents who are terrible with money, and I picked up their terrible habits. Finally, in my 30s, I started getting smarter with my money, but I'm still a novice. Although this book by Carl Richards is mainly about being a smarter investor, and I have no interest in trying to seriously invest any time soon, this was a great book. I've only recently started dabbling in apps like Acorns to invest my loose change, and the thought of doing the real inve ...more

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Jan 10, 2019 Glenn rated it it was ok · review of another edition

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 ...more

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Jun 20, 2017 Emily rated it liked it

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 ...more

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Jan 20, 2019 Maggie rated it it was amazing

Shelves: finance

Read it in a single day. It was that compelling. Carl Richards is a straight shooter without the lazy crutch of excessive harshness. He's realistic and holds his reader accountable in a way that feels actionable. There are few things I dislike more than being coddled when receiving meaningful guidance. Richards does nothing of the sort. He talks to the reader like they are an adult capable of making adult decisions, managing their own behavior, and recognizing the role they play in their own fut ...more

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Aug 08, 2019 Srividya rated it really liked it · review of another edition

Shelves: non-fiction

I finished this book over a weekend. I am a reasonably fast reader. However, it takes time to read non-fiction surely. So, by that standards, this book is much easier to read and is written with ease. Carl Richards has simplified some of the things about investing and personal finance and has cleverly applied it to most things we know (or not) about life.

I find the concepts simple, refreshing as reminders and are a great way to actually take that to think about choices and decisions about goals ...more

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About Carl Richards

Carl Richards

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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 ...more

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“But in the end, financial decisions aren’t about getting rich. They’re about getting what you want—getting happy.” — 5 likes

“whatever you have to do to gain self-knowledge, do it. Find out who you are and what you want. Then you can stop wasting your life energy and your money on stuff that doesn’t matter to you—and start making financial decisions that will get you to your true goals.” — 1 likes

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