Would You Rather Have Money or Prestige?

01.14.08 | Money | 0 Comments | by junger

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What's more important to you: money or prestige?

Michael Shermer, author of "The Mind of the Market: Compassionate Apes, Competitive Humans, and Lessons from Evolutionary Economics," has an interesting article in the LA Times about people and their money desires.

Would you rather earn $50,000 a year while other people make $25,000, or would you rather earn $100,000 a year while other people get $250,000? Assume for the moment that prices of goods and services will stay the same.

Surprisingly — stunningly, in fact — research shows that the majority of people select the first option; they would rather make twice as much as others even if that meant earning half as much as they could otherwise have. How irrational is that?

It doesn't make much sense. But emotion has a lot to do with money, and when it comes to investing — especially when it comes to investing — you shouldn't let emotion overtake you.

Even though I have money in the stock market, I don't follow it every day. How can you, with all of the ups and downs?

Getting too involved emotionally causes you to make irrational decisions. Irrational decisions cost you money.

Now, don't get me wrong — money isn't everything. There are a lot more important things in life, like health, friends and family.

But if you want to maximize your investments and daily money decisions, step away from your emotion. Even if it doesn't sound easy, try and make rational decisions.

Take a few minutes to ponder what would happen if you made that financial decision you're considering. I really want Rock Band for the PlayStation 3, but I know there's a lot better things my money could be doing.

If you find yourself about to make an important financial decision based on your emotion, stop. Consider how important it really is. Think beyond the immediate results and consider how it will affect you in the long-term.

If you let your financial decisions be made emotionally, chances are you'll be making the wrong ones.

You can make smart decisions, if you let yourself.

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