EP 162 | Money Psychology: Your Mind is Not Your Friend Right Now

EP 162 | Money Psychology: Your Mind is Not Your Friend Right Now

Welcome to episode 162 of The Retirement Years on Profit Boss® Radio! In this timely episode, recorded during the coronavirus pandemic of 2020, we’re talking about the psychology behind how we think about money, the mistakes we make, and why we’re so prone to irrational behavior in both good times and bad. 

It’s hard not to get emotional when it comes to money. The stock market took a sharp negative turn recently and the short-term future of the economy is uncertain to say the least. Many Americans are either out of work or find themselves having to pivot to earn money. It would be 100% normal to be panicking now, however, it doesn’t have to be that way.

In this interview, Jeff and I talk about how, if you’re attempting to “react” to what’s happened, you’re not likely to be making decisions that are doing you any good. 

For example, people are asking me questions like, “Should we sell out of the market at least partially?” or How can I make sure to get in at the bottom?” or “Don’t you think hotel stocks are poised for a great return?”

Despite what the media would have you believe, nobody knows the short-term future so these questions cannot be answered. More importantly, investing is about size and consistency, not timing, and it’s important to take a look at it from a big-picture perspective. 

As we navigate the coronavirus crisis, our minds are more vulnerable than ever to tricks, traps, and temptations. If you’re wondering how to invest, what to do with your investments, or just why you’re reacting the way you are to reading the news or checking the market, today’s episode of Profit Boss® is for you.

I’m joined by author, speaker, pundit, comedian, and behavioral science advocate Jeff Kreisler. In addition to writing for TV, politicians, CEOs, and sharing insights on networks like CNN, Fox News, MSNBC, and SiriusXM while he’s not touring the planet, Jeff runs Peoplescience.com. He and past Profit Boss® guest Dan Ariely recently co-wrote Dollars and Sense: How We Misthink Money and How To Spend Smarter, where they hilariously tackle the behavioral science behind our financial decisions. 

So, are you ready to stop letting the news cycle leave you wondering if now’s a good time to buy or sell, identify financial traps before you fall prey to them, and discover frameworks that will help you use human nature to your benefit? Then you don’t want to miss this episode. Tune in to Profit Boss® Radio today!


Here’s what you’ll find out in this week’s episode of Profit Boss® Radio

  • Why we participate in emotional, panicked, and irrational behavior, like hoarding toilet paper, when we see others do it – and how a crisis like the coronavirus makes bad thinking even worse when it comes to money.
  • The reason it’s so important to take a 30,000 foot view of your finances during a recession or extended downturn.
  • Why our brains struggle so much to understand money – and why the things that make money “awesome” in Jeff’s words are also the things that make it so complicated.
  • The things people are most frequently getting wrong right now – and why we’re so prone to making terrible tradeoffs for the future in this moment.
  • Why making your IRA contributions automatic and paying your bills first has a significant, positive impact on your ability to save.
  • Why we’re so much more prone to stressing about small spends instead of big ones.


Resources and Related Profit Boss® Content


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Hilary Hendershott: All right, everybody, Jeff Kreisler with us today. According to his bio, he’s your typical Princeton-educated lawyer turned author, speaker, pundit, comedian, and advocate for behavioral science. So average, Jeff. He runs PeopleScience.com, writes for TV, politicians, we will forgive him for that, and CEOs as well as sharing insights on CNN, Fox News, MSNBC, SiriusXM, and has toured most of the planet. He also just co-wrote a book with one of my most popular guests ever, New York Times bestselling author and economist, Dan Ariely. In that episode, he and I discussed his book, Payoff: The Hidden Logic That Shapes Our Motivations. If you want to check it out, it’s Episode 45 of Profit Boss Radio. Jeff is here to talk about their new book, Dollars and Sense: How We Misthink Money and How to Spend Smarter. I’ll be giving away signed copies of his book until they’re gone and that’s really something, folks. He’s going to sign copies and ship them to us in the middle of the shutdown and pandemic. Thanks to Jeff for that. So, to request one, please leave an honest iTunes review and then head to HilaryHendershott.com/162 to request your copy. 


