Cognitive dissonance influences financial behavior from "summary" of Your Money and Your Brain by Jason Zweig
When we make financial decisions, we often encounter conflicting thoughts and emotions. This internal conflict is known as cognitive dissonance. It arises when our beliefs or attitudes clash with our actions or decisions. This mental discomfort pushes us to resolve the inconsistency in some way. Cognitive dissonance plays a significant role in influencing our financial behavior. When we experience dissonance between our financial decisions and our beliefs, we feel uneasy. To alleviate this discomfort, we may rationalize our choices or seek out information that confirms our decisions. This psychological phenomenon can lead us to make irrational financial decisions. For example, imagine you invest in a stock based on a friend's recommendation. After the stock's value drops, you experience cognitive dissonance. You...
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