ABSTRACT
People face a lifelong struggle between decisions that make life more enjoyable today and ones that improve life in the future. Saving and education are good examples. Self-control helps us to focus on the long term in order to tip the balance toward the future. Self-control is also needed to reduce our susceptibility to psychological biases. The first step is to understand the biases. Then control the investment processes by knowing why you are investing, have specific investment criteria, and be sure to diversify. Last, control your environment. Unbiased financial advisors can help, but few investors seem to value the advice.
Institutions, financial firms, and governments are starting to learn how to frame decisions in such a way that people’s psychological biases help them, instead of hurt them. We can create investment processes that improve savings (like Save to Win) and retirement plan investing (like Save More Tomorrow).
