★ Rockstar Book Review: “The Behavior Gap”

Review of: The Behavior Gap
Carl Richards

Reviewed by:
On June 16, 2017
Last modified:June 16, 2017


When it comes to saving and investing advice, Carl Richards delivers a much-needed reality check with his secret weapons: a Sharpie and a witty delivery.

This is part of our Rockstar Book Review series.
Be sure to check out all previous books we’ve covered!

“The Behavior Gap: Simple Ways to Stop Doing Dumb Things with Money” by Carl Richards

rockstar rating 4 stars

Who it’s for: Those of us looking for a better understanding (or just a reminder) of how our thoughts and emotions can negatively or positively impact our financial planning efforts and our overall success with saving & investing. And if you know of and appreciate his “Sketch Guy” column in The New York Times, you’ll definitely like this book.

Readability: HIGH. At 176 pages, including a lot of diagrams, this book is very short and to the point, while still offering many “light bulb” moments for its readers. It’s not often that a CFP writes a book as jargon-free as this one. This book is a good start for someone who wants to explore the topic of money and human behavior.

What I liked about it: The diagrams! Its lack of complexity is refreshing. That’s what Carl Richards is known for, after all. He also often couples these Sharpie diagrams with a story where appropriate. His style is similar to Greg McKeown’s “Essentialism“, as they both stress the importance of simplifying everything we do in life down to what matters. What matters? You have to get to know yourself very well, in order to even begin to answer that question.

What I didn’t like about it: Oddly enough, I didn’t like its lack of depth in some areas (though intuitively, we can understand that what Richards is saying in many cases makes sense). Though the readability is high, the content’s strength mostly lies in the black marker diagrams throughout. Despite references to a number of sources, the attribution is sometimes vague and there is no index at the end of the book, which would be useful for any book that includes quotes and references.

Where to find it:

Amazon @ $13.58 || Free @ the library

“The Behavior Gap” Brings a Dose of Stupid Simple to Frustrating Finance

I once heard a great saying: “Only trust the expert who can explain a complex concept in a way a five-year-old can understand.” To me, that expert is Carl Richards. In this book, Richards explores the ways in which we can be our own worst enemy when it comes to money, and his illustrated examples drive his points home with face-palm clarity.

His main message: the decisions you make with your money should be based on your goals and values and nothing else. If you’re clear about both of these, you’re less likely to be swayed by bad advice, knee-jerk reactions, fear and/or doubt.

Along with that main message, he acknowledges that getting clear on what it is we really want is HARD, and that it’s the primary reason most of us shy away from these important questions.

Here are some of the main topics he addresses in this book:

  1. Successful planning focuses on the overlap between life (what you want) and money (how to get most of what you want)
  2. Focusing on what we can control is what counts, everything else is a distraction
  3. Fees and hype are the biggest sources of loss over time
  4. Nearly everything we do in life is based on our perceptions and emotions
  5. Slow and steady is the more attractive way to go over the long-term

#1. Successful Planning is About the Overlap Between Life and Money

What do you really want? That is the fundamental question in this book. If we don’t know what we want then any financial plan will get us somewhere. Unfortunately, that somewhere might not match our desires, both along the way and when we ultimately reach the plan’s goals. Rates of return, the choice of investment vehicles and other related information doesn’t mean much if we don’t know why we’re choosing them and why they’re right for us. To Richards, money discussions are life discussions, and lack of clarity in one of these materially affects the other.

Getting clear on what we want tends to enable us to see the bigger picture, make better decisions, and avoid being swayed by short-term developments and advice. That’s the stuff at the core of “real financial planning”.

#2. We Need to Focus on What We Can Control

The author stresses that short-term thinking kills returns. In this sense, the investor is his/her own worst enemy when they treat investing like a game. This focus on the short-term involves an implicit assumption that, by being actively involved on a regular basis with our investments, we have control over the performance of our portfolio. In reality, not only do we not have more control over the portfolio’s performance, but we increase our odds of underperforming the market because increased activity means we’re likely to:

  • Pay more in fees, as some fees are linked to activity levels
  • Time the market incorrectly (consistent market timing is as common as unicorn sightings)
  • Let knee-jerk emotions guide our decision-making
  • Lose track of our long-term goals by chasing short-term returns

And when it comes to our long-term thinking, we can “what if” ourselves to death. Richards suggests that the best approach is to do what we understand is a good, solid decision now (what we can control) and that it may or may not work out exactly as we had hoped (what we can’t control).

