FILE – This April 2017 file photo provided by NerdWallet shows Liz Weston, a columnist for personal finance website NerdWallet.com. (NerdWallet via AP, File)Certified financial planner Jill Schlesinger has seen smart people make some pretty spectacular money mistakes.
One client who repeatedly refused to buy disability insurance later developed multiple sclerosis. A doctor she knew put off writing a will and left behind a six-figure tax bill. A technology company engineer balked at her suggestion to sell some of his stock options, only to watch their value and his retirement plans evaporate when the market plunged.
Schlesinger, a CBS News business analyst and author of “The Dumb Things Smart People Do With Their Money, ” admits to financial missteps as well, including waiting for “just the right moment” to invest and missing a big jump in the stock market.
“We’re emotional animals, not just rational ones,” Schlesinger says. “So even otherwise intelligent people are stymied by their emotions – usually fear and greed – and their cognitive biases.”
In fact, a whole field of economics is devoted to exploring how we make financial decisions – including the bad ones. Behavioral economics tries to pinpoint where our brains and emotions lead us wrong, as well as what we can do about it.