Research shows that optimists make risky investments, gamble, & postpone saving money.
Optimism is a starry-eyed worldview about the future. It affects how each of us sees and responds to people around us and things that happen to us. And it shapes our every decision and action. In previous blog posts, I have described how having an optimistic world-view benefits our health, even helping us recover after a setback. I have also written about a visualization exercise that any of us can do to become more optimistic.
There is one area of life, however, where the net effects of optimism are not necessarily positive. And that is the area of personal finances. The available research shows that optimism’s effects on financial decision making are mostly negative. In this post, I want to consider this research first and then suggest how we can remain optimistic and still handle our finances wisely.
1) Optimists make riskier investments. This is one reason for gender differences in investment decisions.