About the author: This is a guest article written by Dorian Wales, a 30-year-old economist with an MBA in finance. Dorian writes frequently on his own blog, The Personal Financier.

Most common investment mistakes are deeply rooted in psychology. Many of these mistakes can be avoided by allowing another person to take part in the process and by giving this person’s opinions and believes an equal weight in decisions taken.

This person could be an investment broker, a financial planner or a trusted friend. However, who is more appropriate and worthy to take part in such sensitive and significant decisions than your life partner?

At first, some might flinch at the thought of an inexperienced or unprofessional person suddenly participating in a process that clearly requires a certain level of understanding and proficiency. Others might claim a spouse has a right to affect the financial decisions of the household.

I believe both arguments hold certain truths. However, I intend to show how allowing another to take part in the financial decision process, more specifically when it comes to investments, common mistakes can be significantly reduced or avoided at all.

Furthermore, a deeper and more intimate relationship has a better chance at avoiding these mistakes due to the mutual respect and understanding between the two partners. This mutual respect will ensure both opinions are heard and decisions will be made together.

As I’ve already stated most common investment mistakes are deeply rooted in psychology. Some mistakes are a result of over-optimism and success-oriented planning. Others are a result of our innate inability to recognize our own mistakes (or success at times).

The following are three general common investment mistakes and how they can be significantly reduced or avoided by allowing your significant other in the decision process:

1. Planning for the wrong investment time frame. Many investors don’t understand their true time horizon, when you plan to need and liquidate your funds, and plan for either shorter or longer periods of investment. Getting the investment time frame wrong usually ends in loss as a result of either not taking enough risk or taking too much risk accordingly.

Deciding on your investment time frame with your partner may produce surprising results. Perhaps you think you will wait five years before having your first child; it’s possible your future wife has other plans. You may suddenly discover your husband isn’t as happy at work as you thought, and he is contemplating a career change requiring higher levels of liquidity.

Communication is an essential part of living together and it is also, therefore, an essential part of your mutual financial planning.

2. Acting on impulse. Whether investing based on trends or on hot tips, selling at the wrong time, or making all-or-nothing decisions, every investor has been there. Every investor makes his share of mistakes. I believe we all had wished someone could have whispered a word of warning in our ears or had calmed us down before we made those hasty and costly decisions.

Another person actively taking part in the decision process acts as a voice of reason. Simply taking the time to consult will often be enough to prevent yet another spontaneous and costly decision.

On a more humorous note, imagine your wife after you’ve just told her about a great stock tip you got from a friend. One sour face and an “I don’t like him” just might cause you to forget you had ever thought about buying shares in that great bio-tech company you heard about.

3. Lack of self discipline. Two people have more discipline than just one. One individual constantly rationalizes reality to suit his wants and needs, convincing himself of certain scenarios and reasons and acting on them only to find reality backfiring on him.

Two people ground and anchor each other. If you’ve ever trained with another person you must know how harder it is to quit or give up on yourself.

Your significant other can help you stand fast against deviating from your goals and prior decisions. This is important when making investing decisions because constant buying or selling is costly in commissions and lost returns.

Naturally, there are many particular investment mistakes which could be classified under these three groups or any other generic list of mistakes. The important message I’ve tried to relay is that your partner is invaluable in the decision-making process.

A less known fact is that women are better investors than men. If you need proof just think about your TV watching habits, constantly zapping between stations (stocks?) never really making the most of a single show.

Consulting with your partner adds value, even if it’s a psychological message rather than professional advice. Who knows? They might like it and turn advisory skills into a profession or a serious hobby.

If you enjoyed this article, please visit The Personal Financier for more thoughts about investing wisely and economic trends from Dorian’s point of view. We would appreciate your comments and reactions, so if you would like to contribute to the discussion, add your comment below.

One of my favorite musical “acts” is Blue Man Group. The Blue Man Group explores, with primitively modern musical instruments, society, detachment, and collectivism. You may remember them from Intel’s old Pentium commercials. You may also remember them from the television show Arrested Development, in which the character Tobias, played by David Cross, auditioned for the show and failed, later declaring, “I blue myself.” Blue Man Group has shows in New York City, Boston, Las Vegas, and a few other cities, as well as a touring rock show, with each show similar but not identical to the others.

I recently picked up the latest Blue Man Group CD and DVD combination package, How to Be a Megastar! and watched the program. It includes fantastic music and visual performances as I expected, but I am equally intrigued by the special features, including a documentary-style interview with the creators of Blue Man Group, Phil Stanton, Chris Wink, and Matt Goldman.

