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

2008-01-11 Excellent Stuff from Gary & Tom

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