Hilary Hendershott: Well, Jeff, it’s a great time to be talking about money and emotions. Here we are hopefully midway, I hope, midway through the coronavirus pandemic and associated economic decline and I’m not even sure it’s possible to have a non-emotional thought about money. Are your friends calling you for advice?

Jeff Kreisler: Yeah, some are and some know that I’ll probably give them a scientific answer of, “Well, it depends.” Well, yeah, this is definitely a time – every financial decision in normal times is fraught with emotion because we don’t ever really know what the right choice is and now, obviously, emotions are even higher. The uncertainty is even greater. 

Hilary Hendershott: It is. Add uncertainty to any emotional topic and you come up with a bunch of sort of heads spinning around. What’s the most popular question you’re getting about money right now?

Jeff Kreisler: “What should I do?” “Help.” “Can I have some?”

Hilary Hendershott: Can I have some money? Do you have a good pithy answer for, “What should I do?”

Jeff Kreisler: I think that right now more than ever it’s a bit of a take a deep breath and I know that some ways people don’t need to be told to try to see the big picture and all that, but it really does make a difference. In fact, there’s a study that I published an article recently on People Science, where they literally are looking at people that took the opportunity to think of the big picture, think of a long term view, think of sort of a 30,000-foot view, whatever your metaphor is about their financial choices, and in that case, made more rational ones. You know, this is true all the time but perhaps even more so now, when, as we said, we’re even more emotional, more sort of panicked. I mean, it’s something like hoarding toilet paper, right? That is such an irrational thing to do but we’re trying to get control and we’re seeing other people do it, worried about missing out, and I think if we just took a moment to catch our breath, it’s not like we missed the last toilet paper roll on Earth. If we thought about it for a second, and we realize we didn’t need to do it. So, in a big picture sense, taking a deep breath and thinking about bigger ideals will help.

Hilary Hendershott: That’s good. I don’t actually talk about toilet paper on my show often, but I think it’s appropriate now, that and bottled water, right? Because we all know viruses lead to draughts. And it’s a lot like the advice I’ve been giving some clients who have been asking, “How can I strategize getting into the market right now? Or what should we do about my IRA deposit from last year? Should we buy now or next week?” And I said, “You know, really, it’s about how the size of that IRA deposit and the consistency with which you make it every year, not about whether we trade on this Monday or next Monday,” and I think that complements what you were saying about take a 30,000-foot view. It’s like, look, this isn’t significant from the big picture perspective. So, what was your inspiration, your and Dan’s inspiration, behind this new book?

Jeff Kreisler: So, the way that Dan and I came together for anything was from my previous book, which is a satire. I want to be very clear. It’s a satire called Get Rich Cheating.

Hilary Hendershott: I like it.

Jeff Kreisler: Yeah. Some may look at the news in the world and say it wasn’t a satire, it was a documentary but that’s part of it. Regardless, it was satire about a culture of cheating, particularly about financial cheating, everything from steroids to Enron to showbiz and sports. When that came out, Dan got a copy and he invited me to lecture at his class. At the time I was doing this character sort of a Stephen Colbert meets Jim Cramer meets Tony Robbins empowering people with the power of cheating. And I lectured at Dan’s class at Duke business students, and I basically told them, “A cost-benefit analysis, no one’s getting caught cheating, and you can make millions.” I talked to them about it and there was always a small group of the class I would say, “Hey, that’s not a bad idea.” And this was like a light bulb moment for me because I never really heard of behavioral economics or behavioral science or advanced field at that time and this was many years ago, eight years ago. 

And I had always just sort of researched it without using my common sense. I had an economics degree and had a law degree and I researched all these scandals. And my conclusion was that money messes with our heads. But then I started working with Dan and discovering his work and those of his peers. And I discovered, like, that’s not just sort of what I think and there’s a whole field of research supporting that and I was just really smitten. It sort of crystallized a lot of the things I’ve done throughout my career. And we worked on a few different projects and then at some point he said, “Do you want to help me with this book?” that he had on his plate, but he just didn’t have the time to do and I said, “Sure.” And one thing led to another and I sort of got a crash course and everything that’s been written about the psychology of money and came out and it’s done well and it’s opened some doors and hopefully help some people make better decisions whether it’s not to buy a sweater just because on sale or not to take out all the money from the 401(k).

