[Podcast] Why smart people do stupid things with their money, with Tom Corley

You’re smart. You’ve made a few dollars. You’ve done what the financial books have told you.

You’ve listened to the podcasts; you’ve gone to the websites.

So why isn’t it working?

Maybe your emotions and expectations are getting in the way of good sense.

Maybe you’re paying attention to the wrong people.

We’ve all made mistakes with money, sometimes unknowingly, sometimes recklessly.

We all have poor habits that hold us back.

That’s what I’m going to talk to Tom Corley about today.

So, whether you're a seasoned investor or just starting out, join us as we uncover the reasons why smart people do stupid things with their money and learn how to make smarter financial decisions.

Common spending traps

I want to delve into the curious phenomenon of why even the most intelligent people make financially foolish choices.

Despite having high levels of education and expertise, everyone is susceptible to irrational thinking and emotional biases when it comes to their finances.

Fifteen factors that make it hard for people to hold onto their money or build wealth:  

1. Pretender Syndrome – Ego-driven purchases intended to make others perceive that you are doing better financially than you actually are.
2. Procrastination – Believing you have plenty of time left to get serious about saving money.
3. Smarter Than Everyone Else – This is one of the reasons why many people do not hire experts.
4. Emotional Spending – Spending decisions that you make when you are in an emotional state are always going to be bad spending decisions.
5. Bias – Making money decisions that are not fact-based but, instead, founded on certain beliefs incompatible with prudent money management.
6. Ignorance – Not knowing what you don’t know and, nonetheless, making important long-term financial decisions that leave you with too much debt and too little discretionary income.
7. Overthinking – Simple solutions are usually the correct solutions. Seeking more complicated solutions leads to procrastination and delay.
8. Fear – Making money decisions out of fear. An example would be liquidating investments during a downturn in the stock market.
9. Stress – Studies have shown that stress reduces your IQ by 13%. When you are under stress, you should never make any money decisions.
10. Impairment Spending – Spending money or making spending decisions while impaired by drugs or alcohol.
11. Desperate Decisions – These are decisions that you make from a position of weakness. They are typically the result of prior bad decisions and are almost always forced upon you by some third party.
12. Impulse Spending – Making spur-of-the-moment purchases. This could be emotion-based or due to Decision Fatigue.
13. Peer Pressure Spending – This is where you try to mirror the lifestyles of neighbours, friends, or family.
14. Rescue Spending – When you spend on those inside your inner circle who struggle financially.
15. Impatience – Making poor money decisions, such as liquidating investments during a downturn in the market can be fear-based or driven by a lack of patience.

As you can see, there are many reasons why people make mistakes with their money. Being aware of these common pitfalls can help prevent you from falling into any of these Spending Traps.

Links and Resources:

Join Tom Corley and me at Wealth Retreat 2023 – click here to find out more.

Metropole’s Strategic Property Plan – to help both beginning and experienced investors

Tom Corley’s blog

Get your copy of Rich Habits, Poor Habits here- www.RichHabitsPoorHabits.com

Some of our favorite quotes from the show:

“Wealthy people, smart people, still do stupid things with their money, and this all falls down to, I guess what we’ll call behavioural biases.” – Michael Yardney

“A lot of us want to keep up with the Joneses and think other people probably pay a lot more attention to what we are, what we do, what we wear, than they do.” – Michael Yardney

“I think what we’ve realized as we’ve worked through this list is that emotions override almost any level of intelligence.” – Michael Yardney

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