The Cognitive Psychology of Finance

The Cognitive Psychology of Finance studies how our mental processes—like perception, memory, emotion, and decision-making—affect financial choices. It explores why people sometimes make irrational decisions, such as overconfidence, loss aversion, or herd behavior, despite knowing better. By understanding these psychological tendencies, financial professionals can develop strategies to improve decision-making, reduce biases, and create better financial tools. Essentially, it reveals how our brains influence our financial behaviors, helping us make more rational and informed decisions in investing, spending, and saving.