Impulse buying is a common behavior that affects people across all income levels and lifestyles. It often happens without planning and is driven by emotions, convenience, or sudden desire rather than real need. While occasional spontaneous purchases may seem harmless, frequent impulse buying can quietly disrupt financial stability. Understanding why these urges happen is the …
The concept of the “rational human” is often used in traditional financial theory. This model assumes that individuals can process information accurately and make decisions that maximize their interests. The idea seems to work in mathematical theory, but in practice, it doesn’t. When the market falls, people panic; when the market rises, they become enthusiastic. …
Most of us like to believe we are rational human beings. When we make decisions, especially about money, we assume we weigh the pros and cons, calculate the risks, and act in our best financial interest. If the math works, we do it. If it doesn’t, we walk away. But if that were true, credit …
You might think that successful investing is all about spreadsheets, financial ratios, and analyzing market trends. While those hard skills are certainly important, there is a softer, often overlooked variable that dictates your portfolio’s performance more than you might realize: your own psychology. Humans are not purely rational beings. We are emotional, reactive, and prone …
When it comes to money, most people like to think they’re incredibly smart. You might think you apply calm, astute logic to every purchase, investment, or savings goal. But traditional economic theory often ignores a crucial factor: human thinking and feeling. Our brains are filled with all sorts of emotions and psychological signals that can …
Most of us are familiar with the basic formula for financial success. Spend less than you make and invest the difference. On paper it sounds easy, but millions of people have trouble sticking to their budgets every month. It’s not a matter of a lack of math skills or an inability to use spreadsheets. It’s how we are …
You have likely observed individuals entering a store to purchase milk and subsequently departing with a brand-new television. You may have even held on to a stock whose value was falling because you would rather not admit that you had made a mistake. These scenarios would not be possible if traditional economic theory were true. We are …
The traditional economics is based on the simple and comforting assumption that humans are rational agents. In this world of theory, people make decisions to maximize their wealth and well-being. They plan for retirement, sell stocks when fundamentals change, and don’t let emotions dictate their spending. You know that this assumption is wrong if you’ve ever …