Did you know that financial planning is more emotional than it is financial? That your cognitive biases help to shape your lifestyle and financial decisions?
Daniel Crosby is a psychologist and behavioral finance expert who wrote the book on investor and financial psychology that dovetails into our individual biases. In our conversation, we talk about Daniel’s New York Times best-selling book, The Behavioral Investor, where Daniel lays out the four consistent types of behavioral risks – Ego, Emotion, Attention, and Conservatism underpinning our psychological makeup.
Even great psychologists such as Danny Kahneman struggle between knowing and doing, which is one of the significant challenges in the world of psychology. For most people, even though you may know something is not good for you, you go and do it anyway.
Put another way, just because you are aware of your biases and emotions doesn’t always lead to good decisions. To combat this emotional battle, Daniel points out the three E’s that can help you make better financial decisions and life decisions.
We also discuss the impact that COVID has had on our cognitive ability to make decisions. Social connectedness is essential to good mental health, which is one reason why we likely felt more stress during the past year because of social isolation.
Daniel talks about how his life transitioned from being a clinical psychologist who wanted to help people with eating disorders to being the chief behavioral officer for a financial company. A path that was heavily influenced by his father, who is a financial advisor.
Please enjoy my conversation with Daniel Crosby.
Resources Featured in This Episode:
Standard Deviations – Podcast