Comments on: Why Smart People Make Big Money Mistakes (and How to Correct Them) http://www.getrichslowly.org/blog/2007/08/15/why-smart-people-make-big-money-mistakes-and-how-to-correct-them/ personal finance that makes cents Fri, 16 May 2008 02:36:40 +0000 http://wordpress.org/?v=2.5.1 By: Food and the Sunk Cost Fallacy http://www.getrichslowly.org/blog/2007/08/15/why-smart-people-make-big-money-mistakes-and-how-to-correct-them/#comment-108604 Food and the Sunk Cost Fallacy Thu, 13 Dec 2007 16:54:44 +0000 http://www.getrichslowly.org/blog/2007/08/15/why-smart-people-make-big-money-mistakes-and-how-to-correct-them/#comment-108604 [...] feed. Thanks for visiting!Earlier this year, I learned about the “sunk cost fallacy”, a behavioral finance term that describes our tendency to throw good money after bad. When a person makes a decision [...] [...] feed. Thanks for visiting!Earlier this year, I learned about the “sunk cost fallacy”, a behavioral finance term that describes our tendency to throw good money after bad. When a person makes a decision [...]

]]> By: Free at Last! Saying Good-Bye to 20 Years of Debt ? Get Rich Slowly http://www.getrichslowly.org/blog/2007/08/15/why-smart-people-make-big-money-mistakes-and-how-to-correct-them/#comment-107305 Free at Last! Saying Good-Bye to 20 Years of Debt ? Get Rich Slowly Tue, 04 Dec 2007 06:09:28 +0000 http://www.getrichslowly.org/blog/2007/08/15/why-smart-people-make-big-money-mistakes-and-how-to-correct-them/#comment-107305 [...] comics, it would make me feel guilty, would have caused me to buy more comics. I learned to simply accept my mistakes and move on, re-focusing on my financial [...] [...] comics, it would make me feel guilty, would have caused me to buy more comics. I learned to simply accept my mistakes and move on, re-focusing on my financial [...]

]]> By: Why Smart People Make Big Money Mistakes http://www.getrichslowly.org/blog/2007/08/15/why-smart-people-make-big-money-mistakes-and-how-to-correct-them/#comment-101545 Why Smart People Make Big Money Mistakes Fri, 19 Oct 2007 22:05:56 +0000 http://www.getrichslowly.org/blog/2007/08/15/why-smart-people-make-big-money-mistakes-and-how-to-correct-them/#comment-101545 [...] good reviews at Get Rich Slowly and The Simple [...] [...] good reviews at Get Rich Slowly and The Simple [...]

]]> By: Book Review: The 4-Hour Workweek ? Get Rich Slowly http://www.getrichslowly.org/blog/2007/08/15/why-smart-people-make-big-money-mistakes-and-how-to-correct-them/#comment-96430 Book Review: The 4-Hour Workweek ? Get Rich Slowly Tue, 28 Aug 2007 12:01:06 +0000 http://www.getrichslowly.org/blog/2007/08/15/why-smart-people-make-big-money-mistakes-and-how-to-correct-them/#comment-96430 [...] the art of non-finishing. This is all about the sunk cost fallacy: just because you paid $10 to see Pirates of the Caribbean 3 doesn’t mean it’s a good [...] [...] the art of non-finishing. This is all about the sunk cost fallacy: just because you paid $10 to see Pirates of the Caribbean 3 doesn’t mean it’s a good [...]

]]> By: The (Lack Of) Relationship Between Intelligence And Wealth http://www.getrichslowly.org/blog/2007/08/15/why-smart-people-make-big-money-mistakes-and-how-to-correct-them/#comment-95979 The (Lack Of) Relationship Between Intelligence And Wealth Thu, 23 Aug 2007 13:57:02 +0000 http://www.getrichslowly.org/blog/2007/08/15/why-smart-people-make-big-money-mistakes-and-how-to-correct-them/#comment-95979 [...] I do have some issues in this area that need to be addressed). Recently, JD of Get Rich Slowly elaborated on this subject (incidentally, the post was a review of the book titled “Why Smart People Make Big Money [...] [...] I do have some issues in this area that need to be addressed). Recently, JD of Get Rich Slowly elaborated on this subject (incidentally, the post was a review of the book titled “Why Smart People Make Big Money [...]

