Looking for Sound Financial Advice? Look to Psychology

http://www.psychologymatters.org/behavioralecon.html
So for this post I really wanted to do some browsing for behavioral economics stuff... and it really is pretty interesting stuff. Who woulda thought you could tie psychology with economics, but it makes sense.

This article, by the American Psychologists Association, had some good applications of behavioral economics. The first example that was used dealt with the stock market. Everything with behavioral economics seems to be analyzed with experiments... so these two economists did a study of 78,000 households and divided the investors into those who trade more and those who trade less. They actually found that those who traded less had a smaller net annual return than those who traded more. They tied this with the overconfidence... most investors think its easier to pick winners than it really is. I'm thinking gambling kinda falls in the same category as this... the overconfidence characteristic... i know it does for my grandpa anyway.
Next they talked about a popular experiment that a guy name Thaler conducted with a manufacturing company. He based his experiment on the knowledge that a lot of people are procrastinators and overly optimistic about their future... especially when it comes to saving money. So he convinced employees of this manufacting company to commit right away to putting a portion of their salary towards retirement money. By making them commit to it early it gave them no way come up with excuses not to save their money. And it worked... employees went from saving 3.5 to almost 14% of their salary. I'm pretty sure a lot of companies do this already... but i think its a really good idea, especially for people like me who aren't real good at saving.
Behavioral economics can be applied in other ways too... like getting people to become organ donors... check out the article to learn more!