Why Smart People Make Big Money Mistakes and How to Correct Them: Lessons From the New Science of Behavioral Economics

Why Smart People Make Big Money Mistakes and How to Correct Them: Lessons From the New Science of Behavioral Economics

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Overview

Why Smart People Make Big Money Mistakes and How to Correct Them: Lessons From the New Science of Behavioral Economics by Gary Belsky

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.

Product Details

ISBN-13: 9780684859385
Publisher: Simon & Schuster
Publication date: 04/28/2000
Edition description: 1 FIRESIDE
Pages: 224
Product dimensions: 5.60(w) x 8.40(h) x 0.60(d)

About the Author

Gary Belsky is editor in chief of ESPN The Magazine, where he has worked since 1998. The author of several books, he lectures frequently on the psychology of decision-making to business and consumer groups around the world. From 1994 through 1998, Belsky was a regular commentator on CNN's Your Money and a frequent contributor to Good Morning America, CBS This Morning, Crossfire and Oprah; he continues to appear on local and national radio and TV, commenting on sports, economics, business and personal finance. A St. Louis native, Belsky graduated from the University of Missouri in that city in 1983 with a BA in speech communication and political science. Before joining ESPN he was a writer at Money magazine and 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, administered by The Anderson School at UCLA. Belsky, who lives in Manhattan, serves on the board of directors of Urban Pathways, one of New York City's largest providers of services to the homeless and mentally ill; as well as the New York Neo-Futurists, an East Village theater company.

Thomas Gilovich is a professor of psychology at Cornell University and author of How We Know What Isn't So. He lives in Ithaca, New York.

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Why Smart People Make Big Money Mistakes And How To Correct Them: Lessons From The New Science Of Behavioral Economics 5 out of 5 based on 0 ratings. 3 reviews.
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Guest More than 1 year ago
This book is one of the 10 best investing books of 1999 and 2000. People don't act like computers when making economic decisions. Our minds act much more like broken-down wheels stuck in muddy ruts, instead. This book is full of examples that show why people make miseconomic decisions. The basic point is that we have rules of thumb learned in daily life that we apply to economic decisions, whether these are good rules or not, and the results are costly to us. This book reminds me of Robert Cialdini's excellent book, Influence, that explains the psychological biases that harm us as consumers and how to protect ourselves against unethical sellers. If you read and apply both books, you will have much more prosperity in your life. Here are some examples: We are all more careful about saving money in some areas than in others. For instance, I'll go to great lengths to save money on air travel, but frequently buy expensive wines in restaurants (not a great value). I could drink better wines at home for less money. Now, how dumb is that? Most of us are more concerned about avoiding losses than in making gains. This often translates into holding stocks with losses, rather than selling them, even if there is not much chance of a rebound. I know I'm guilty of this. Another example is assuming that we have knowledge that we really don't have. Someone who is good in math may not take the time to mathematically evaluate the choices. For instance, a 15 year mortage on your home is only a little more costly per month than a 30 year mortgage. The different in the cost of the total interest you pay is enormous, yet almost everyone gets a 30 year mortgage. Almost everyone has the skill to compare the two choices, but few take the time to do so. This kind of stalled thinking can be irresistible, and your wallet will inevitably be lighter as a result. When you discover that you have a weakness in one of these areas, you can then be more cautious in avoiding your biases in the future. This book is very helpful in this regard because each chapter explore one bias and begins with a question to test your instincts. In answering that question, you will probably find (if you are like me) that you make the wrong choice. This book will return its cost in time and money hundreds of times over the rest of your life. Be sure to read and apply it! I also suggest that you examine where you have rules of thumb in noneconomic areas. When you are busy and someone in the family wnats your attention, what do you do? Your choices may be costing you closer relationships and effectiveness. Take the time to make good decisions and at least adopt better rules of thumb! Donald Mitchell, co-author of The Irresistible Growth Enterprise and The 2,000 Percent Solution