Psychology

Thinking Negative

We’ve all heard many, many things about the power of positive thinking. Some people (myself included) believe that a key part of being successful at anything is visualizing that success. In doing so, you picture the details of that success, which often helps you a great deal in formulating a plan to get there. It …

Categories: Psychology

Money and the Shrinking Attention Span

Since 2000, the average attention span has dropped by 33%. That’s an amazing little statistic. When I see statistics like that, I attempt to immediately translate them into what they mean from a money perspective. I often talk about the “ten second rule,” which is a simple idea for shopping that helps guide you away …

Categories: Psychology

Using the Decoy Effect to Your Advantage

First, let’s talk about what the decoy effect is: The decoy effect is the phenomenon whereby consumers will tend to have a specific change in preference between two options when also presented with a third option that is asymmetrically dominated. An option is asymmetrically dominated when it is inferior in all respects to one option; …

Denial and Delusion

When the topic of personal finance comes up, most of the challenges that are initially seen are external ones. Debt is an external challenge. Investment decisions are an external challenge. Yet, over and over agan, if we look a little deeper, we see that those external challenges tend to rely quite a lot on internal …

Blocking What We Can’t Deal With

For a few days last week, I spent a lot of time reading and playing video games. It was kind of out of the blue for me, so it didn’t take long for me to start asking myself why I was doing these things. What was triggering it was an avoidance of thinking about the …

Categories: Psychology

Selective Memory and Your Wallet

I love my children. I’m proud of them. When I think about their behavior, my thoughts are almost entirely filled with positive things. I think of my oldest child’s studiousness, my daughter’s creative energy, and our youngest child’s humor. What I often don’t recall is when they do things that they shouldn’t. If you ask …

Some Thoughts on Passive Personal Finance Barriers

In my most recent book, The Simple Dollar, I spent some time talking about passive barriers. A passive barrier is a small barrier that you set up that will make a particular bad habit more difficult to continue or, sometimes, make a particular good habit easier to repeat. Putting your cigarettes in a hard-to-reach place …

Impulse Control

As I’ve mentioned on here several times, I have a weekly piano lesson, something I enjoy very much. On my way to my lesson, I drive by a bookstore and a game shop. On my way home from my lesson, I drive by that same bookstore and same game shop. Every week, especially on the …

Outcome Visioning and Personal Finance

It seemed so incredibly simple. But it actually worked. Last week, I visited a local bookstore. As I’ve mentioned many times, bookstores are one of my biggest weak spots. I can easily go into a bookstore and find myself picking up two or three interesting books before I’ve even really thought about it. My usual …

Categories: Psychology

When Your Mental Health Keeps You from Success

Anxiety disorder. Depression. Panic attacks. Intense phobias. Our brains are incredibly complex pieces of meat. Just like other parts of their body, they can break down and not work quite right. Yet, society often treats ailments of the mind as something either not to be spoken of or something to be looked at as an …

Why Do You Buy?

What’s the single most important piece of personal finance advice you would give a person? I’ve heard this question (or variations on it) many times. I have a very simple answer to it. Whenever you buy anything, ask yourself why five times. That seems really off the wall at first glance, but I firmly believe …

Categories: Psychology, Shopping

The Mythology of Spending and Mental Anchors

I have a quick four question quiz for you to run through in your head. Just give your snap response to these – don’t think about each one too much. What is a wedding supposed to cost? What is an automobile supposed to cost? What is a home supposed to cost? What is a three …

Categories: Psychology

The Cult of the New

2010 has seen a ton of books released already that I’d love to read, from The Politician by Andrew Young to The Immortal Life of Henrietta Lacks by Rebecca Skloot. (I happen to be passionate about books, of course – perhaps your passion is films or video games or gadgets or music or something else …

Impulse Buys and Post-Purchase Rationalization

When I was a child, I went to the store with enough birthday money in my pocket to buy a new game for my Nintendo. After carefully thinking about the options before me, I whittled my choice down to two video game titles: Rampage and Castlevania II: Simon’s Quest. After hemming and hawing until my …

Review: Snap Judgment

Every other Sunday, The Simple Dollar reviews a book of interest. Over the last few years, I’ve come to believe that the biggest key to personal finance success is controlling your own psychology and impulses. Our entire lives are filled with quick decisions we must constantly make – and, for the most part, we’re good …

Spending Choices and Deeper Psychology

Christmas has always been a challenging time of the year for me. During various years, within a week or two on either side of Christmas, my grandfather (who I cherished) died of cancer, a great uncle that I was very close to also died of cancer, and one of my cousins who was exactly the …

Categories: Psychology

What’s Your Motivation?

As I sit in my office and look out the window, I can see a number of people and a few pieces of construction equipment busy at work about a quarter of a mile away. It just happens to perfectly line up that I can see the workers if I turn my head to the …

The 40/30/30 Rule

Recently, I was reading a great article at The 99 Percent entitled The 40-30-30 Rule: Why Risk Is Worth It. I originally intended to include it in my weekly roundup, but as I thought about the 40-30-30 idea, I found that the connections to careers, personal finance, and life were profound. What is the 40-30-30 …

The Five Whys and the Power of Analyzing Your Life

Over the last month, I’ve mentioned a technique I call “the five whys” two or three times. The technique itself is simple: when you see something in your life that’s not working like you want it to, you start asking “why” until you come to something where you can’t say “why” any more. When you …