Common Sense

Why even the smartest people make dumb financial mistakes

From Financial Mentor:
It seemed like a smart idea at the time…
I sold the hedge-fund business and became financially independent at age 35. What's wrong with that?
After all, it bought me the freedom to embark on a six-month trip and live the dream I had put off since college – long-term travel throughout the Middle East and Europe with nothing more than a backpack, credit card, and no worries in the world. My whole life lay before me as one grand adventure.
Seriously, I have no right to complain.
Yet, it was one of the worst financial mistakes of my life. It cost me millions – many millions of dollars. I was so caught up in living my dream that I lost all financial perspective.
I had no idea at the time that I had just followed the classic recipe for a foolish expensive financial mistake, but I was about to find out the hard way. Hopefully these lessons will help you avoid doing the same.
What Causes Financial Mistakes?
In a perfect world, there would only be two causes of financial mistakes – bad information and flawed reasoning.
If humans were perfectly rational with accurate programs in our heads, we could take the information provided, process it to an accurate conclusion, and consistently make smart financial decisions.
I wish it was that simple. However, it doesn't work that way in practice...
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