Hilary Hendershott: So, I’m hoping it seems really serendipitous that the book came out and now you’re watching current economic events unfold. So, you really have this platform to educate people from an even-handed perspective. Look, this is what the data and the research say about the crazy things that we do about money. Do you find yourself in kind of proselytizing role?

Jeff Kreisler: There’s a bit of it. I mean, I’ve always hesitated my life to really sort of give people advice like this is what you must do. And so much of this is sort of context-driven, right? Not everyone has the same problems with their 401(k). Some people are living week to week and others it’s about long term planning. So, there’s no one size fits all but there’s definitely some sort of approaches and some of the traps that we fall into apply to everyone in different ways. Something like the power of social proof, right? The fact that we’ll make a decision based upon what we think other people are doing. It’s not necessarily what they actually are doing but what we think they’re doing, particularly people in a tight peer group and this comes up a lot if we like at this time think, “Oh my gosh, everyone, they’re borrowing against their home or they’re taking out money in their 401(k) or whatever it may be.” If we think other people are doing it, that tends to be the reason why we take action, when really we should stop and figure out if it’s the best choice for us. But that emotional driver that like easy feeling of, oh, others are doing it so I should do it, too, is particularly dangerous at a time like now when, again, we don’t know what to do.

Hilary Hendershott: Right. Why do our brains struggle so much to understand money? Why is it a topic that’s so hard for us?

Jeff Kreisler: Because what makes money awesome is also what makes it so hard to understand. Money has all these like unique features. Money is divisible. It’s storable unlike like the olden days, if you barter, you can put money aside and invest it. You couldn’t do that with like goods and services. Money is fungible. Any $10 that you have is the same as any other $10. It doesn’t have to be represented by a certain bill. There are other elements of it and just the complexity of money is what allowed us to do so many great things but it also just makes it really hard to think about. And there’s one takeaway I want your listeners to have or readers, whoever it is that everyone has trouble thinking about money. Oftentimes, like, we don’t ask for help because we think there’s a stigma. We think we’re the dumb ones but I’ll talk to like wealth advice for companies and I’ll go in and I’ll talk to them about this and I always share a story of how they’re a number one performer, the person who’s the best at telling others what to do with their money makes the most mistakes his or herself. 

It’s because it’s emotional. It’s because when I tell you what to do with your money, I look at a spreadsheet or I look on a chart and look at some numbers and just data, here’s your kids future, here’s your retirement, here’s the education. But then we asked about me, that’s my retirement, my future. It’s personal. So, it’s an emotional thing. It’s a complex thing. And if I can give one more layer that that’s really sort of semi in the weeds. But ultimately, the challenge of money is when you make a financial decision, what you’re supposed to do, what the perfect rational person is supposed to do? This person doesn’t exist. He’s weighed the opportunity cost but weigh, what else he could do with that…

Hilary Hendershott: Billions of other things you could do with it.

Jeff Kreisler: Exactly. And that’s impossible to do like I think of myself as a person that’s smart but that’s way too much thinking, like, “Oh, I could take this $5 latte and instead, I could invest it in a fund and retire at age 17.” Or there’s a bunch of fun stories in the book about this, and Dan did some cool research but the point is that’s too hard to think about. So, instead of even attempting that, what we end up doing is falling for sort of value cues or money traps or nudges, little things that lead us to think we’re sort of making the right decision and think that we’ve gone through this whole opportunity cost calculation when we have it. The number one, one is sort of sale prices, right? Sale prices make us think, “Oh, we got a great deal because those hundred dollar shirts marked down to 60. I love this because I saved $40.” It fools us into thinking we did the opportunity cost analysis when we really didn’t.

Hilary Hendershott: Right, but it does feel good to think you got a deal.

Jeff Kreisler: You know, JC Penney, we talked about this again in the book, but just real briefly, JC Penney, their whole model of their store is to have inflated prices, but then a bunch of like sales and coupons and all this. They hired a new CEO at one point who said, “This is stupid. Let’s just give them the regular price.” So, they changed their pricing and all their customers left because they’re like, “No, we don’t want fair pricing. We want this game.” 

Hilary Hendershott: Deals. 

Jeff Kreisler: And they fired that guy, put someone else back in, have the sales on again and everyone came back. It’s not rational, but it’s human. 

