Your Brain Hates Money (And Loves Being Poor)

Welcome back, cognitive disaster zones! I see you've returned for another dose of financial reality. Either you're a glutton for punishment or you've actually started to realize how monumentally screwed up your financial decision-making process is. Either way, I'm impressed you're still here.

Last week, I walked you through the mind-numbing simplicity of index fund investing - a strategy so boring it makes watching paint dry seem like an extreme sport. Today, as promised, we're diving into why your brain is basically a saboteur when it comes to handling money. Because nothing says "financial success" like a primitive organ that evolved to find berries and run from tigers making decisions about derivatives and asset allocation.

If you somehow missed last week's issue on the only investment strategy that actually works (but you'll probably ignore anyway), here's the link:

Your Caveman Brain vs. Modern Finance

Let's start with an uncomfortable truth: your brain evolved to help you survive on the savannah, not navigate financial markets. Your ancestors needed to detect threats quickly, find food, and avoid becoming food themselves. They didn't need to understand compound interest or asset allocation.

This mismatch between your Stone Age brain and modern financial complexity is why you keep making the same stupid mistakes with money:

Loss Aversion: The Terror of Losing $10

Studies show that the pain of losing $10 is roughly twice as powerful as the pleasure of gaining $10. This is why you:

• Hold onto losing investments way too long ("It's not a loss until I sell!")

• Sell winning investments too early (gotta lock in those gains!)

• Panic sell during market crashes (when you should be buying)

• Refuse to cut your losses on terrible investments (looking at you, LUNA holders)

Loss aversion is why your investment portfolio probably looks like a museum of bad decisions. You're still holding that penny stock your cousin recommended in 2018 because selling it would mean admitting you were wrong. Meanwhile, you sold Apple after a 20% gain in 2015, missing out on the subsequent 1,000% rise because "profits are profits!"

Congratulations, your brain is optimized for not getting eaten by lions, not for building wealth. Unfortunately, lions aren't the predators in the financial jungle—your own psychology is.

Recency Bias: Everything That Just Happened Will Happen Forever

Remember 2021, when crypto bros were convinced Bitcoin was heading to $1,000,000? Or 2009, when people thought the stock market would never recover? This is recency bias—your brain's charming tendency to overweight recent events and project them indefinitely into the future.

This is why you:

• Buy at the top of bubbles ("This time it's different!")

• Sell at the bottom of crashes ("The economy is doomed forever!")

• Make financial plans based on whatever CNBC is screaming about today

The world isn't ending. It's not becoming a utopia either. It's just continuing its messy, unpredictable march forward, while your brain desperately tries to create patterns from randomness.

Confirmation Bias: The Echo Chamber of Financial Doom

Once you form an opinion about an investment, you seek out information that confirms it and ignore everything else. Convinced Bitcoin is going to $100,000? You'll follow every crypto bull on Twitter and ignore warnings about market manipulation. Think the housing market is about to crash? You'll read every doom-and-gloom article while dismissing positive economic indicators.

This is why that friend of yours is still waiting for the housing market to crash... since 2014. Or why that coworker won't shut up about gold even though their portfolio has underperformed a basic index fund for decades.

Your brain doesn't want the truth. It wants to be right, even if being right makes you poor.

Herding: Following the Financial Lemmings Off a Cliff

"Everyone I know is buying GameStop, so I should too!"

Humans are social creatures. For millions of years, following the group improved survival odds. In financial markets, it creates bubbles and crashes.

This is why you:

• Got into NFTs right before they collapsed

• Invested in meme stocks after they were already up 4,000%

• Still believe crypto will make you rich because "everyone's talking about it"

By the time "everyone" is talking about an investment, the smart money is already selling to you, the dumb money. Congratulations on volunteering to be exit liquidity!

How to Override Your Financial Lizard Brain

Now that I've thoroughly insulted your primitive brain functions, let's talk about how to overcome them in four easy steps. Because unlike actual cavemen, you have the capacity (theoretically) to recognize and override your worst instincts.

1. Automate Everything

Your willpower is a finite resource, and it's probably already depleted by trying not to eat that second donut or strangle your coworker. Don't rely on it for financial decisions.

