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While a positive mindset is often associated with success, a new study suggests that optimism often leads to poor decision-making, especially when it comes to finances.


The study, conducted by the University of Bath in the UK and published in the Personality and Social Psychology Bulletin, sought to determine if people with an optimistic mindset had poorer decision-making cognition than people who were not optimistic. The researchers found that people with lower cognitive function tended to be more optimistic, which led them to make poor financial decisions.
Study Findings Explained

The study examined more than 36,000 individuals and found that people with realistic expectations and planning processes tend to make wiser decisions than people with a more optimistic mindset do.

Researchers discovered that people with the highest cognitive ability were 22 percent more likely to be realists (or pessimists) when it came to financial planning. They also had a 34.8 percent decrease in optimistic tendencies compared to people with lower cognitive ability. Cognitive ability was measured based on various cognitive skills, including verbal fluency, numerical reasoning, and memory. The results suggest that optimism bias causes people to expect unrealistically positive outcomes in life decisions, especially in regard to their finances.

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Originally posted by 6ixStringJack:

That being said, if you are a defensive pessimist, it is a good idea to surround yourself with some optimists... strategic or otherwise.

There's a lot of good to be said about defensive pessimism, but it is possible to get yourself stuck on something that can put you in a negative feedback loop that is much easier to get out of if you've got an optimistic influence or two in your life to give you a hand.

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