Hilary Hendershott: So funny how people can be manipulated like that. It’s hard to think about. So, people are at home and they’re shopping for what they’re shopping for. I do think there’s a good amount of retail therapy happening right now. And one of your warm Amazon reviews, by the way, said, “This is a book about helping people understand why they spend on what they spend on and helping them make better, more rational choices.” Maybe you would articulate that as saying choices that better provide you happiness or utility, right? So, what do you think people are getting most wrong now? Whether it’s about spending or investing or the economy, what is this most messed up in terms of our thinking?

Jeff Kreisler: That’s a challenging question but what I would say is all of those that impact our long-term thinking, our self-control. I mean, ultimately, self-control is about the fact that we don’t connect to our future selves. We are much more emotionally connected to Jeff right now than Jeff in 20 years say for retirement, even Jeff in a few weeks. In fact, studies show that Jeff in the future is like, I think of that person as a totally different being. It’s not me. It’s somebody else. So, anytime we have to make something that’s about the trade-off for the future, we’re inclined to do that very poorly. And right now, that’s even more so because a lot of us just don’t know what the future is like, whether that’s are we going to be working in six months? Or what are we going to be in five years? And so, the temptations of the present are even more heightened. For some people that’s eating comfort food or like you said, the comfort of shopping and getting something that feels good, as opposed to thinking about the future. 

But I would say and I question, there are times like our goal is not to have everyone be penny pinchers. You know, there are times when buying a nice bottle of wine or buying that cake and eating it. So, you got to take care of yourself sometimes. I would say pulling out all of your money from your retirement fund to buy a giant cake is a bad idea but we don’t want people to be miserable penny pinchers. We just want them to be aware of sort of why they’re making the choices they are so that then they’re in control as opposed to the marketers or their emotions being in control.

Hilary Hendershott: Is there an example you can think of from the book that would give listeners a clear cut idea of someone who was making choices that seemed rational to them at the time, but who in understanding their own cognitive biases were able to better make those choices so that they actually improve their own both current and potentially future situation? 

Jeff Kreisler: I mean, there are numerous sort of examples large and small. I’m trying to think if there’s sort of the one hero of the story and there isn’t necessarily one superhero story but there are people who, when it comes, retirement savings is sort of the easiest place to go because it’s measurable and so many people have worked there that people that have changed, even just from having the default option, the automatic withdrawal into your 401(k)…

Hilary Hendershott: The nudge. 

Jeff Kreisler: Right. It’s a nudge. It’s a system. I mean, ultimately, we can’t change human nature but we can understand our human nature so that we then create systems and environments and products so that we use our human nature to our benefit instead of having that they use against us. And in the retirement context, one way to do that is you go in and you say, “Yeah, if you have a job, you’re fortunate to keep your job these days and you had your automatic money taken out each month or each paycheck.” If you increase that or if you say every pay raise I get, I’m going to increase also my – the percent goes into my 401(k). Like setting that up once or twice so it’s automatic, instead of forcing yourself to make that decision every paycheck makes a gigantic difference. 

Ultimately, there are plenty of people that were going every two weeks and saying, okay, it’s up to me to write a check to put into an IRA versus it just automatically gets taken out of my paycheck and put into an account. The people that made that switch see just a dramatic increase, not just in their savings for the future, but an increase in their good behavior in the present. Because ultimately, like above a certain level of need, a financial need, like more money, so it doesn’t really change our lives. It’s like you move into a bigger house and eventually, you just have a bigger house and your life is the same. It’s the same with getting like a few hundred dollars more a week. Again, assuming you’re not struggling to pay bills, it doesn’t change that much. We can live on $200 extra a month instead of $300 and put that extra $100 in the bank if we get a raise. So, the people that like have done that and have made that something get automatic have really benefited from it.

Hilary Hendershott: I would extend that into personal spending. So, obviously, saving is related to spending but one of the things that was most powerful for me and that I teach now with my clients is to pay your overhead, your bills first and then save, and then only spend what’s remaining. So, your rent, your memberships, your subscriptions are all paid, and then you “pay yourself first” and then what’s remaining in your checking account is you can spend all of that and still be flush. And it really helps but it’s a nod to human nature, like how we naturally act with money. So, Jeff, what do you think is this solution to all the cognitive biases that we have, anchoring bias, hindsight bias? These things really are limiting to us when it comes to understanding the world rationally, and I’m going to get this wrong but the gist is right. Even the author of the book on cognitive biases, Daniel Kahneman wrote an introduction in which he said, “I wrote this book and I still suffer from cognitive biases.” 

