Podcast Summary: Afford Anything - [F] Why Your Brain Sabotages Your Money [GREATEST HITS]

Host: Paula Pant | Guest: Dr. Daniel Crosby
Originally Aired: November 16, 2022 (Re-released December 22, 2025)
Theme: Financial Psychology (Letter F of "FI I R E" greatest hits week)

Overview

This episode delves into the deep psychological underpinnings of why humans consistently struggle with money and financial decisions, even when they know better. Host Paula Pant is joined by Dr. Daniel Crosby, a clinical psychologist and behavioral finance expert, to explore the ways physiological, neurological, and sociological wiring sabotages good investing and money management. Together, they break down research findings, behavioral risks, and actionable frameworks for making smarter financial choices, ultimately focusing on how achieving financial wellness has holistic benefits.

Key Discussion Points & Insights

1. The Intersection of Psychology & Investing

• Field Evolution: Behavioral finance is moving from highlighting irrationality and biases toward studying financial wellness and happiness ([01:40]).

  "Behavioral finance had to break with traditional economics by documenting departures from full rationality... Now I think you're seeing a lot of talk about what makes people financially happy."
  — Dr. Daniel Crosby ([01:40])

• Money’s Holistic Impact: Financial stress is perennially the top stressor in Americans’ lives, affecting health, relationships, and overall wellness ([03:01]).

2. Happiness, Income Thresholds, and New Problems

• Maslow’s Hierarchy of Financial Needs: Once basic survival is met, higher income creates new, more existential, or relational money problems rather than eliminating stress ([05:18]).

  "As our income elevates, the class of our money problems elevates, but they don't necessarily go away."
  — Dr. Daniel Crosby ([05:18])

• Wealth & Relationship Stress: Even high-income individuals face tension over balancing living for today versus securing tomorrow, and communal versus individual money values ([06:53]).

3. The Three Ways We’re Wired Against Financial Success

a. Physiological ([09:38])

• Bodily states like hunger, fatigue, or even needing to pee can significantly and unconsciously influence money decisions.
• Example: Israeli judges’ decision harshness correlated with how recently they’d eaten.

"People tend to not understand how their environment and the way they take care of their body impacts their broader health and their mental health and indeed their financial behavior."
— Dr. Daniel Crosby ([10:04])

b. Neurological ([13:36])

• Our brains are wired for survival, immediacy, and action: the exact opposites of good investing, which requires patience, long-term focus, and inaction.
• We're also wired for cognitive (and physical) laziness, relying on shortcuts—"heuristics"—and following the crowd.

"We really are wired for survival. And as part of that we're wired for immediacy action. We're wired to be on high alarm."
— Dr. Daniel Crosby ([13:36])

c. Sociological ([21:33])

• Groupthink and mimicry, key to humanity’s evolutionary success, make it especially difficult to invest contrarily to the crowd.
• Social pressure physically alters perception, as shown in experiments like the Asch conformity study.

4. Four Types of Behavioral Risk

Dr. Crosby’s Four Risks, with practical implications ([26:52]):

a. Ego (Overconfidence)

• Most people believe they're better than average in skills, future prediction, and luck.
• Overconfidence fuels risky investing and prevents recognizing cognitive errors.

"Ego is the bias that begets all other biases."
— Dr. Daniel Crosby ([30:32])

b. Conservatism (Risk Aversion & Familiarity Bias)

• Confusing what is familiar as being safe (e.g., investing heavily in local industries or companies).
• Even risk-takers may fall into this trap by misattributing their knowledge for safety ([31:57]).

c. Attention

• Tendency to focus on what's loud or salient, not what's statistically likely.
• Media influences focus on unlikely dangers (shark attacks) over likely ones (diabetes), and so it is with investing ([39:27]).

"We confuse things that are loud with things that are likely."
— Dr. Daniel Crosby ([39:27])

d. Emotion

• Heightened emotions—positive or negative—impair rational decision-making.
• Exception: Harnessing positive emotion (love for family) can encourage smart behaviors, like increased saving ([42:13]).

5. Tools for Better Financial Decisions

• Three E’s of Behavior Change:
  1. Education: Understanding and being aware of our biases.
  2. Environment: Setting up systems and processes that foster good habits.
  3. Encouragement: Having advisors, friends, or communities for support ([34:05]).
• Community as Antidote: For contrarian/value investors, finding supportive like-minded groups is vital to resist emotional and social pressure ([25:52]).

Notable Quotes & Memorable Moments

• On Money and Well-being:
  "Money is sort of transcendent. Money touches every part of our lives. As we're able to rein in this number one stressor, we see holistic improvement—relationships, physical wellness, workplace benefit."
  — Dr. Daniel Crosby ([03:01])

• On Groupthink and Human Success:
  "The one thing that we have over the rest of the animal kingdom is cooperation... We are good at mimicry and working together. In the stock market, though, you're literally asking people to spit in the face of the thing they do best."
  — Dr. Daniel Crosby ([21:33])

• On Leveraging Laziness:
  "If we set a process in place whereby we auto withdraw and auto escalate... because we're lazy, we tend not to mess with that either. So, it's hard to get started because we're lazy, but if we set something good in place, we're unlikely to stop it."
  — Dr. Daniel Crosby ([16:10])

• On Community for Contrarian Investors:
  "Investors need a religion, not like a real religion, but a framework to believe in. We need a tribe and a group we can point to and say, 'yep, this is how we do it.'"
  — Dr. Daniel Crosby ([25:52])

• On Emotional Triggers and Investing:
  "Emotion can be used to trade more effectively or to make better decisions... almost universally not the case."
  — Dr. Daniel Crosby ([42:17])

Timestamps for Key Segments

• Intersection of Psychology & Investing: [01:14] – [03:01]
• Money’s Holistic Impact: [03:01] – [04:33]
• Maslow's Hierarchy & Income Threshold: [05:18] – [06:48]
• Wealth and Relationship Problems: [06:48] – [08:36]
• Physiological Wiring Against Investing: [09:38] – [13:33]
• Neurological & Laziness Biases: [13:36] – [17:24]
• Sociological Forces & Groupthink: [21:33] – [25:44]
• Community & Investing Frameworks: [25:44] – [26:52]
• Four Types of Behavioral Risk: [26:52] – [41:53]
• Three E's of Behavioral Change: [34:05] – [36:26]
• Emotion & Decision-Making: [42:13] – [45:23]
• Final Thoughts and Takeaways: [47:02] – [47:52]

Final Takeaways

• Financial wellness lifts all areas of life; making small, positive changes can facilitate personal and relational improvement.
• We must recognize and work with—not against—our deeply rooted physiological, neurological, and sociological wiring.
• Addressing behavioral risks (ego, conservatism, attention, emotion) and leveraging supportive systems and relationships is key to better financial outcomes.

"I just hope people will take 10 minutes, 15 minutes today to take one step in the direction of, of getting their financial house in order. Because I do think it lifts all boats."
— Dr. Daniel Crosby ([47:08])

Resources & Further Reading

• Connect with Dr. Daniel Crosby: Twitter @danielcrosby, LinkedIn (Daniel Crosby, PhD), and his podcast Standard Deviations.
• Free Book: Escape — affordanything.com/escape