Ep 20: What Do Money Biases Cost You?

Do you have any money biases and what could they be costing you? A recent Morning Star study revealed that most of us hold at least some financial biases. Everyone has different views on money but it’s important to reflect on those views.

Do you go for immediate rewards over long-term goals? Have you overreacted to headlines before? Most of us have probably fallen to one or more of the four money biases: present bias, base rate neglect, overconfidence, or loss aversion. Research shows that people with low levels of present bias tend to do better in the long run, financially. The best thing you can do for yourself and your future is to build a money life that matches your priorities. On today’s episode, we’ll explore the pitfalls of these biases and how you can improve your money mindset.   

What we discuss on the show:

0:52 – How was January?

2:02 – Recent Study on Morningstar

4:35 – 1. Present bias

4:52 – 2. Base rate neglect

5:57 – 3. Overconfidence

6:48 – 4. Loss aversion

7:32 – Lower biases save more money

8:50 – Higher biases have less savings

9:50 – Loss aversion leads to lower 401(k) balance

10:11 – Build a money life or financial mission statement

12:06 – Putting speed bumps for emotional reactions

13:39 – Selling a stock after a gain

14:26 – How do work through these biases?

15:39 – Think about your money personality

Get additional information: https://greenwaywealthadvisory.com/podcast/