The Psychology of Personal Finance
Ramit Sethi uses some of Carl Richards’s simple economics diagrams to illustrate the psychology of investing and why it’s hard to get ahead of the cycle as he looks at Buying High and Selling Low. It’s amazing how powerful “napkin sketches” can be when done by someone who can explain them.
Of course, this is part of a larger trend where behavioral economics underscores the role of psychology in personal finance — as well as in high finance.. What often seem to be logical money decisions turn out to be driven by emotions like greed, fear, etc.
While Money Habitudes is not an investing tool, per se, it is often used by financial professionals. It is used both as a way for financial advisers to understand their own money personality or financial psychology but also affords an opportunity to talk about this difficult and elusive subject with clients — and do so in a fun, engaging way.