]]> By: What if the Stock Market Makes You Nervous? ? Get Rich Slowly http://www.getrichslowly.org/blog/2007/08/15/why-smart-people-make-big-money-mistakes-and-how-to-correct-them/#comment-95720 What if the Stock Market Makes You Nervous? ? Get Rich Slowly Mon, 20 Aug 2007 15:01:46 +0000 http://www.getrichslowly.org/blog/2007/08/15/why-smart-people-make-big-money-mistakes-and-how-to-correct-them/#comment-95720 [...] these concerns reminded me of Why Smart People Make Big Money Mistakes, which I reviewed last week. In the book, the authors discuss panic selling as a common financial pitfall. When people suffer [...] [...] these concerns reminded me of Why Smart People Make Big Money Mistakes, which I reviewed last week. In the book, the authors discuss panic selling as a common financial pitfall. When people suffer [...]

]]> By: guinness416 http://www.getrichslowly.org/blog/2007/08/15/why-smart-people-make-big-money-mistakes-and-how-to-correct-them/#comment-95673 guinness416 Sun, 19 Aug 2007 17:56:16 +0000 http://www.getrichslowly.org/blog/2007/08/15/why-smart-people-make-big-money-mistakes-and-how-to-correct-them/#comment-95673 I loved this book too, and agree with Grace above that this is one of the rare personal finance books that's worth buying and keeping on the shelf. I don't get the "dry" comments personally; I practically fell asleep reading the Bogleheads book, among others, but for a book by academics this one is short, to the point, and full of examples. I loved this book too, and agree with Grace above that this is one of the rare personal finance books that’s worth buying and keeping on the shelf. I don’t get the “dry” comments personally; I practically fell asleep reading the Bogleheads book, among others, but for a book by academics this one is short, to the point, and full of examples.

]]> By: Cesar http://www.getrichslowly.org/blog/2007/08/15/why-smart-people-make-big-money-mistakes-and-how-to-correct-them/#comment-95553 Cesar Fri, 17 Aug 2007 20:48:29 +0000 http://www.getrichslowly.org/blog/2007/08/15/why-smart-people-make-big-money-mistakes-and-how-to-correct-them/#comment-95553 Very good book, different from most personal finance books that only tell you the obvious. Very good book, different from most personal finance books that only tell you the obvious.

]]> By: MoneyDork.com http://www.getrichslowly.org/blog/2007/08/15/why-smart-people-make-big-money-mistakes-and-how-to-correct-them/#comment-95415 MoneyDork.com Thu, 16 Aug 2007 13:09:54 +0000 http://www.getrichslowly.org/blog/2007/08/15/why-smart-people-make-big-money-mistakes-and-how-to-correct-them/#comment-95415 How did you like the writing style? I thought it was a little dry, personally. How did you like the writing style? I thought it was a little dry, personally.

]]> By: VinTek http://www.getrichslowly.org/blog/2007/08/15/why-smart-people-make-big-money-mistakes-and-how-to-correct-them/#comment-95394 VinTek Thu, 16 Aug 2007 04:12:43 +0000 http://www.getrichslowly.org/blog/2007/08/15/why-smart-people-make-big-money-mistakes-and-how-to-correct-them/#comment-95394 @Money: "'Better yet, ignore investment news entirely! '" "I think this is the biggest mistake." Why? If you're well diversified through index funds and have the appropriate allocation for your risk level and time horizon, why wouldn't simply rebalance on an annual basis and leave it at that? @Money:

“‘Better yet, ignore investment news entirely! ‘”

“I think this is the biggest mistake.”

Why? If you’re well diversified through index funds and have the appropriate allocation for your risk level and time horizon, why wouldn’t simply rebalance on an annual basis and leave it at that?

