Even the wisest among us have our weaknesses. Often these weaknesses take the form of cognitive biases, which prevent us from identifying areas for positive changes in terms of our personal finances. In this article, we’ve outlined some examples of these biases to help you from wasting your own money.
Diminishing Sensitivity & Refinancing Your Home Loan
First, consider the phenomenon of “diminishing sensitivity”, which suggests that we are less responsive to changes the further they are from a reference point. Wharton School at the University of Pennsylvania professor Jonah Berger, describes this well in his book “Contagious: Why Things Catch On”. Berger conducted a study in which 87% of participants said they’d drive an extra 20 minutes to save $10 on clock radio normally priced at $35, but not to save $10 for a TV normally priced at $650, even though the savings and time of travel was the