Why We Don't Understand Money: How to fix your thinking flaws - [Cognitive Biases #3]

Think you konw what you're doing with you money on your mind? Think again.

You walk into a cinema and buy the $12 large popcorn because the medium is $10. You think you got a deal, but you actually just fell for the "Decoy Effect."Your brain is wired to latch onto the first number it sees.

In this episode, I break down the psychological pricing traps that businesses use to hack your wallet.

We also cover why Sir Isaac Newton lost his fortune to the Sunk Cost Fallacy and why having more information actually makes you a worse investor. It’s not about being smart; it’s about understanding the system.

Key Takeaways:

"Consider the Opposite" strategy: Mentally flip the price anchor to neutralize the urge to buy.

Spot the Decoy: Identify products that exist solely to make expensive options look cheap.

The 5-Point Rule: Stop researching after five data points to avoid the Information Bias trap.

Listen now to stop your brain from leaking money on deals that aren't real.

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CHAPTERS

00:00 Money Traps - Financial Cognitive biases #2

02:49 The Opposite Strategy

08:01 Decoy Effect

10:44 Gambler's Fallacy

16:48 Sunk Cost Fallacy

19:24 Bad Prediction Flaws

19:59 Overconfidence Bias

21:33 Information Bias

25:43 Send Off Learn more about your ad choices. Visit podcastchoices.com/adchoices