9 Dumb Financial Decisions Most People Make (Do You?!)

[@matthewryan4844]

6:10 Sunk cost fallacy 10:00 Mental accounting 14:32 Endowment effect 19:00 Social contract 25:20 Overconfidence bias 32:28 Accelerated gratification 37:48 Loss aversion 44:53 Herd mentality 53:55 Transaction utility

[@tanhuynh5095]

Thank you, Matthew! What is the Endowment Effect again?

[@sberrios77]

Thanks to you I got the useful information from this hour-long video in 8 minutes!

[@traveltx]

@@sberrios77 As they would remind you, time is your most important commodity :D

[@ankitkapoor8846]

Thanks man! saved my time.

[@ericjuli6576]

I remember trying to justify Jnco’s by pointing out that I’m getting a lot more material for the same price as Levi’s etc. 🤦‍♂️

[@jonathanm1571]

Jncos and a chain wallet. *sigh*

[@aurinator]

Costco's free samples make so much more sense now, and I can confirm you absolutely feel that way.

[@TKoeth12]

Great to see The Money Guy show promoting the work of Two Cents! Both incredible shows - subscribed to both on KZbin.

[@michaelkennedy5584]

I was fortunate to have Richard Thaler as one of my Economics Professors at Cornell University Business School in 1987. Very educational! I highly recommend his first book (Nudge) co-written with Cass Sunstein. Richard Thaler won the Nobel Prize for his work in Behavioral Economics in 2017.

[@commanderrandy3259]

Haven’t even started yet and I like it!! I listen to you guys constantly.

[@Evergreenscoderzone]

Oh. That's so true! I could see my actions as in a mirror while listening to what you were saying! Thanks for that revelation!

[@artait1]

My wife gets annoyed because I can’t stop saying “Brian Preston....THE MONEY GUUUUUUY”.

[@MoneyGuyShow]

This makes me so happy 😁 👍

[@tyfly867]

33:35 Wealth Multiplier by Age is the single best graphic to illustrate why saving early is so important. Go Dawgs!

[@Yugiboii]

Yup, I was a fool for not starting at 20

[@beaubreau]

Sunk cost fallacy: Great way to trap people at a poker game.

[@cameliajones6029]

Omg. I know this video is old, but I'm so happy to hear you guys live in TN.

[@RichardServello]

That dollar chart is a perfect example of compounding interest! Amazing how exponential growth works so well over time.

[@specialsituationsinvesting3310]

As an investor in individual stocks, I found this video informative and great to review. These psychological concepts are much more useful for individuals attempting to avoid mistakes than I realized when I was first introduced to them. This is probably why Warren Buffett talks so much about temperament being crucial to his investing success.

[@brandoncarroll9433]

I think this video is very helpful. Gunna share it with others. Thanks Bo and Brian!

[@financeoholic]

Great review of the behavioral finance concepts. Definitely one of the more interesting sides of finance, observing people's behavior and psychology. There's always the concept of the utility curve that explain's people's "satisfaction" attached to a specific dollar value. For example, the utility of renting an apartment next to work instead of purchasing a house 45 minutes away (and earning equity) may have a much higher value on the utility curve, even though it may not be the most financially efficient decision. Also recommend Kahneman's Thinking Fast and Slow book for Behavioral Finance.

[@chemquests]

Similar to the overconfidence bias, & where I thought you were going, is the Dunning-Kruger effect. It’s the U-shaped relationship between confidence and years of experience, the novice is more confident than the journeyman & similar time the seasoned expert.

[@Wilvin]

I have watched a good amount of your videos and this one is definitely my favorite. Most of the time, the information is somewhat basic and repetitive. This time, the information was refreshing. I enjoyed the personal examples as well.

[@cosmoslady]

I love "Misbehaving" by Richard Thaler. Great book! So is "Nudge"

[@VTCMart]

Haha I am the JNCO generation...they were popular when I was in Middle School/High School in the mid to late 90s. When they first came out they were just slightly baggy but an arms race of leg opening size proceeded until they got ridiculously huge up to 36" wide if I remember right. They were also very expensive, like $60-$80 in '90s dollars. A pair of Airwalks, JNCOs and a South Park shirt was the ultimate middle school outfit :)

[@mikhailsordinarylife]

Great episode! Plus as a long-time sub of the Two Cents couple, it’s great to see them get a shout-out from another channel I sub to.

