When I released The Lobster League, my goal was to help people better understand how they make decisions in the first place. We all like to think our financial decisions are logical, well-thought-out, and intentional. In reality, though, most of them are made quickly, instinctively, and with far more influence from bias than we would like to admit.

My book was written to make those hidden forces visible. I want to help you apply some of the lessons from The Lobster League to your own life by walking through a few of the most common biases we all face, how they tend to show up in financial decision-making, and what you can do to reduce their impact.

Making Sense of Your Financial Decisions

I started studying behavioral finance in the late 1990s and early 2000s, long before it became a mainstream topic in financial planning. What initially caught my attention was how often people’s financial decisions didn’t align with their stated goals, even when they were intelligent, successful, and well-informed. The more I studied decision-making, the more I realized something uncomfortable but important: most of our decisions are driven by subconscious mental processes instead of conscious thoughts.

To better understand this, I started thinking about how animals make decisions. A bird deciding when to take flight or a squirrel jumping from branch to branch is making an incredibly complex decision, but not by using the part of the brain we associate with logic and reasoning. Humans aren’t that different. We like to believe we’re carefully weighing options, but much of our decision-making happens automatically, long before logic gets involved.

This is one reason our financial decisions often don’t make sense to us in hindsight. We can’t always tell which part of our brain was in charge when we made them. That’s why a core part of my process with clients involves having them articulate their goals out loud, or better yet, write them down. Once a goal leaves your head and exists on paper, it becomes much easier to see whether your decisions actually support it.

Caption: Cognitive biases and mental shortcuts can cause us to make financial decisions that don’t make sense in hindsight. We may think we’re using logic, but really our emotion may be steering the ship, especially when decisions are quick. Photo by Nadezhda Moryak.

The Importance of Thinking Slower

We make an astonishing number of decisions every single day. Because of that volume, we rely heavily on quick decision-making just to get through life. While that works for many day-to-day choices, it can quietly derail long-term financial goals.

I often compare financial goal-setting to building a company’s strategic vision. A strong strategic plan exists to ensure that daily actions align with the bigger picture. Without that clarity, even well-intentioned decisions can pull a business in the wrong direction. Personal finances work the same way.

A goal like “I want to make more money” isn’t particularly useful. A clearer goal might include what that money is for, when you will need it, and roughly how much you expect to require. Setting S.M.A.R.T goals creates a solid framework for evaluating your financial decisions and setting specific, detailed, practical ways to achieve your targets.

Writing down your goals is the easy part. The harder part is consistently making decisions that align with them. Even small, seemingly isolated financial choices can have long-term consequences. Blind spots can form when we move too quickly, and we can unknowingly make decisions that feel reasonable in the moment but work against our future selves. Slowing down introduces intention. It gives you space to consider the impact of your actions and not just the outcome.

Why Biased Thinking Is Inevitable

Every decision we make is filtered through our past experiences. Someone who had a great experience with real estate might assume that success was entirely due to their skill, while not considering that favorable market conditions played a major role. Likewise, someone with a terrible experience investing may become risk-averse, even though their experience happened when the markets crashed in 2020. Biases like this can cause us to miss risks, ignore warning signs, and misread opportunities.

After advising people for more than three decades, you might think I would be immune to these biases. I’m not. No one is. This is where Rational Finance has been invaluable to me, both professionally and personally. It forces me to examine why I’m making a specific decision, and not just what decision I am making.

There is a common misconception that financial advisors exist to tell people what to do. Yes, advisors should be experts in the markets and investments, but successful advisors go beyond that. A good advisor acts as a facilitator who takes your entire life into account. We help align your goals with your decisions while also working around the biases that naturally influence you.

My understanding of how the brain makes decisions helps me explain to clients why it’s important to structure decisions in a way that sometimes doesn’t seem natural. Our brains are wired to avoid pain and seek pleasure. Unfortunately, sound financial decisions often involve discomfort or delayed gratification. For example, “buy low, sell high” sounds great in theory, but it rarely feels good in practice. Who wants to invest in the market when everybody's complaining because it’s down? But the truth is, it’s a great thing to do.

Caption: “Buy low, sell high” hardly ever feels right in the moment, because who wants to buy when everyone else is selling off? But the truth is, it’s sound advice to go against our herding tendencies. Photo by Jakub Zerdzicki.

Cognitive Biases in The Lobster League

The book highlights several biases that frequently interfere with rational decision-making. Three of the most common are overconfidence, loss aversion, and negative narrative bias.

