Decisions we think we make rationally are actually purely about emotions, short-term temptation, and blind spots in the mind beyond awareness, described iconic behavioral psychologist Dan Ariely in his Predictably Irrational. Same goes for the important topic of money. Real wealth does not begin with choosing the right broker or investment strategy. Real wealth starts in your head, where you know your emotions and dreams that drive your money decisions.

Why do emotions dictate our money?

With all the investment experience in the world, too many can’t keep themselves in check with the proper emotional mindset. The temptation of quick payoff usually gets the better of them. Ariely summarizes an experiment in which subjects were offered a choice: $100 now or $120 in a month. Most picked the smaller, sooner reward, even though the mathematical better choice was to wait.

This also happens in investing. Individuals seek quick gains by falling prey to questionable deals such as “double your money in a month”, speculative investments, or active trading. They behave on an emotional basis instead of rational calculation, even though they are aware that even professionals do not beat passive index strategies very often.

I’ve also witnessed firsthand as an investment advisor how emotions ruin financial success. Clients who were earning tens of thousands of dollars a month couldn’t invest due to their splurging it all on luxuries. They didn’t even have a financial safety net even though they were earning money.

Others labored diligently saving their initial $100,000 and then started to trade on a whim as soon as they could muster $80,000 to $90,000, hoping to “beat the market.” They eventually lost most of what they saved. Their emotions and need for quick profits negated years of solid work.

How financial marketers exploit our emotions

In the quest for quick money, most become victims of clever financial marketers. Television and print advertisements touting “guaranteed returns,” “computerized trading systems,” or “select investment opportunities” set our fear of missing out and love of quick money ablaze.

Remember a common rule: if it sounds too good to be true, chances are it will be. Patience, prudence, and acceptance of inherent market risks form the foundation of good investment strategies. Even veteran investors cannot give assurances of returns, as markets are volatile.