[@huskiefan06]

I definitely remember JNCO jeans in middle school. I never had a pair, but did have some wide leg jeans for sure. It was definitely the style 😂

[@RichardServello]

I had a bad investment last year that I didn’t research well enough and it reverse split and made it impossible to recoup my loss. I held it for about a year and nothing changed. So I decided exactly what you said, I sold it and put the money into good assets that have made me more money than I lost. Sometimes you just have to bail out.

[@slevitron1543]

When my wife and I were shopping for houses we ran into someone who definitely had the Endowment effect. They had leased solar panels on their house and the wife thought they increased the home value. I explained that it was an additional liability because I had to take over their lease. Offered them full listing contingent on them paying off the remainder of the solar panels. They were offended by our offer and sat on the house for 4 months after our offer and sold for $35k less than their initial listing price. We're very happy with the house that we ended up purchasing, but it took visiting over 50 homes to finally pick one.

[@nlux711]

Yep.. Jinco's were what everyone wanted in late grade school/junior high. My mom wouldn't buy them - I should thank her now. Please do a show on what things I can do that my daughter will thank me for in the future! i.e. - opening up a credit card in her name, starting an Roth IRA in her name (can I do that AND have a 529 in her name at the same time?) etc.

[@rosiesrun]

What's funny is I literally have one of those action figures at my house. I would have never even realized the demand for it...WOW

[@samanthaleshikar9025]

SELL IT!

[@cliftonmadden1992]

Sunk cost trap example: Someone I work with made a really dumb decision; she fell into the sunk cost trap. We had an unsuccessful product that we stopped selling. The tooling for the plastic parts for this product originally cost $400,000. She decided to have the tooling shipped to our warehouse at a cost of $10,000 rather than scrapping it. These tools have been sitting in the warehouse for more that two years collecting dust. To what end? This person has and MBA; I guess Elon is right: MBA's are worthless.

[@FmFpF1992]

I love how this video proves the subjective value theory promulgated by the Austrian School of Economics. As FA Hayek put forward (paraphrased and in my own words), all human action is rational as all value is based on their individual value judgments. So irrational to one is rational to another because their value judgments are different.

[@mainstreetmoose445]

“A GREAT BIG BEAUTIFUL TOMORROW”?! (32:10ish) Being a fellow Disney Nut, i caught onto that RIGHT AWAY!

[@Th3Think3r]

I think one of the most common mental accounting mistakes people make is spending a state or federal tax refund. It is money the person overpaid in taxes during the year but they treat it as a "free money" once they get it back and allocate it atypically.

[@brianlane9534]

The bicycle flat tire at the bottom of the hill - great analogy.

[@VerdyBerdy]

My financial goal is to save at an extreme amount and slowly decrease it after a while so i live the same or better lifestyle with increased/same levels of saving net worth, until I can retire.

[@jerrybrown2158]

Just give yourself some cushion so that you don’t stress out about money. Or better yet, find enjoyment and fulfillment in free/cheap events and things.

[@Ethernet480]

Robert Cialdini has a great book on the power of persuasion through social contract ( I.e. free stuff up front to draw you in)

[@willshuford5576]

I listen to Dave Ramsey sometimes on KZbin and while some of what he has to say is relevant a lot of what he teaches is way too simplistic AND I get super annoyed by his moralizing. However, listening to Dave led me to this show and for that I am grateful. Thank you for the thoughtful insight guys.

[@Stormy_Dawn]

He led me to them also...life changer!

[@MoneyGuyShow]

My heart has grown two sizes ❤️ ❤️ Thank you!

[@brandenwilson3815]

Agreed. He led me here and am very happy. I think he is great at getting the average Joe (or Jane?) out of debt, but I disagree on many pf his investing strategies. My biggest pet peeve, Bo hits on the head. Get your free 401k match. Why would I stop putting in 4% or 5% of my salary to get an exact match from my employer? Why wouldn't I utilize 0% credit cards to help me avoid interest? Dave is great for the average and below average intelligence person but I don't think he maximizes the best options, and sometimes those do confuse folks. I also hate how he pushes religion into everything. One thing I love about Brian and Bo is that there is little religious motive behind there words. I hate having people push their religous beliefs onto me

[@DietBajaBlast]

@@brandenwilson3815 well said

[@dustin9258]

Same here. I used to listen to Dave a lot, but his responses were predictable and the side dose of politics got overwhelming. The money guy show is so much more informative and enjoyable to watch.

[@erivers71]

Bo and Brian are financial wizards at the highest level! Great show guys!

[@tacticalheadlampwithstrap3184]

Once my homie and I went rolling through Height Ashbury in long sleeves and pleated slacks. Even had our sweaters sling across our backs. We got so many offers for drugs. Pleated slacks, they thought we were there to party.

