The Hidden Reasons People Spend Too Much

One of our main roles as financial advisors is to act as a behavioral coach for our clients. The primary function of a behavioral coach is to protect clients from making life-changing wealth destroying decisions. These can include decisions such as:

  1. Pulling all of one's money out of the market near the market bottom
  2. Keeping all of one's wealth in his employer's stock rather than diversifying (before something happens to the company and one loses significant value in one's stock and one's job)
  3. Investing a significant amount of money into one deal that turns sour
  4. Forgoing insurance 

However, beyond these life-changing wealth destroying decisions, there are also much more subtle parts of each of our behavior and psychology that can have a negative impact on our wealth. This week, the Wall Street Journal put out an interesting article describing 5 of these more subtle psychology pitfalls that we can fall into: