Finance is often viewed as something dry and all about calculations, math, and smart saving or investing strategies when nothing can be farther from the truth. It has a great deal to do with the way you think, you behave, and with your psychology than you might imagine.
Financial behavior is significantly influenced by your habits, lifestyle, outlook, and several psychological factors. It is essential to understand your psychology or at least a part of it to find solutions to your financial challenges that suit your needs and psychological outlook.
Here we will review a few books that might help you gain insights into these areas of your behavior that influence financial decision making and how to make amends where needed.
The Behavioral Investor by Daniel Crosby
Touted as one of the best works on behavioral finance, this book can deal more with human psychology than finance. If you ask why, the simple answer is that the author believes that without insight into decision-making processes in the human mind, it is impossible to understand finance from a psychological perspective.
The book is divided into three parts. The first part deals with sociological, neurological, and psychological factors that go into financial decision making. This is aimed at understanding the why and wherefore of our financial decisions and outlook. The second part covers four basic psychological tendencies that help make financial choices. Understanding these psychological tendencies will immensely help readers grasp the factors that make them financially behave the way they do.
The third part of the book deals with developing a personalized approach to investment and finance in a behavioral outlook. It also explains how most investment approaches, like value, growth, and momentum investing, are rooted in investors’ psychology. This beautifully links the whole concept and weaves an entire idea of behavioral finance.
The Psychology of Money: Timeless Lessons on Wealth, Greed and Happiness by Morgan Housel
This book will take you beyond math and formulas to help understand the more intimate and personal aspects of financial decision making. How people behave and react to situations, their temperament, outlook on risk and opportunities, and way of thinking reflect in their financial behavior.
This work delves deeper and deals with ego, pride, and fear that influence financial choices and tackles the concept of greed beautifully. What is happiness, and how financial behavior adds or takes away from some of the ideas discussed in these pages? It will change your understanding of finance forever and make it more relatable and personal than ever before.
Next time you plan to borrow, you can go through the concepts explained in this book, and you might be better equipped to find the best 15-minute loans in times of urgency. The same holds good for investment decisions and planning strategies to meet your future goals with a better understanding of psychology.
The Dumb Things Smart People Do With Their Money: Thirteen Ways to Right Your Financial Wrongs by Jill Schlesinger
The author is a financial expert who treats the subject with care and with a bit of flair. Based on his decades’ long experience in the field, the author deftly explores and analyzes how even smart people are sometimes financially dumb. How emotions and expectations can quickly get in the way of most intelligent people, make informed financial choices.
Identifying and tackling these emotional blind spots, in a sense, lies at the heart of this book. It is never easy to see beyond your feelings and find psychological loopholes created by things’ emotional aspects. This is where a more significant effort, a helping hand, a guide, is needed most of all. The author offers you just that helping hand to circumvent your psychological loopholes and be truly smarter when it comes to financial decisions and actions.
It is not always a big decision that matters most but the smallest of the actions that sometimes make all the difference. Once you know where did you go wrong, it all becomes easier to understand and handle. This book explores at least thirteen such potential wrongs that people tend to commit and ways to take corrective measures in time and fulfill your financial goals.
It could be making a false choice of the lender when looking for loans without guarantors or investing in a mutual fund that does not meet your portfolio needs, it all is in your mind, and the answer is right here to find for you in this book.
Conclusion:
These are some of the books that will open a window to the world within your mind and offer you a chance to correct your financial wrongs. Such works are not meant to be a casual read, even if you can read and understand them easily. They tend to become an absorbing read that one doesn’t let go of quickly and becomes part and parcel of their way of thinking, and that is the purpose here to learn about finance not from the mind but the heart.
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