[@josephdigi9373]

I'm 35 and live and grew up in Mass. I'm laughing! I lived the JNCO jean life with the wallet chain! You forgot about the wallet chain! 😂🤣

[@joyaustin6581]

Never heard of the brand

[@jbullionaire2749]

Some great analogies/examples in there. Good Job!

[@curtiswfranks]

I think that being greedy and treating the free sample not just as the win, but as a win over the other person, might help to cure the social contract and endebtedness problem. Tell yourself that you are getting one over on the other person and that if you buy the thing, then they are getting one over on you. That will make the victory sweeter. Plus, loss aversion makes the alternative far less appealing. But it will probably make you a worse human.

[@stevenbowdich6716]

I am a cheap person and do not fall into any of these. I am kinda the complete opposite in that I love money so much that I never buy anything nice. I have weened myself off of that over the years though. Also, I have found a way to beat the casinos. It involves using the coupons many of them handout in Las Vegas. I also had gotten it with the ones in Puerto Rico as well. Basically the coupons double your bet (Usually a max of $25) on whatever your play and they are built in as an enticement to keep playing. You go to a crap table and put one coupon with $25 on the pass line, another coupon with $25 on the do not pass and then $1 on rolling a 12 which is a X30 roll. You are guaranteed to walk away with at least a $24 profit. You basically just hop around the different casinos taking advantage of the coupons. Don't hit up the same one too often or they will catch on. You can usually get another set of coupons when the desk clerks swap out.

[@sunnyd4734]

If you're spending money on gambling, hotels and airplane fares, you're not a cheap person.

[@WeLoveAttractions]

Former Disney Cast Member here. I can totally relate to your comments about the turkey legs. It happened to me once before where the smell got too much for me and I had to buy one. It was disgusting! 😂

[@duneme]

Thank You Matthew Ryan! I was just thinking I don’t want to watch these guys chat for an hour!

[@TheFinancialCreep]

Love the show. Your last example really turned my wheels. Because I think there’s another rationalization, it may only cost $1k more for this upgrade now, but later It’ll cost $5k to have it re-done and upgraded. That’s kind of a 10th one that I don’t think really got hit. The coupon mentality. I may not need this but I can save so much, I’ve got to do it!

[@TheFinancialCreep]

Kind of accelerated gratification.

[@MoneyGuyShow]

Great point Jon 👍

[@ranger2316]

Hanging on to a financial deal that has gone bad ... Dave Ramsey calls that 'paying a stupid tax.'

[@ScaryHairyHarry]

Yes, because every failed investment is due to your stupidity.

[@colin1818]

@@ScaryHairyHarry - You didn't read the original comment very closely.

[@ryanhamstra49]

@51:00 not worth it either way. It’s 10 min there and 10 min back, my time is worth more than $15 an hour ($5 saved over 20 min) I have this conversation with my wife all the time, am she will spend an extra 3-4 hours to drive to the larger town south of us to buy groceries to save $20, but then be super stressed from dragging a toddler and infant around all day. Just buy the damn groceries….

[@danielshawtoy1]

Liked all of it and good work guys. Shared it w my investment group.

[@MoneyGuyShow]

Thanks Dan 👍

[@DDEHoodStarz]

This video right here is a gold mine! ❤

[@SovereignMoney]

the endowment effect isn't as prevalent in real estate because there are costs when you sell. not just the 6% agent commission on the sell side and the closing costs on the buy side, but you have to move all your possessions and get used to a new area. a true endowment effect is visible when transaction costs are not apparent.

[@entrepreneurlife649]

Wow, just went through the endowment effect last week. Going through negotiation for business and personal damages with an insurance company on the other end. We got to a number, it's 4:45 pm, the other side is highly irritated and not enjoying the negotiation process, do you take it or try again in court? "My personal damages are worth more than this", "This barely covers my hard economic expenses (after fees and lawyer cut)". Do you gamble with convincing 12 jurors to double the money or just take it? I chose to take it because it does get us out of the bad debts and lets us move forward within the business.

[@bbstroup2040]

The worst case of social contract as a woman is when a friend invites you to a "makeup party" some of the worst financial dilemnas ive eveer been put in.

[@ThanhTLam1]

this channel deserves over 1m subs...

[@damcrac]

Great show. I'm actually stopping a little early to watch it later so I can jot down a couple of notes. Will add those two books to the reading list as well.