So, knowing about cognitive biases doesn’t solve for them, but at the very base, we need to understand the frameworks in which we make mistakes. Yes? So, we need to understand what those are. Yes?

Jeff Kreisler: Yes. First step is definitely awareness. And then trying to create a system or a framework to get to better decisions.

Hilary Hendershott: Okay. And you can implement those frameworks at the micro level so you can look at what are your own behaviors and create systems that supersede them. But just understand that we’re human and we’re subject to irrational choices.

Jeff Kreisler: Yeah. When I said earlier, my one big takeaway is that everyone has trouble thinking about money, sort of hand-in-hand with that is that like getting over that sense of you’re doing something wrong, like accepting that we’re human and we make mistakes. That’s hard for a lot of people to hit. It’s been hard for myself too. You know, I’m not Daniel Kahneman but for me to say I wrote a book about finances, yet I still make these stupid mistakes. I have to at first say that’s the truth and accept that and say that’s not a big deal, in order then get to the step where I do the work that needs to be done.

Hilary Hendershott: Any systems or anything unique you’re doing in your own financial life that you think is smart and contrary to the norm?

Jeff Kreisler: There are a couple of things that I’ve recommended frequently because I’ve done them myself. One is for people to especially nowadays, a lot of people most of their spending goes through their credit card because their credit card is tied to their phone and everything else’s. If you go through your monthly credit card bill with another person and you explain what and why each purchase was made and quick, important caveat don’t do this with like a spouse or partner or… 

Hilary Hendershott: Someone you just started dating. 

Jeff Kreisler: Exactly. I mean, you know if you’re not going to date for very long. Do it with someone you trust, but it’s not emotionally connected to your money. If you go through that, two things will happen. One is you’ll start to see that the expenditures that you have that are not really justified. And two is you’ll start to see sort of your own patterns and maybe you’re spending too much on money. Maybe you’re spending too much on dinners out or on clothing or whatever it may be and that is a way to sort of help personalize whatever framework you might create because everyone has different spending decision, spending faults. The people that go to JCPenney for the sales like I don’t connect to them. That’s not how I would be but that’s how they are. And so, they should create sort of a system to address that. I have my own issues. 

So, identifying those issues is a great first step that lends itself to sort of easy and immediate rewards and the other thing I’d say, another suggestion that tabs on to something you just said about with money left in your checking account is that we tend to think of our discretion or discretionary, excuse me, our discretionary spending, based upon our checking account, what we see at the ATM, what’s on our phone app. We can sort of trick ourselves to spending less if we create another account, just a regular savings account. I don’t mean a 401(k) but it’s a regular savings account and each paycheck, we put a little money into that. That’s still money that we can use if we need it but then when we look at our ATM balance or we looked at our phone, and we see what our amount is in our checking account, that’s what we think we can spend where somewhere else we’ve put money sort of hidden it from ourselves. And that really makes a big difference in our behavior. 

Again, that money’s there for you whenever you want. It’s not like there’s an extra fee to somehow hit an extra button or two on your computer but that little step is a big deal. And again, if you’re fortunate to still have a job, most HR departments can do that for you automatically each paycheck.

Hilary Hendershott: Great. And I saw a line in the book. I can’t remember if it was a chapter head or something I read in one of the chapters. It basically said, “People are irrational. They’ll take $10,000 vacations, but they spend 20 minutes a day looking for parking.” Talk about why that’s irrational.

Jeff Kreisler: It’s irrational because all of the dollar 50s that we can save on parking over the course of a lifetime will never add up to a $10,000 vacation. 

Hilary Hendershott: Is that right? 

Jeff Kreisler: But what we tend to do is we tend to really stress about the small spends, just spend $0.10 more per pound on organic tomatoes and we don’t stress about the bigger spreads, right? I’m buying a house for $500,000 and the contractor says for $5,000, you can get this Italian marble thingamajig. You’re like, “Sure, whatever,” because it’s like… 

Hilary Hendershott: It seems trivial. 