]]> By: JenK http://www.getrichslowly.org/blog/2007/08/15/why-smart-people-make-big-money-mistakes-and-how-to-correct-them/#comment-95381 JenK Thu, 16 Aug 2007 00:51:13 +0000 http://www.getrichslowly.org/blog/2007/08/15/why-smart-people-make-big-money-mistakes-and-how-to-correct-them/#comment-95381 Roger - One thing to factor in is the use you got out of it. How much would it have cost to rent those Apples during the time you did use them? Or to rent a car during the time you drove the $2300 car? :) Roger -

One thing to factor in is the use you got out of it. How much would it have cost to rent those Apples during the time you did use them? Or to rent a car during the time you drove the $2300 car?

:)

]]> By: Roger http://www.getrichslowly.org/blog/2007/08/15/why-smart-people-make-big-money-mistakes-and-how-to-correct-them/#comment-95365 Roger Wed, 15 Aug 2007 22:43:58 +0000 http://www.getrichslowly.org/blog/2007/08/15/why-smart-people-make-big-money-mistakes-and-how-to-correct-them/#comment-95365 The sunk-cost fallacy affects everyone from us schlubs to big businesses. You can see examples of it every day you watch professional baseball--older players who have clearly left their salad days behind but who are run out day after day because they have gigantic contracts which the team cannot simply admit were huge mistakes. In those specific cases, you can argue the team is losing even more than the value of the contracts because every win is worth extra revenue to the team. Some of the sunk-cost fallacy is easily explained by our reluctance to admit past mistakes (something we can see at all levels of our government, as well). I once bought a car for $2,300 which was terrible, my lack of knowledge about that particular brand really bit me. I eventually gave it away for $100. But it was gone. I finally threw out all of my old Apple computers a couple of years ago. It was incredibly painful to chuck a IIx which I paid $7,500 for in 1986 or 87 (current value: none), along with a IIci which was $3,000, special $1,000 video cards, stupid Zip drives, blah blah blah. But taking up space in the closet wasn't getting me any of my money back... The sunk-cost fallacy affects everyone from us schlubs to big businesses. You can see examples of it every day you watch professional baseball–older players who have clearly left their salad days behind but who are run out day after day because they have gigantic contracts which the team cannot simply admit were huge mistakes. In those specific cases, you can argue the team is losing even more than the value of the contracts because every win is worth extra revenue to the team.

Some of the sunk-cost fallacy is easily explained by our reluctance to admit past mistakes (something we can see at all levels of our government, as well). I once bought a car for $2,300 which was terrible, my lack of knowledge about that particular brand really bit me. I eventually gave it away for $100. But it was gone.

I finally threw out all of my old Apple computers a couple of years ago. It was incredibly painful to chuck a IIx which I paid $7,500 for in 1986 or 87 (current value: none), along with a IIci which was $3,000, special $1,000 video cards, stupid Zip drives, blah blah blah. But taking up space in the closet wasn’t getting me any of my money back…

]]> By: susan http://www.getrichslowly.org/blog/2007/08/15/why-smart-people-make-big-money-mistakes-and-how-to-correct-them/#comment-95363 susan Wed, 15 Aug 2007 22:25:39 +0000 http://www.getrichslowly.org/blog/2007/08/15/why-smart-people-make-big-money-mistakes-and-how-to-correct-them/#comment-95363 I so agree with Leslie, the budget is critical! Two people who I admire, Dave Ramsey & Clark Howard, have said they review their investments either 12 or 24 months. It's long term that counts! That said, I really don't take care of my own investments. I have 4 accounts that I need to roll over into some good index accounts. Any suggestions about fund families or additional reading? I am meeting with my accountability partner (lovely sister Sarah) in a few weeks and I expect her to give me h@ll about my neglect! I so agree with Leslie, the budget is critical!

Two people who I admire, Dave Ramsey & Clark Howard, have said they review their investments either 12 or 24 months. It’s long term that counts!

That said, I really don’t take care of my own investments. I have 4 accounts that I need to roll over into some good index accounts. Any suggestions about fund families or additional reading? I am meeting with my accountability partner (lovely sister Sarah) in a few weeks and I expect her to give me h@ll about my neglect!