[@Josh-fw5yt]

I was a professional FX Options trader (sell side) before I switched into high yield bond investing (buy side), and I can confirm that he definitely knew nothing about options. 😂 You can spend years managing first and second order greeks and lose money on mismanaged delta exposure. Nothing beats regular long-term buy and hold index investing for the layman, maybe sprinkled with some single stock buys if you can handle fundamental research and build out a half decent model.

[@TheAndrewLopezFinancePodcast]

Mental Accounting is definitely a bad habit! I do it too!

[@colyhope6467]

I haven't heard Adam Smith or Wealth of Nations referenced in years.

[@mayukhghosh3520]

Love your show hope to attend a live one in Franklin

[@wmmarquez]

Thank you for the info

[@michaelsmagicalmoments]

Oh man, I definitely had a JNCO phase. Such a throwback memory.

[@legionvenise]

Great video As a black woman I can relate to this 💯

[@tommiller3695]

Got a kick out of your gambling budget, ha. Every year for probably 20 years my company would hold a bus. conf. In Vegas, year 1 I started playing nickel slots and would play until I lost 20 buck. I did that until the min bet went to a quarter and my 20 bucks didn't last as long ha. After that I quit gambling and got my gambling gratification by watching all my buds lose hundreds or more every year. Lol

[@TruthSubjective]

Thank you for the free samples. When i have it you can social contract my business

[@tjjensenjr]

Where is the best place to ask the Money Guy Show detailed financial questions?

[@accrualworld9957]

You're brave for showing a picture of those jeans

[@ashley443410]

Sum 41 immediately started playing in my head when they posted a picture of the Jnco jean trend lol

[@thomaswolff3261]

Sorry guys but the Boba Fet is not worth nearly as much out of the package.

[@Zorlig]

Every time my S&P index goes down I put more in. Can't get out of it!!!

[@jillpruett4772]

One thing I am very aware if is the marketing costs of whoever is trying to sell me something. Especially if it involves personal selling, like telemarketing, this is a prime indicator of lack of remaining value. Ain't worth it.

[@kimberleyblake6326]

Hi Brian and Bo. I love your show and have learned so much from you guys - and also had lots of giggles with you along the way! I am from Auckland, New Zealand and was wondering if you could consider making a one-off show specifically for children - my 9 year old son is quite interested in finance in terms of future planning and hoping to be a 'millionaire' one day - I know that you could explain the savings steps in a far more clear and logical way than I can! He already has a 'Kiwisaver' (which I believe is the equivalent of a 401 plan) and I offer $ for $ matching for any contribution that he wants to make into this. Thanks guys and have a lovely day, Kimberley

[@michaelwoods4495]

It's fine that your child wants to be a millionaire, but I'm sure you recognize that a million $NZ or $US isn't really all that much money.

[@danielthompson2561]

Mental accounting! Buying a house, and not caring about 10k, 20k - buying a coke, can’t be more than 2!

[@MikeyB_1972]

You’re buying the salty turkey leg, eating the whole thing because it is gratuitously overpriced, and then you’re going to buy water and or pop which has like a 10,000% margin for them.

[@MoneyGuyShow]

Mike you understand the struggle 😉👍

[@hotwykinger6889]

2:21 "Human beings dont allways act in a rational matter" looking left to the desk, watching a beer worth $1 bought for $88 and agree :P

[@jacoblloyd2573]

Me: Asks question Money Guy Team: We have a show for that. Me: *dumbfounded* I never thought of that!

[@alohabluewave]

Question: Would I have to pay taxes on a Roth Distribution this year if i am affected by COVID? It's my undestanding that you can do distributions up to 100K without penalty. I am wondering if i have to pay taxes on a Roth distribution.

[@RichardServello]

I’ve never enjoyed casinos. The 2 times I’ve been there I lost $50 and I was done. No point. It’s a scam.

[@rayvicka9749]

I'm not sure how to get past the endowment effect. How can I trust in what I think it's worth.

[@ctndiaye1]

I'm 56 and I've never seen or heard of that jeans fad until right now.

[@daheni8857]

With Money Markets and HYSA rates so low, any new ideas for where to put cash while saving for a down payment for a house? Here in California, it's going to take another year. Thanks and the content keeps me excited to save!

[@DietBajaBlast]

I use robo advisors for this purpose. Have mine in a Wealthfront investing account with a risk score of under 5

[@moneytalkswithjonathanthom4150]

On pace to 100k well done

[@zacharypeacock514]

Bo, have a question for you: how beneficial has the CFA has been in the financial planning space? I’m studying for the CFP right now, still in early career, but am fascinated in your thoughts on the designation. Thanks so much, huge fan of the show, I do my best to recommend you guys wherever I can :)

[@kenmaylin4744]

I don't think keeping a beloved possession is necessarily irrational. If his family was hungry or homeless, and he refused to sell it, that would be irrational. Thinking you need to sell it because it's valuable even though you don't need the money would be more irrational than keeping something you just love.