Set up automatic transfers to your investment accounts the day after your paycheck hits. Automate your bill payments. Automate your savings. The less you have to actively decide, the less opportunity your monkey brain has to sabotage you.

2. Create Artificial Friction

Make it difficult to access your investments. Don't install trading apps on your phone. Don't check your portfolio daily. Create separate accounts for separate goals. The harder it is to act on impulse, the more likely you are to stick to your plan.

Remember: Every financial service making it "easy to invest!" is actually making it "easy to make terrible decisions impulsively!" They're not helping you—they're exploiting your lack of self-control.

3. Follow Rules, Not Feelings

Create investment rules and follow them religiously:

• "I will invest X% of my income every month regardless of market conditions."

• "I will rebalance my portfolio annually on my birthday."

• "I will never invest more than 5% in any single stock."

Rules protect you from yourself. Your future self will thank you, even as your present self whines about missing out on whatever idiotic investment bubble is currently forming.

4. Seek Disconfirming Evidence

Whatever you believe about an investment, actively seek out the strongest arguments against your position. If you think Tesla is going to $5,000, read the most compelling bear cases. If you think the housing market is about to crash, find the best arguments for why it might not.

This won't completely cure your confirmation bias, but it might prevent you from making catastrophically stupid decisions based on one-sided information.

Sneak Peek: Coming Next Week

Excited about our next thrilling installment? You shouldn't be. It's going to be another brutal reality check that makes you question everything your parents taught you about money.

Next week, we'll be dismantling some of the most cherished financial fairy tales that boomers have been feeding millennials and Gen Z for decades:

• Why your parents' advice to "just buy a house" might be the financial equivalent of "just have rich parents".

• The college degree delusion: when that $200,000 piece of paper is worth less than the frame it's in.

• The "good job with benefits" myth in the age of quarterly layoffs and shrinking pensions.

• Why your parents' retirement strategy is about as relevant to you as their advice on dating.

Prepare to have your childhood financial programming completely rewired. Or don't, and continue making the same mistakes that are keeping you financially stunted. Your choice.

This Week's Financial Reality Check

Japan’s Central Bank Masters the Art of Doing Nothing

The Bank of Japan held rates at 0.5% on May 1, slashing GDP forecasts to 0.5% for 2025. Governor Ueda blamed “uncertainty over U.S. trade policies,” which is central-banker code for “We’re terrified of Trump’s Twitter feed.” Meanwhile, the yen surged to 143.7 per dollar, because nothing says stability like a currency rallying on global panic.Commentary: BOJ’s innovation: Negative rates for life! Coming soon: Paying citizens to take out loans.

U.S. Jobs Report: Everything’s Fine (Please Clap)

April nonfarm payrolls rose by 177,000, with unemployment holding at 4.2%. The BLS noted “notable gains” in healthcare and warehousing-industries thriving because tariffs are literally making everyone sick and desperate for Amazon deliveries. Average hourly earnings grew 0.2%, which is 0.1% after adjusting for tariff-driven inflation.Commentary: Economy adds jobs hauling Chinese goods off container ships. Full employment achieved when we’re all working at Customs.

S&P 500’s Nine-Day Rally Dies of Dysentery

The S&P 500 snapped its longest winning streak since 2004, dropping 0.64% on May 4 as traders remembered tariffs exist. Tech stocks led the decline, because AI can’t solve “trade war 2.0: Electric Boogaloo.” Nasdaq fell 0.74%, proving even algorithms get bored of volatility.Commentary: Market mantra: “Buy the rumor, sell the fact, blame the Fed.” SPACs for tariff insurance launching soon.

Subscribe or Accept Financial Mediocrity

Let's be honest—most of you will read this, nod in agreement, then immediately return to making the exact same psychological mistakes I just outlined. Why? Because knowing about cognitive biases doesn't automatically cure you of them.

But for the few of you who might actually want to override your caveman financial instincts, subscribe to continue this journey of financial self-improvement. It's either that or resign yourself to a lifetime of buying high, selling low, and wondering why everyone else seems to be getting ahead while you're still living paycheck to paycheck.

P.S. Share this with your friend who panic-sold everything in March 2020 and is still waiting for "the right time" to get back into the market. When they're still on the sidelines while the S&P hits another all-time high, you can smugly say, "Should've read that newsletter I sent you."