Behavioral Finance

The Theory of Relativity and your Divorce Decision-Making

Wednesday, August 25th, 2010

Humans tend to make decisions influenced heavily by relativity. We compare one option relative to another. You may decide a grande latte is a good deal relative to the cost of a tall latte. You may think a BMW including complete scheduled maintenance for 1 year is a better deal than a one year old [...]

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Posted in Asset Division, Behavioral Finance, Budgeting, Debt, Divorce Financial Planning, Marital Home, Marital Settlement Agreements, Post divorce financial planning | No Comments »

The Difference Between Cognitive and Emotional Biases in Financial Decision-Making

Tuesday, August 24th, 2010

“Passive clients tend to be followers. They tend to take advice from friends and family without forming their own opinions. In divorce situations, these clients often make statements like “My friend said they got $2,000 a month in spousal support and I deserve the same”. We call this the “Greek chorus effect.” In ancient Greek [...]

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Posted in Behavioral Finance, Divorce Financial Planning, Morningstar Advisor | No Comments »

Ever Wonder Why Frequent Flyer Miles Seem So Valuable?

Tuesday, August 24th, 2010

People often focus on near-term concrete goals in financial decision-making. While trying to maximize these immediate and clear goals they forget or discount the real reason for the actions. This is called Medium Maximization. Having something measurable within reach can redirect our motivation. Immediate and concrete goals by which to measure ourselves give a sense [...]

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Financial Infidelity Survey

Wednesday, August 18th, 2010

A non-profit organization, CESI Debt Solutions, recently completed a survey of more than 200 American consumers. The survey revealed some interesting facts about how couples manage their finances in a marriage.
According to the survey 80% of couples have at least one member who spends money their spouse does not know about. Almost 20% of married individuals have [...]

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Posted in Behavioral Finance, Community Property vs. Separate Property, Debt, Divorce Financial Planning | No Comments »

Using Behavioral Finance to Understand Emotions in Financial Decision-Making

Friday, July 30th, 2010

“Emotions are the most damaging of all obstacles. Fear of loss can paralyze a client, causing not just an obstacle but an aversion to facing the decision at hand. In divorce scenarios, we often see one party moving through the emotional roller coaster of the change and transition at a much slower pace than the [...]

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