[@localfocalkc]

I shared a turkey leg with two people today at Worlds of Fun. 😂 I cut it up into small pieces! I also owned Jnco Jeans you do a dance called the shuffle and it looks like you're flowing on air.

[@stevendean9637]

Great show!

[@mic7996]

39:16 - 39:33 Had to watch it twice. XD Great work, Brian and Bo!

[@MoneyGuyShow]

Dr. Mark in the house 👍

[@jakeshota4050]

Totally agree the turkey leg at Disneyland was a let down. I got buyers remorse for sure. A couple chicken legs would have been better.

[@martingainty9623]

Brians house in Georgia has all those stairs to ward off alligators climbing into the house? I'll bet he doesnt have that problem in Tennesee!

[@svalentina3075]

I really like Bo. He's so funny. No, his looks don't make me biased. Well, ok, maybe a bit.

[@beaubreau]

Haha it is so true about the turkey leg. They look and smell so insanely good.

[@RichardServello]

Here’s another one for you about gut checks. Charlie Munger said he saw BRK drop 50% 3 times in his life. If they bailed any of those times they would have failed.

[@AstorSkywalker]

The Bobba Fett story 😂 I wouldn't let it go either, but taking it out of the case😢🤕 ouch

[@stevenewsome5306]

Reminds me of our kids when they order something expensive at the roadhouse and they don’t like it. “I don’t care, you’re going to eat it”. 😂

[@joseCalderon1976]

I think that I've made almost all of your 9 mistakes. 😢. I'm getting better at it. Finally at 47 😂. Thanks for all the tips guys!

[@FloEvans]

Yep, pretty sure I have done all these. Currently thinking about buying a boat. Glad you didn’t mention it 😅

[@MoneyGuyShow]

“2 best days...” 😂

[@Chris-qf7yn]

Boys just some advice. When I see your video titles I really want to watch em. But when I see 56 mins, i know theres just so much fluff that I don’t care about that I can’t watch it. But appreciate what you do. Just consolidate for us out here that dont have an hour to listen to this.

[@MoneyGuyShow]

Look in the upper right hand corner of each our thumbnails. We make shorter “Highlight” videos and also release the “Full Episode”. It may not be for you, but our long format shows are our some of our most popular videos. The good news is we have something for everyone 👍

[@DavidMontgomery1]

Is “BUBBA Fett” a Southern bounty hunter? 😀

[@debbied8525]

Bo, you have left me speechless over those jeans. Wow. Just wow.

[@2legit2Kwit]

That Disney turkey leg for 12.50... hahaha! That’s hilarious. Can’t wait to try one

[@phillipbyrnes2885]

They really are terrible ☹️

[@jensonabraham8184]

What is the 72,900 number on top representing? I’ve seen the number change in other videos but can’t figure out what it actually is

[@MoneyGuyShow]

KZbin subscribers- tell your friends and family. Goal of 100k by year-end 👍

[@svalentina3075]

Ahhh thanks for asking, I've been racking my brain trying to figure it out too

[@70qq]

@@MoneyGuyShow 185k as of 10-14-21 ...congrats guys !

[@YanilleCastillo]

On 5:27 in video I guess not having self control and wanting instant gratification let’s see answer so curios 😊

[@yashc7132]

Can you guys do a show about the financial implications of marriage??? (I didn't know our joint income would prohibit me from contributing to my Roth IRA) Helpful to know. Are there any other surprises in store for us???

[@John-zb3lr]

The limit is per person so it would double if you are married. Unless your spouse earns a lot more than you or you are both straddling the limit you would still be able to contribute

[@yashc7132]

@@John-zb3lr From what I can tell, the joint limit is $206K. We make more than that. (I was going to add "unfortunately," but it's only unfortunate in this instance.)

[@5942USMC]

Was watching the Financial Order of Operations video this morning, got about halfway through before I had to leave for work and now it's private. What happened?

[@MoneyGuyShow]

Just you wait Chris - all that and more coming your way Oct 1! 😉

[@DietBajaBlast]

@@MoneyGuyShow You're going to start making us pay for content. I smell a channel membership coming.

[@tendercrispbacon]

Jncos now can hold a whole iPad. There's that.