When working on and researching for Monkey Money Mind, a Forbes book I co-authored with Chris Zadeh, both of us were struck time and again by the human capacity for fooling ourselves. We think we are rational when it comes to spending, when in reality, most of our financial decisions are made based on our emotions. Our subconscious tricks us into buying stuff we don’t need and can’t afford because we think it will make us look or feel good; we ruin our credit scores, we don’t save for pensions, we max out our credit cards…and, when we are finally able to set aside some money, we already owe it on interests.
We constantly overestimate our future earnings and underestimate the likelihood of bad luck. In the end, when we have painted ourselves in a corner, financially, some of us are left with no options other than face years of debt repayment or live in constant fear that something large, our car, the washing machine, could break down and we can’t afford the repairs.