Why Smart People Make Big Money Mistakes and How to Correct Them Lessons from the Life-Changing Science of Behavioral Economics

by Belsky, Gary; Gilovich, Thomas

• ISBN13: 9781439163368
• ISBN10: 1439163367
• Format: Paperback
• Copyright: 2010-01-12
• Publisher: Simon & Schuster

Summary

THIS REVISED AND UPDATED EDITION OF THE CLASSIC WHY SMART PEOPLE MAKE BIG MONEY MISTAKES AND HOW TO CORRECT THEM GIVES YOU THE LATEST RESEARCH IN THE EXCITING FIELD OF BEHAVIORAL ECONOMICS.

In their fascinating investigation of the ways we handle money, Gary Belsky and Thomas Gilovich reveal the psychological forces -- the patterns of thinking and decision making -- behind seemingly irrational behavior. They explain why so many otherwise savvy people make foolish financial choices: why investors are too quick to sell winning stocks and too slow to sell losing shares, why home sellers leave money on the table and home buyers don't get the biggest bang for their buck, why borrowers pay too much credit card interest and savers can't sock away as much as they'd like, and why so many of us can't control our spending. Focusing on the decisions we make every day, Belsky and Gilovich provide invaluable guidance for avoiding the financial faux pas that can cost thousands of dollars each year.

Filled with fresh insight; practical advice; and lively, illustrative anecdotes, this book gives you the tools you need to harness the powerful science of behavioral economics in any financial environment.

"A terrific introduction to the emerging science of behavioral finance." - Money magazine

"Great stuff. Fresh and helpful." - BusinessWeek

"This very helpful book is aimed at the novice and the expert, and you come away from it somewhat chastened by your own financial mistakes, but hopeful that you might learn a thing or two about holding onto your hard-earned cash. The authors don't offer simplistic solutions, but hard facts and sound advice."-Robert J. Hughes, SmartMoney

Author Biography

Gary Belsky is the editor in chief of ESPN The Magazine and the author of several books. He lectures frequently to businesses and consumer groups around the world on the psychology of decision making. He lives in Manhattan. Thomas Gilovich is a professor of psychology at Cornell University and the author of How We Know What Isn't So. He lives in Ithaca, New York.

Table of Contents

Introduction: Why Smart People Make Big Money Mistakes	p. 1
An introduction to the life-changing science of behavioral economics
Not All Dollars Are Created Equal	p. 21
How "mental accounting" can help you save, or cost you money.
When Six of One Isn't Half A Dozen of the Other	p. 45
How "loss aversion" and the "sunk cost fallacy" lead you to throw good money after bad.
The Devil That You Know	p. 77
How the "status quo bias" and the "endowment effect" make financial choices difficult.
Number Numbness	p. 105
"Money illusion, " "bigness bias, " and other ways that ignorance about math and probabilities can hurt you.
Dropping Anchor	p. 131
Why "anchoring" and the "confirmation bias" lead you to make important money decisions based on unimportant information.
The Ego Trap	p. 155
"Overconfidence" and the price of thinking that you know more than you do.
Herd It Through The Grapevine	p. 183
"Information cascades" and the danger of relying too much on the financial moves of others.
Emotional Baggage	p. 209
The role of emotions in decision making: What don't know about how we feel.
Conclusion: Now What?	p. 235
Principles to ponder and steps to take.
Postscript: Psychic Income	p. 253
Acknowledgments	p. 257
Index	p. 261
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