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Why Smart People Make Big Money Mistakes - And How to Correct Them: Lessons from the New Science of Behavioral Economics
Synopses & 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 ways we spend, invest, save, borrow, and waste money, Gary Belsky and Thomas Gilovich reveal the psychological causes — the patterns of thinking and decision making — of irrational behavior. Most important, they focus on the decisions we make every day and, using entertaining examples, provide invaluable tips on avoiding the financial faux pas that can cost thousands of dollars each year.
This revealing look at the mental blind spots that lead to financial blunders offers sensible, on-target solutions from an award-winning financial journalist and a pioneer in the new science of behavioral economics.
About the Author
Award-winning journalist Gary Belsky was a writer at Money magazine from 1991 through 1998, covering all aspects of personal finance. From 1994 through 1998 he was a regular weekly commentator on CNN's Your Money personal finance show and a frequent contributor to ABC's Good Morning America. Currently a senior editor at ESPN The Magazine, Belsky graduated from the University of Missouri in his hometown of St. Louis in 1983 with a BA in political science and speech communication. Before joining Money magazine, he was a reporter for Crain's New York Business and the St. Louis Business Journal. In 1990, Belsky won the Gerald Loeb Award for Distinguished Business and Financial Journalism, the most prestigious award given to business or personal finance reporters and writers. He lives in New York City.
Table of Contents
WHY SMART PEOPLE MAKE BIG MONEY MISTAKES
An introduction to the new science of behavioral economics.
Chapter 1: NOT ALL DOLLARS ARE CREATED EQUAL
How "mental accounting" can help you save or cost you money.
Chapter 2: WHEN SIX OF ONE ISN'T HALF A DOZEN OF THE OTHER
How "loss aversion" and the "sunk cost fallacy" lead you to throw good money after bad.
Chapter 3: THE DEVIL THAT YOU KNOW
How the "status quo bias" and the "endowment effect" make financial choices difficult.
Chapter 4: NUMBER NUMBNESS
"Money illusion," "bigness bias," and other ways that ignorance about math and probabilities can hurt you.
Chapter 5: ANCHORS AWEIGH
Why "anchoring" and "confirmation bias" lead you to make important money decisions based on unimportant information.
Chapter 6: THE EGO TRAP
"Overconfidence" and the price of thinking that you know more than you do.
Chapter 7: I HERD IT THROUGH THE GRAPEVINE
"Information cascades" and the danger of relying too much on the financial moves of others.
Conclusion: NOW WHAT?
Principles to ponder and steps to take.
Postscript: PSYCHIC INCOME
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Business » Personal Finance