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Why Smart People Make Big Money Mistakes and How to Correct Them: Lessons from the New Science of Behavioural Economics Paperback – 26 Apr 2000


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Product details

  • Paperback: 220 pages
  • Publisher: Simon & Schuster; Fireside ed edition (26 April 2000)
  • Language: English
  • ISBN-10: 0684859386
  • ISBN-13: 978-0684859385
  • Product Dimensions: 21.6 x 14.2 x 1.4 cm
  • Average Customer Review: 4.8 out of 5 stars  See all reviews (17 customer reviews)
  • Amazon Bestsellers Rank: 363,290 in Books (See Top 100 in Books)

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Amazon Review

Why do so many otherwise rational individuals make irrational decisions when it comes to money? Financial journalist Gary Belsky and Cornell University psychology professor Thomas Gilovich contend the answers can be found--and the deficiencies remedied--with help from a relatively new science called behavioral economics. Still largely unknown outside academic circles, the field can be traced to research on the impact of rewards and punishments on human judgement and decision-making that first were undertaken at Jerusalem's Hebrew University some 30 years ago. In Why Smart People Make Big Money Mistakes, Belsky and Gilovich update this pioneering work and show readers how to understand exactly why they invest, spend, and save as they do. More importantly, using examples that everyone can identify with and language that anyone can understand, the authors offer dozens of workable suggestions that can help readers manage their money better. "We believe that by identifying the psychological causes behind many types of financial decisions," they write, "you can effectively change your behaviour in ways that will ultimately put more money in your pocket and help you keep more of what you already have." --Howard Rothman, Amazon.com --This text refers to an out of print or unavailable edition of this title.

Review

Beth Koblinerauthor of "Get a Financial Life"This is a terrific book. Belsky and Gilovich tackle financial decisions from the inside out...sweeping away the psychological obstacles that stand in the way of our goals.

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Customer Reviews

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Most Helpful Customer Reviews

22 of 23 people found the following review helpful By A Customer on 10 April 1999
Format: Hardcover
WHY SMART PEOPLE MAKE BIG MONEY MISTAKES is full of examples of decisions you might have to make. You get to choose an option, and then the authors tell you what you should have chosen. This is a great learning technique to bring home the lessons of this superb book. The authors point out several biases that most people have about money (such as it's okay to blow certain money, but not other money -- all money is really the same), themselves (people always overrate their abilities and get taken as a result), and circumstances (even people who got an A in statistics will usually misanalyze the risks they take). Since money is ultimately about math, a lot of your lifetime income and earning potential is lost in the process of following these biases. This book could make or save you a million dollars. You cannot afford not to read it. I was reminded of a parallel book on the same sorts of problems about bad thinking habits as they apply to work situations called "The 2,000 Percent Solution" which you should also read. If you use the lessons of both books, you will be enormously better off financially in your lifetime. It'll be like owning the casino, instead of losing money in it. Good luck!
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18 of 19 people found the following review helpful By A Customer on 21 Mar 1999
Format: Hardcover
I am a "debt elimination specialist" - a financial consultant who teaches people how to pay off their debts and achieve financial independence quickly. Every day, I see smart people who have made big money mistakes, so the title caught my eye. I read the book thinking that it would be useful in helping me to understand my clients better. It did that AND MORE. I was surprised at the self-revelation that I received. At several points, I thought to myself, "These guys must have been reading my mail!" I'll never make any decision (financial or other) in quite the same way as I used to. I highly recommend the book.
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11 of 12 people found the following review helpful By Donald Mitchell HALL OF FAMETOP 500 REVIEWERVINE VOICE on 27 May 2004
Format: Hardcover
People don't act like computers when making economic decisions. 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, and the results are costly.
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 them both, 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).
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.
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1 of 1 people found the following review helpful By A Customer on 20 Jan 1999
Format: Hardcover
Unlike most books on investing and personal finance, which breathlessly offer the "secrets" of how to get rich quick, this book tells us the honest truth: It doesn't really matter very much which investments you pick unless you know how to control your own fear and greed. The only real key to investment success is self-control! Belsky & Gilovich don't offer a list of "best investments"--and that's a good thing, too, since all those lists are useless anyway. Instead they show how, by understanding and attacking your own limitations, you can combat your own mental shortcomings as an investor. They show us all how we can take simple, sensible steps to get rich slowly--the only way, after all, that it's even possible to get rich. You can learn more by reading this terrific book than you could learn by memorizing 49 wheelbarrows full of all the so-called investment books out there. It's great!
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2 of 2 people found the following review helpful By karen bennett on 28 Mar 2009
Format: Paperback Verified Purchase
this one is a keeper. I learned from it and shifted my attitude to cash (with the exception of bookbuying). One to pick up again and again and should be part of the school curriculum.
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1 of 1 people found the following review helpful By alan smith on 31 Aug 2010
Format: Paperback
Although a decent read, there is nothing very new and anyone reading economics/bevavioural finance books recently (freakonomics/Nudge) will have covered most of the issues they write about.
Still its an easy read with some useful reminders - but in need of a 2010 update
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Format: Paperback
I have recently been introduced to the area of behavioral finance and I should admit that I have been thoroughly impressed so far by whatever I have read.

The authors talk about how we need to make our choices in everyday life based on positives. Though it might sound obvious, several times we make choices by process of elimination. We arrive at our preferred choice by eliminating weak choices by focusing on negatives. The authors then explain that how a change in the approach to focus more on the positives changes our approach and helps us to make informed choices based on things that matters most.

Overall an excellent read
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