A cognitive bias is an error in thinking or reasoning that affects our memory, judgement, and ability to make decisions. There are over 188 of them in existence, and all of them can wreak havoc on our finances. When left unchecked, cognitive biases can keep us from spending wisely or saving diligently. They can even damage credit and cause us to make unwise investment decisions. As Benjamin Graham, an investor and economist once said, “The investor’s chief problem — and even his worst enemy — is likely to be himself.”
With so many opportunities to slip up, it’s no wonder that seven in ten Americans have admitted to postponing major financial decisions. Fear of regret can be paralyzing — especially since only 17% of people say they have no financial decisions they regret. The good news is that some of the most common cognitive biases are also some of the most easily correctable. Once you start recognizing your own biases, you can work to avoid them in the future and maximize your financial health by establishing the right mindset. This infographic from Self Lender shows you how.
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