One thing that's puzzled me over the years of dealing with people and their money (and there have been quite a few of them!) is why people make financial decisions that are not in their best interest.
You see that most of our economics is based on the assumption that you and I will try to get the most for our money. We might not always be successful. And, sometimes we'll be misled or even cheated. But, overall we'll generally get the best deal on any purchase and, if we're selling, get the best price for our item. The assumption is believed to be true for both individuals and for companies. At least that's what I learned in school.
The last few years I've become more aware that often people don't do what's best for them. Sometimes they spend (or save) irrationally. They make financial decisions that even they know aren't in their best interest. But somehow they seem unable to do anything else.
If I look at my own financial decision making I like to think that I'm rational. Yes, sometimes I spend money when I shouldn't. But, it's not unconscious. I'm aware that a choice is being made to buy extra comfort, convenience, or... I'm also aware that sometimes I too reluctant to spend money. Buying used when new would better suit my needs.
Based on my email, I know that I'm not the only one making decisions like these. What I'm beginning to wonder is whether most of us are irrational in our financial decisions at least some of the time.
What's your take on the question? Are people generally logical in their financial decisions? Are they a mixture of rational and irrational depending on what day of the week it is? Or could they even be largely illogical in choosing
their financial path?
I'd love to hear your thoughts on the subject. Who knows, maybe we'll all learn something that can help us be more successful in managing our finances.
Keep on Stretching those Dollars!
Gary
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