Making financial decisions is hard. So hard, in fact, that 7 in 10 Americans admit to postponing making major financial decisions. The stress that comes with potential repercussions of our decisions lead us to commit errors in thinking called cognitive biases which affect our judgement and decision-making skills. They cause us to hold on to our own preferences and beliefs instead of assessing our situation from a more rational standpoint.
Cognitive biases can wreak havoc on our financial lives — tanking credit, worsening debt, and draining savings accounts. In one study, one-third of investors continued to over-confidently spend money on a project even after receiving advice that it was no longer wise.
Fortunately, some of the most common cognitive biases are also some of the most easily avoidable. With a little education, you can start recognizing these biases as they come up in your life and take strides to avoid them to maximize your financial health. Find out how in this infographic created by Self Lender.
Infographic courtesy of Self Lender
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