The Behavior Gap by Carl Richards

Behavior-GapCarl's best selling book is about making smart and rational decisions about money. The principles of removing emotions from important decisions does apply beyond just financial decisions.

As an example we all know that we should buy investments low and sell high but most people do the opposite.  When the market is strong people think it's a good time to buy.  When it tanks fear tells us to sell.  It's not that we are stupid, as Carl says, we are just built to avoid pain even when it's not rational.

Carl teaches that we all are motivated by fear and greed. Most of us are motivated by both but generally lean toward one or the other. This is why so many financial planners have their clients take some sort of test to judge their tolerance of risk.

The online conversation in my book group was interesting as it turned to a chat about the various life arenas where it is difficult to make logical and rational decisions in the face of great emotion. Thinking of the various decisions in our careers, business, relationship, shopping, and the way we spend our time.

One of the other strong lessons this book cemented for me is the importance of having a third party (councilor, adviser, friend) to help us make the more difficult decisions where emotions tend to cloud our judgement.

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