Jeff Kreisler: It seems trivial. It’s an issue of what we call relativity, right? 5,000 off of 500,000 is 1%, whereas $0.10 off of $0.99 per pound thing is a lot more. And we get caught up in percentages, when really you think about the absolute dollars that are going into or coming out of our accounts. Some of that is a function of that sort of percentage and aspect and some of it’s also just like buying a home or saving for retirement or college or buying a car or even a cell phone. These things are really complex decisions and it’s hard to think about all the different elements so we sort of at some point cop out. Those are the places we really need to do the hard work, buy the $5 latte, enjoy your life, buy that organic tomatoes if you want them. Don’t worry about that. But watch how much you’re spending on undercoating for your car.

Hilary Hendershott: Can I circle back and ask you about get rich cheating? Were you just ticked off that it seems like there’s a lot of people cheating and winning?

Jeff Kreisler: Yeah. So, I was writing a column for the Street.com with Jim Cramer, Mad Money, for his website. It was a humor column and it was fairly popular at the time and someone approached me with an idea and I was also sort of a, not sort of, I was a political comedian doing political stand up. And I was just sitting there and I remember I was walking with a friend and thinking about what might be a topic for something to write about? And it was the end of the previous decade, the Enron steroids decade and all these people, CEOs, right? They drive their company into the ground and they get a $20 million golden parachute, which is actually a low number nowadays. And it just seemed like it was just cheating the system. I’ll spare your listeners and I won’t get into politics, but it just seemed to be everywhere. 

And it really struck a nerve with me, especially, because I wouldn’t say that I come from privilege, but I’m a fortunate guy like I went to Princeton and I went to like a great law school. And I’ve been around people who are very fortunate in their lives, but sort of don’t. I wouldn’t say they’re intentionally cheating, but there’s a bit of like they’ve worked the system one way or another. And whether it’s a personal drive or just following the news, I just felt like let’s sort of just call this what it is. And I did it with a satirical take and a lot of jokes and I got a good response from comedy people as well as money people. My hope was that even before I thought of Dollars and Sense, it would help people stop being tricked into spending money and help people stop sort of either idealizing those that had sort of cheated their way. Since Dollars and Sense came out, now I feel like it’s a whole that first book was like, these are how other people are cheating you and tricking you and Dollars and Sense is about how we are tricking ourselves.

Hilary Hendershott: Interesting. Okay. Well, I’ll check that one out, too. So, my takeaways from today’s conversation are, A, it’s very difficult for us to think long-term right now and that what we ought to be doing is continuing our good prudent conservative financial behavior. Even though there’s a lot of uncertainty, we are going to recover. And, B, we can learn about our cognitive biases and put systems in place and I think Dollars and Sense, there’s several excellent examples of how people make mistakes. I think anchoring is the most fascinating cognitive bias ever, where people will guess the price of something is higher, because the last two digits of their social security number are higher. I was like, “Really?” So, we can learn about those and put systems in place to supersede them. And one of those being we can expose our decisions to the light of day. We can talk about what we’re spending on with a rational human being and kind of hear ourselves talk and think, gosh, it really doesn’t make sense for me to spend on that thing right now.

Jeff Kreisler: Absolutely. I mean, that’s a big thing. From my background, and what I’ve seen and experience is that people just don’t talk about money. We’re talking about how to get it and how to spend it. We compete on like what kind of car you have or where you go to college. We don’t talk about saving and investing and all that. We make a lot of assumptions and I think the more we’re able to talk about money with our family and our colleagues and our communities, the better we’ll all be because we’ll all learn about what’s going on.

Hilary Hendershott: Great. Jeff, thanks for saying that. I say that all the time so thanks for the prompts.

Jeff Kreisler: Cool.

Hilary Hendershott: All right. Appreciate the interview today.

Jeff Kreisler: Thank you so much.



Hendershott Wealth Management, LLC and Profit Boss® Radio do not make specific investment recommendations on Profit Boss® Radio or in any public media. Any specific mentions of funds or investments are strictly for illustrative purposes only and should not be taken as investment advice or acted upon by individual investors. The opinions expressed in this episode are those of Hilary Hendershott, CFP®, MBA.