]]> By: Money http://www.getrichslowly.org/blog/2007/08/15/why-smart-people-make-big-money-mistakes-and-how-to-correct-them/#comment-95358 Money Wed, 15 Aug 2007 18:02:30 +0000 http://www.getrichslowly.org/blog/2007/08/15/why-smart-people-make-big-money-mistakes-and-how-to-correct-them/#comment-95358 "Better yet, ignore investment news entirely! " I think this is the biggest mistake. For as low cost Mutual Funds, some ignore that because Mutual Funds are boring. I would also suggest low cost ETFs and do your own homework! “Better yet, ignore investment news entirely! ”

I think this is the biggest mistake. For as low cost Mutual Funds, some ignore that because Mutual Funds are boring. I would also suggest low cost ETFs and do your own homework!

]]> By: Titus-Armand http://www.getrichslowly.org/blog/2007/08/15/why-smart-people-make-big-money-mistakes-and-how-to-correct-them/#comment-95357 Titus-Armand Wed, 15 Aug 2007 17:51:36 +0000 http://www.getrichslowly.org/blog/2007/08/15/why-smart-people-make-big-money-mistakes-and-how-to-correct-them/#comment-95357 This is a very good article, and that looks like a worthy book! Thanks for bringing it to attention, I'll definitely get it for a read. This is a very good article, and that looks like a worthy book! Thanks for bringing it to attention, I’ll definitely get it for a read.

]]> By: Jess http://www.getrichslowly.org/blog/2007/08/15/why-smart-people-make-big-money-mistakes-and-how-to-correct-them/#comment-95356 Jess Wed, 15 Aug 2007 17:30:31 +0000 http://www.getrichslowly.org/blog/2007/08/15/why-smart-people-make-big-money-mistakes-and-how-to-correct-them/#comment-95356 Great post! :) Great post! :)

]]> By: Leslie http://www.getrichslowly.org/blog/2007/08/15/why-smart-people-make-big-money-mistakes-and-how-to-correct-them/#comment-95354 Leslie Wed, 15 Aug 2007 17:12:33 +0000 http://www.getrichslowly.org/blog/2007/08/15/why-smart-people-make-big-money-mistakes-and-how-to-correct-them/#comment-95354 I am a bad one for mental accounting. Finally sitting down and doing an actual budget where I account for every dollar coming in and out was the only thing that helped me with this issue. It has really made a huge difference in our cash flow. I will reserve this book at the library next time I am on the library website. I am a bad one for mental accounting. Finally sitting down and doing an actual budget where I account for every dollar coming in and out was the only thing that helped me with this issue. It has really made a huge difference in our cash flow.

I will reserve this book at the library next time I am on the library website.

]]> By: Grace http://www.getrichslowly.org/blog/2007/08/15/why-smart-people-make-big-money-mistakes-and-how-to-correct-them/#comment-95347 Grace Wed, 15 Aug 2007 15:47:38 +0000 http://www.getrichslowly.org/blog/2007/08/15/why-smart-people-make-big-money-mistakes-and-how-to-correct-them/#comment-95347 I LOVED this book when I first read it, and I've loved it the next two times that I reread it over the years. I would disagree about owning it--it's the kind of book that needs rereading because it is too easy to forget how the psychology works. I saw myself in so many of the examples of faulty thinking. I LOVED this book when I first read it, and I’ve loved it the next two times that I reread it over the years. I would disagree about owning it–it’s the kind of book that needs rereading because it is too easy to forget how the psychology works. I saw myself in so many of the examples of faulty thinking.

]]> By: Own Your Own Decisions http://www.getrichslowly.org/blog/2007/08/15/why-smart-people-make-big-money-mistakes-and-how-to-correct-them/#comment-95346 Own Your Own Decisions Wed, 15 Aug 2007 15:29:18 +0000 http://www.getrichslowly.org/blog/2007/08/15/why-smart-people-make-big-money-mistakes-and-how-to-correct-them/#comment-95346 This is the second book you've reviewed this week that I've been really interested in. This kind of stuff if my bread and butter, and I find it really fascinating. Thanks for the reference. This is the second book you’ve reviewed this week that I’ve been really interested in. This kind of stuff if my bread and butter, and I find it really fascinating. Thanks for the reference.

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