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How to Stop Good Financial Decisions from Backfiring

  • Wisdom In Wealth

Ever undue a great financial decision with a poor one?

In this episode of Wisdom in Wealth, Chief Behavioral Officer Brendan Frazier explains why our best financial decisions are often followed by our worst. The cause may not be a lack of discipline, but a behavioral phenomenon called the licensing effect. This effect happens when a responsible action unconsciously gives us permission to indulge. 

Brendan breaks down how money makes this effect stronger and the resulting behavioral loop: good decision → justification → indulgence → guilt → repeat. 

To break this cycle, Brendan shares three practical strategies: 

  1. Precommitting Rewards: Determine the reward before achieving the goal.
  2. Replace “I earned” Thinking: Substitute “I earned this” with questions such as “Does this help me?” 
  3. Guilt-Free Fun: Avoid depravation and create a plan that includes fun.

Click play to watch the full episode or explore more Wisdom in Wealth conversations. 

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