Overconfidence Bias

Overconfidence is the belief that competence in one area automatically translates to competence in others, or an inaccurate assessment of one’s own limitations. In The Lobster League, overconfidence is explored through scenarios that mirror real-world financial mistakes.

Confidence itself is not inherently bad. In fact, it plays an important role in helping us navigate uncertainty. The problem arises when overconfidence puts non-negotiables at risk, such as the ability to pay bills or maintain long-term financial security. When people overestimate their understanding or underestimate risk, they can end up in situations with consequences they truly did not anticipate.

A common example I see is excessive concentration in a single stock or industry. A company may feel stable because it’s been successful for decades, but history is full of well-established businesses that eventually failed. Confidence in an investment should always be paired with a clear understanding of its risks. For example, instead of putting your entire portfolio into one industry, diversifying your stocks can act as a financial cushion.

Checks and balances are the most effective way to mitigate overconfidence. Writing down a financial plan or verbalizing it with a trusted advisor often exposes gaps, assumptions, or misalignments that were not obvious internally. This gives the opportunity to re-evaluate before taking action. Whatever decisions you’re making, the most important thing is that you understand the implications of them and the magnitude of the risks you're taking.

Loss Aversion

Loss aversion is the tendency to feel the pain of a loss more strongly than the pleasure of an equivalent gain. This often leads to excessive caution and difficulty making necessary financial decisions. I see this frequently in people who grew up during the Great Depression or in households with significant financial stress. It also appears in those who had a negative experience with a particular investment, such as real estate, and then avoid similar opportunities entirely.

The danger of loss aversion is that by trying to avoid perceived risk, people sometimes expose themselves to greater long-term risks. People hold onto stocks or assets that are declining to avoid the pain of realizing the loss, and potentially lose much more over time. Likewise, avoiding the risk associated with investments or other financial instruments that keep up with inflation can jeopardize one’s ability to take care of themselves later in life.

The most effective way to address loss aversion is awareness. If this bias is part of how you are wired, that is not a flaw. The key is recognizing when it is preventing you from accomplishing what you want. Awareness gives you the option to push back on instinct when necessary. Try to be aware of how your biases influence your decisions and if they’re preventing you from reaching your goals. That way, you can see where you may be able to push back on your own intuition and realign.

 “The most effective way to address loss aversion is awareness. If this bias is part of how you are wired, that is not a flaw. The key is recognizing when it is preventing you from accomplishing what you want.”

Negative Narrative Bias

Negative narrative bias involves interpreting information through a pessimistic lens and seeking evidence that confirms an already negative worldview, even when not supported by objective reality. This bias often leads to a scarcity mindset. I’ve known millionaires who lived like paupers, and after their death, the millions of dollars they earned went to charities they didn’t care about because there was nobody else to leave it to.

Negative narrative bias is particularly powerful because it feels responsible. It often disguises itself as prudence, realism, or “just being prepared,” which makes it harder to challenge. When every decision is filtered through worst-case scenarios, people can become so focused on protecting against imagined future losses that they stop engaging with the opportunities and experiences their resources were meant to support.

Like loss aversion, this bias never fully disappears if you’re predisposed to it. The best way to mitigate this bias is to be aware of it and accept that it will always be there. Once you can see the narrative influencing your decisions, you can decide whether it truly reflects reality.

Keeping Your Financial Goals and Decisions Aligned

Biases are part of being human. We all have biases to different degrees. While we can rationally understand them and get comfortable with them, they're still going to be constantly affecting our decision-making processes in the future.

Misalignment between goals and decisions often shows up during major life changes. Retirement, health issues, the loss of a loved one, or a significant career shift can all create pressure to act quickly. That’s when people are most vulnerable to making drastic decisions out of overwhelm.

We’re all going to face a big life change at some point. The best time to prepare for big decisions is long before you face them, but people most commonly seek out advisors in the middle of one. It's a great idea to seek an expert during these times to avoid making drastic decisions too quickly without thinking them through.

Writing things down is one of the simplest and most effective tools available to mitigate cognitive biases. Ideas that feel perfectly reasonable in your head often look very different once they are on paper. I also suggest planning for decisions far in advance. If you’re up against one of these life decisions, make sure you’re getting quality advice from someone who understands the full situation and has expertise in these matters.

If there is one core lesson I hope readers take away from The Lobster League, it’s this: better financial outcomes do not come from faster decisions. They come from clearer goals, greater awareness, and the willingness to slow down when it matters most. If you want to explore these ideas further, I encourage you to read The Lobster League and start examining not just what decisions you are making, but why you are making them.

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