Why Smart People Do Stupid Things with Their Money

Rich Habits
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In my ongoing Rich Habits research, I have the fortunate opportunity to peer into the lives many of the rich and poor. Thanks to my research, I’ve learned that there are fifteen factors that make it hard for people to hold onto their money or build wealth:  

  1. Pretender Syndrome – Ego-driven purchases intended to create the perception to others that you are doing better financially then you actually are.
  2. Procrastination – Believing you have plenty of time left to get serious about saving money.  
  3. Smarter Than Everyone Else – This was one of the reasons why many people do not hire experts, seek feedback from experts or why they took Uneducated Risks (taking risks without doing your homework).
  4. Emotional Spending – Spending decisions that you make when you are in an emotional state, are always going to be bad spending decisions.
  5. Bias – Making money decisions that are not fact-based but, instead, founded in certain beliefs that are incompatible with prudent money management.
  6. Ignorance – Not knowing what you don’t know and, nonetheless, making important long-term financial decisions that leave you with too much debt and too little discretionary income.
  7. Overthinking – Simple solutions are usually the correct solutions. Seeking more complicated solutions leads to procrastination and delay.
  8. Fear – Making money decisions out of fear. An example would be liquidating investments during a downturn in the stock market.
  9. Stress – Studies have shown that stress reduces your IQ by 13%. When you are under stress, you should never make any money decisions. Wait until you sleep before you make any money decisions because sleep resets your emotions back to their baseline.
  10. Impairment Spending – Spending money or making spending decisions while impaired by drugs or alcohol.
  11. Desperate Decisions – These are decisions that you make from a position of weakness. They are typically the result of prior bad decisions and are almost always forced upon you by some third party, such as a lender, government agency, credit card company, employer, spouse, family or friends.
  12. Impulse Spending – Making spur of the moment purchases. This could be emotion-based or due to Decision Fatigue.
  13. Peer Pressure Spending – This is where you try to mirror the lifestyles of neighbors, friends or family.
  14. Rescue Spending – When those inside your inner circle struggle financially, your inner circle will almost always ssure from spouse, family, friends, work colleagues, etc.
  15. Impatience – Making poor money decisions, such as liquidating investments during a downturn in the market can be fear-based or driven by a lack of patience. Making any major purchase without wanting to spend the time in doing your homework, is another example.

As you can see, there are many reasons why people make mistakes with their money. Being aware of these common pitfalls can help prevent you from falling into any of these Spending Traps.

Tom Corley is an accountant, financial planner and author of “Rich Kids: How to Raise Our Children to Be Happy and Successful in Life”, Effort-Less Wealth, Change Your Habits Change Your Life, Rich Habits Poor Habits and “Rich Habits: The Daily Success Habits of Wealthy Individuals.”



  1. J S on December 22, 2022 at 8:47 AM

    VERY GOOD article. Tom, I’m wishing you a merry christmas and prosperous new year.

    Sam Pittsburgh.

    (Its been a tough year with Biden and Powell but its not a loss until you sell!)

  2. Daniel Clavijo on December 22, 2022 at 8:59 AM

    Excellent article! It’s rare to find a deep and complete list like this one. It’s very helpful to learn to avoid common mistakes when managing money.