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47Mostly Money Leadership

Preet Banerjee is a consultant to the wealth management industry, specializing in commercial applications of behavioral finance. He is the founder of MoneyGaps, an investor and personal finance educator. Preet hosts the Mostly Money podcast, where he helps listeners take control of their finances by exploring the full world of all things money with expert interviews.

(Highlights from our interview, recorded May 30, 2023.)

WHY DO PEOPLE MAKE BAD decisions about money? The first generation of behavioral finance and economics assume people were rational actors making self-serving decisions. When we tried to understand money mistakes, we chalked it up to people being irrational. That was a weird assumption to make, though, because when we look around, a lot of people are being irrational. Instead, people are predictably irrational. They repeatedly make the same kinds of money mistakes, and there are patterns. The current thinking is that we should look at the things people value. Maybe they don't value money more than status, for example, and this shapes their spending. It's not that they are irrational; instead, they look at the world from a different perspective, a bigger perspective than just money. Behavioral finance asks, “We know we need to save more than we spend to save money. Why do we have so much trouble doing that?”

Personal finance success is 90% psychology and 8% math. The missing 2% is a testament to how unimportant the math is. It really ...