Yes, we should periodically adjust course based on the outcomes of our decisions, but the main message is that as long as we’re making the best decisions we can along the way, we’re likely to end up reaching our goals even if life throws us a curve ball now and then.

#3. Biggest Sources of Loss = Fees and Hype

As mentioned above, Richards considers all money decisions to be emotional decisions, whether these decisions are related to spending and/or saving & investing. In any of these cases, fees and hype can rob us of our hard-earned savings.

As mentioned in point #2, fees are related to activity. The greater our economic activity is, the more we’ll pay in fees, be it investment fees, banking fees, taxes, not to mention our time & effort. And fees are the biggest draw on our portfolio’s ability to grow. Indeed, Richards identifies fees as the greatest predictor of a fund’s future performance.

Hype is often related to fees. The more attractive a product is – either because it’s new or because it’s been well marketed – the greater the likelihood we’ll be paying too much for it. This premium is either in the form of fees we could otherwise have avoided or because market demand artificially boosts its value. We see this phenomenon in consumer goods and in investment vehicles, both of which we can consider temporary bubbles, because what’s a sexy product today usually doesn’t stay in demand for long.

With that said, there’s no problem in putting aside a small amount of money to play with. That can be a hobby just like anything else, as long as we don’t lose sight of the fact that we’re doing it for fun, as opposed to some far-fetched idea that it will make us rich.

#4. Perceptions and Emotions Drive Our Behavior

We are and do what we think about most. What we perceive to be true is true, at least for us. If we perceive a situation to be bad, it will be bad. If we perceive it to be good, it will be good. The same holds true when it comes to fear and greed.

These emotions cause us to behave in ways that are often uncharacteristic of our typical demeanor. There’s a great deal of power in both being aware of our behavior, and in establishing investing principles and rules that guard against the fallacies of emotionally-driven short-term thinking. As Richards says “feelings can be expensive”.

This awareness also insulates us against the perils of following bad advice and of being unduly influenced by the media. A solid plan invites us to ignore most of the messaging we’re bombarded with because we know why we’re doing what we’re doing as opposed to looking for solutions in all the wrong places. Fear and doubt, after all, are the marketer’s best friend.

The most important choice comes down to this: do we act based on what we know or how we feel? (pg. 124)

#5. Slow and Steady = Long-Term Success

When it comes to making money, focusing on steady, incremental changes is key. The simpler, more predictable the plan, the more likely it is to be effective over time. There’s nothing flashy about tracking spending, saving money on a consistent basis and investing a steady stream of these savings into solid investment vehicles. What is flashy is the result of this steady, predictable behavior: reaching investment goals in lock step with our life goals. Slow, steady and simple does win the race, every step of the way.

Bottom Line

When it comes to saving and investing advice, Carl Richards delivers a much-needed reality check with his secret weapons: a Sharpie and a witty delivery.

Where you can find the book: Amazon @ $13.58
Where you can find the author: behaviorgap.com

Other recommended books by this author: “The One-Page Financial Plan

Other suggested books of this type: “Unshakeable” by Tony Robbins, “The Little Book of Common Sense Investing” by John C. Bogle, “The Index Card” by Harold Pollack and Helaine Olen, and “Broke Millennial” by Erin Lowry.

Books on habits and behavior: “The 7 Habits of Highly Effective People” by Stephen R. Covey and “Essentialism” by Greg McKeown.

Book on saving, spending and investing: “Your Money or Your Life” by Vicki Robin and Joe Dominguez, “Happy Money” by Elizabeth Dunn and Michael Norton, “The Millionaire Next Door” by Thomas J. Stanley and William D. Danko.

Books on behavioral psychology: “Predictably Irrational” by Dan Ariely and “Mistakes Were Made (But Not by Me)” by Carol Tavris and Elliot Aronson.

Books on the shadier side of the financial industry: “Pound Foolish” by Helaine Olen and “The Big Short” by Michael Lewis.


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Hélène is Rockstar Finance’s Curator of Books, and Blogger at FreetoPursue.com. A perpetual student, speaker, writer and coach, you’ll often find her reading, researching or writing. She also likes travelling and hanging out with her husband and their greyhound Belle.

Last modified: June 16, 2017

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