The Psychology Behind Cognitive Dissonance

The Psychology Behind Cognitive Dissonance

What is cognitive dissonance? How do people resolve the uncomfortable feeling that arises as a result of dissonance between cognitions and actions? In psychology, cognitive dissonance is the mental discomfort that occurs as a result of holding two conflicting cognitions (e.g. beliefs, values, or attitudes) or acting in ways that contradict those cognitions. To ease this discomfort, people tend to deny the facts or rationalize their thinking to restore cognitive consonance. Keep reading to learn about the psychology of cognitive dissonance.

How Personal Finance Stories May Be Influencing You

How Personal Finance Stories May Be Influencing You

Do you allow personal finance stories to change how you use your money? Do finance stories scare you away from making certain decisions or inspire you to invest in certain things? According to Morgan Housel, the author of The Psychology of Money, falling for financial success stories can cause you to make poor financial decisions. Listening to the personal finance stories of others can influence you to risk your financial health based on hope, or even make you think that you have more control than you actually do. Here’s why you should be careful what stories you believe about money.

The Neglect of Probability Bias in Decision-Making

The Neglect of Probability Bias in Decision-Making

What is the neglect of probability bias? Do you consider the probabilities of possible outcomes when making decisions? Neglect of probability bias is the tendency to disregard probability or risk when making decisions in the face of uncertainty. The most optimal choice is the one that has the highest probability of turning out well, but people tend to opt for the option that will have the biggest positive impact if it occurs, regardless of how likely it is. Here’s why we tend to neglect probability when making decisions.

Hyperbolic Discounting Bias: What It Is & How to Avoid It

Hyperbolic Discounting Bias: What It Is & How to Avoid It

What is hyperbolic discounting bias? Why is the brain so prone to seeking immediate gratification? Hyperbolic discounting bias is the tendency to crave immediate gratification and the willingness to sacrifice an unreasonable amount of money, time, or effort for that immediacy. According to Rolf Dobelli, the author of The Art of Thinking Clearly, humans are hardwired to opt for immediate reward (in the past, it helped us survive), but more often than not, it inspires bad decisions, like paying a high amount to get something quicker. Keep reading to learn about hyperbolic discounting bias, why it happens, and how to

The Affect Heuristic in Risk-Benefit Judgment

The Affect Heuristic in Risk-Benefit Judgment

What is the affect heuristic? How does the affect heuristic influence decision-making? The affect heuristic is a mental shortcut in which your brain makes rapid subconscious judgments of like or dislike. These “affects” influence your risk-benefit analyses: If your immediate judgment is good, you’ll focus on the benefits of a situation, if the affect is bad, you’ll focus on the risks. Keep reading to learn about the affect heuristic and its implications for decision-making.

The Salience Effect: The Psychology of Attention

The Salience Effect: The Psychology of Attention

What is the salience effect? Why does the brain tend to focus on the most flashy, salient stimuli to the exclusion of everything else? As the name suggests, the salience effect is the tendency to focus on the most salient stimuli in the environment. The salience effect relies on your past experiences. You might notice certain unusual details due to, for instance, your career or past experiences, while someone else would notice different details. Keep reading to learn about the salience effect, why it occurs, and how to overcome it.

Déformation Professionnelle: The Curse of Knowledge

Déformation Professionnelle: The Curse of Knowledge

What is déformation professionnelle? How can having too much experience in your area of expertise limit your perception of the world? Déformation professionnelle is a cognitive bias resulting from having too much experience in a certain field. It is defined as a tendency to see the world through the lens of one’s profession or area of expertise. Keep reading to learn about déformation professionnelle bias, why it’s problematic, and how to overcome it.

How to Develop a Survival Mentality Around Money

How to Develop a Survival Mentality Around Money

What does it mean to have a survival mentality around money? What three ideas around money should you develop? In his book The Psychology of Money, Morgan Housel suggests developing a survival mentality around money. This means accepting that you could lose all your money at any time, so you follow certain steps to ensure you protect your assets. Here are the three steps for developing a survival mindset.

Hindsight Bias: What It Is and Why It Happens

Hindsight Bias: What It Is and Why It Happens

What is hindsight bias? Why does the predictability of the outcome seem higher in hindsight? Hindsight bias is where you—upon knowing the outcome of an event—overestimate your ability to have predicted it. According to Rolf Dobelli, the author of The Art of Thinking Clearly, hindsight bias is a by-product of the brain’s pattern-finding tendencies. Here’s why things seem clearer in hindsight.