Book Review: The Behavior Gap by Carl Richards

By reading this book, you will be able to make better financial decisions. 

Richards outlines how to close the behavior gap, the gap between what we ought to do and what we actually do, so that you can make smart financial decisions for life.

You may be wondering if you should read the book. This book review will tell you what important lessons you can learn from this book so you can decide if it is worth your time.

At the end of this book review, I’ll also tell you the best way to get rich by reading and writing

Without further ado, let’s get started. 

Lesson 1: Investing rationally requires you to be honest, get rid of stagnant assets, and only invest based on your personal goals

Emotions are what make us human, but allowing your emotions to influence your financial decisions comes at a high cost. What can you do to keep emotions from influencing your financial decisions?

First and foremost, be honest with yourself: great investments require both skill and luck. You can sometimes make wise investments by selecting the right items. Sometimes you just get lucky.

You can also avoid emotional decisions by asking yourself, “Would you buy these stocks again if your investments were sold overnight?”

In this hypothetical situation, you may decide to sell a few investments. Investments are frequently clung to simply because we are accustomed to them, just as a loveless relationship may be clung to simply because we are accustomed to it.

Overnight Tests allow us to view our investments objectively by removing our biases.

If you’re unsure whether to keep an investment, ask yourself, “Would I buy it again tomorrow?” If the answer is no, throw it away.

Third, make certain that your financial decisions are not influenced by your emotions: Check to see if the decision will help you achieve your personal objectives.

Some people do not follow this rule. Investing in something simply because it is popular is not a wise financial decision. Instead, start saving for retirement.

As a result, think about what you really want for yourself and your family in the future. In order to meet these financial objectives, consider whether the potential investment will have a significant impact on your portfolio.

Of course, rational decisions do not always produce the desired results. Investing, no matter how many precautions you take, forces you to make decisions under uncertainty.

Your only option is to make the best decision you can today and accept responsibility for the consequences.

Get The Book Here

Lesson 2: Take responsibility for your decisions, but keep in mind that outcomes are never completely within your control

Children are taught to admit when they have done something wrong. Are we adults listening to our own advice?

If you’re not used to taking responsibility for your actions, it can be difficult. However, it is critical for improving your financial situation.

One of the author’s acquaintances believed that driving a BMW and wearing expensive clothes would boost his success. Despite all of this glitz, he lacked substance beneath the surface, and keeping up appearances cost him a lot of money.

Instead of faking success, the individual should have worked hard to advance in their career. Patience and discipline are required to get there. Positive change necessitates effort.

As you strive to improve your finances, you should also revisit your assumptions about what truly affects your financial situation. It’s all too easy to become engrossed in trivialities.

As an example, the author once drove a long distance in search of cheap gas. He realized that if he saved ten cents per gallon on a 20-gallon tank, he’d save $2. That barely covered the cost of the gas he used on the trip. If he had realized this earlier, he could have saved himself a long drive.

Even plans that appear to be financially sound, such as purchasing cheaper gas, should be closely scrutinized in this regard.

Although a thorough examination of your decisions can help you reach positive outcomes, you should also recognize that you are never completely in control.

Sending your daughter to Harvard, for example, is a significant investment in her future.

After graduation, she may decide to teach underprivileged students at an urban high school for $19,000 per year. This is the correct decision for her. However, it is not what you had in mind when you invested in her education.

Because these types of surprises can happen to anyone, it is best to be prepared for them in advance.

Lesson 3: It can be uncomfortable to talk about money with family and friends, but it’s also vital

Many people still believe that openly discussing money with friends and family is frowned upon. Money can be a risky topic because everyone has a different background and perspective on it. In any case, it’s far too important to ignore if your financial future is at stake.

To avoid misunderstandings, we must first recognize our own biases.

While the author and his wife were talking with a friend about the friend’s recent kitchen renovation, the author began calculating the project’s costs. His wife later informed him that they couldn’t afford to renovate the house on their own.

The wife was perplexed because she had just discussed someone else’s kitchen renovation project and had no plans to do the same. After a 15-year marriage!

Talking about money can be difficult for husbands and wives, and it can be even more difficult when our children are present. Do not let your discomfort prevent you from discussing money.

One of the author’s friends wanted to be open and honest with her children about money. “We simply cannot afford it.” When her children demanded an unreasonable purchase, she told them.

Their 14-year-old son, on the other hand, asked how poor the family was on a scale of one to ten. His parents quickly realized that the boy was concerned about their well-being rather than the family’s financial situation.

As a result, even if it is uncomfortable, discussing money with family and friends is extremely beneficial. Finally, these discussions can be handled in an open and direct manner.

Get The Book Here

Lesson 4: Keep things simple and be boring when it comes to making financial decisions

“Simplicity is the ultimate form of sophistication,” as the saying goes. The same can be said about your financial situation.

We can achieve our goals more quickly if we use simple solutions, whereas complexity slows us down.

People spend $40 billion per year on weight loss programs, despite the fact that eating fewer calories and exercising is the most effective approach.

In any case, people become entangled in complex commercial diet plans and products, failing to achieve their objectives. If they did, the weight loss industry would not be worth $40 billion.

Keep it simple: Simplicity comes into play here. Instead of spending a lot of money on products, go for a morning run.

This principle can also be used to guide your financial decisions. Spend your money wisely and slowly; don’t get caught up in the latest fad. This is referred to as gradual and steady capital accumulation.

When accumulating slow and steady capital, it is critical to avoid instant gratification.

Delaying gratification is critical for long-term success. A decade-long Stanford study conducted in the 1950s examined people’s ability to delay gratification, discovering that those who could delay the fulfillment of their desires had greater long-term success than those who succumbed to temptation.

If you want to build wealth slowly and steadily, avoid chasing after huge short-term gains and instead aim to build long-term wealth gradually. You will avoid large losses and be financially secure in this manner.

Is that dull? Okay. Make your financial habits monotonous.

Spend no more than you earn. Set up a savings account. Clear your debts. Don’t lose too much money.

A conservative approach to money can yield significant results over time.

The author once met a gentleman who had turned a small inheritance into a substantial fortune.

In response to the author’s question about this man’s success, he replied, perplexed, that there was no secret. Instead of making extravagant purchases, he made “boring” purchases and paid for them gradually, just like everyone else.

About the Author

Carl Richards works as the director of investor education for BAM ALLIANCE, a network of over 130 independent wealth management advisors.

His work has appeared on Oprah.com, Marketplace Money, and Forbes.com.

Buy The Book: The Behavior Gap

If you want to buy the book The Behavior Gap, you can get it from the following links:

Get The Book Here

How To Get Rich By Reading and Writing?

You must be an avid reader who is hungry for knowledge if you are reading this book review. Have you thought about making money using your reading and writing skills?

Thanks to the Internet, the world has undergone a massive change in recent years. Blogging has now become the best way to make money online.

Since no tech experience is required, as long as you’re good at writing, you can easily start a blog that generates cash flow for you while you sleep. 

Warren Buffet said, “If you don’t find a way to make money while you sleep, you will work until you die.”

Instead of looking for a 9-5 job and staying in your comfort zone, it’s better if you become your own boss as soon as possible.

Find out how to build a blog and become a wealthy blogger today!

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