7 Common Mental Money Mistakes

WSJ round up seven mind games people play that can have them short-changing their personal finances.

1. Mental accounting
Obsessing over the price of a new car, but failing to monitor the weekly grocery bill.
2. Playing it too safe
Putting too much cash in money-market funds and not enough in stocks
3. Misunderstanding risk
Putting too much of your savings in your company’s stock
4. Living in the moment
Not coming up with a monthly budget
5. Throwing good money after bad
Making repairs that cost more than your car is worth
6. Overconfidence
Concentrating picks among a handful of “surefire winners”;
7. Following the crowd
Dumping your stock fund after a steep market decline

Number 5 is basically the principle of sunk costs. Not understanding it results in the same fallacy that keeps you from changing lanes in the supermarket when another line is much shorter just because you’ve been in this one for so long. — BEN POPKEN

Seven Common Mistakes With Money [WSJ]