When originally devising the concept of the Blue Man, the creators struggled at first. These three percussionists, who were working day-jobs as caterers in New York City, were ready to abandon their vision. At the right time, they received a sign. While watching television, they came across an interview with an expert on religion and philosophy. In this interview, the expert was asked to summarize the prevailing philosophical thought across the world, to which he answered: “Follow your bliss.”

Stanton, Wink and Goldman then knew that despite their difficulties, they must continue to create their vision through completion, even if success would never come. Thankfully for them, success did come, and Blue Man Group is now a cultural phenomenon. But the interview made me think about this particular philosophical idea.

First of all, what is “bliss?” Wordnet defines the word’s most common sense: a state of extreme happiness. The true path is the path that leads you towards a state of extreme happiness. In fact, in the interview, the creators of Blue Man Group went on to say that the journey is more important than the destination.

Am I following my bliss? I’m not sure. There was a time when I thought I had my life planned out, but year by year, I allowed this path to change. I’m now quite far from what I thought I would be doing with my life by this point, the age of 32. My job is fine, but it’s not intellectually, emotionally, or artistically stimulating. I like writing for Consumerism Commentary, but I’m not a particularly good writer. I enjoy building online communities, and that may be my personal strength for the moment, but is it my “bliss?”

Who should follow this advice, to follow one’s bliss? Perhaps not everyone has the luxury of doing so. The world needs janitors, truck drivers, bus boys, and others who perform thankless jobs—the jobs children often don’t think of when they are asked what they’d like to be when they grow up. But then again, are we sure that these individuals are not following their bliss? Perhaps their “extreme happiness” is satisfied simply by providing for their family in any manner possible.

In the case of the creators of the Blue Man Group, they needed to complete their project before they could be satisfied. With success, it seems their project may never be complete; shows are revised, new tours are initiated, and new audiences are born constantly.

After leaving the arts world, I thought my goal would be to volunteer for causes about which I feel strongly or become a to philanthropist as much as my budget allows. It seems I may be too picky to do so at the level at which I would be making a difference, and in some cases, to do so at all. Even though the organization closest to meeting my requirements is strongly involved in the activity I wish to support, having been close to that organization with intimate knowledge of its administration, I’d prefer not to do business with them. Unfortunately, no other organization is similar.

Do you follow your bliss?

This is a question mainly for readers in a relationship in which finances are mostly combined or you rely on one another for income and make spending decisions together. I am wondering how much you can spend—whether as a percentage of a total budget or a hard dollar amount—without discussing the details with your significant other. Do you hide any spending from your spouse or partner? (Don’t worry, you can answer anonymously.)

Perhaps you each knowingly keep some separate funds to surprise one another, but I’m more concerned with the little things that may go unnoticed. Can this type of deception be harmful? If so, at what limit would it hurt you or your partner?

Also, do you have or would you consider having a secret bank account? If so, what is it used for?

Recently, I wrote about Jung Typology and Finance, looking at the first of four dimensions used by psychologists and career coaches for categorizing personality preferences. Introverts and Extraverts draw their energy from individual or group activity, and that difference can have an interesting effect on opinions and behavior with regard to money.

The second dimension in the Myers-Briggs version of this personality typology pertains to information gathering. People who take the test are categorized along a dimension whose extremes are “Sensing” (S) or “Intuition” (N). Wikipedia provides a good layman’s definition of this aspect:

Individuals with a preference for sensing prefer to trust information that is in the present, tangible and concrete: that is, information that can be understood by the five senses. They tend to distrust hunches that seem to come out of nowhere. They prefer to look for detail and facts. For them, the meaning is in the data. On the other hand, those with a preference for intuition tend to trust information that is more abstract or theoretical, that can be associated with other information (either remembered or discovered by seeking a wider context or pattern). They may be more interested in future possibilities. They tend to trust those flashes of insight that seem to bubble up from the unconscious mind. The meaning is in how the data relates to the pattern or theory.

The first thing that pops into my mind is stock analysis. While everyone who analyzes stocks looks for facts, I think those on opposite sides of this spectrum will have a different approach. The Sensing individuals might look at a company’s underlying strengths and weaknesses, identifiable in annual reports, for example. On the other hand, those who gather information via Intuition might be more prone to looking for patterns inherent in performance. Both approaches are highly technical.

Perhaps you’ve heard of the Elliott wave principle. This is a method of predicting market trends based on patterns on historical up-and-down movement. The tricks with this principle is that it’s hard to know where you are in any particular “wave.” Someone with an Intuitive personality might be drawn to this type of analysis.

If you’ve read personal finance books, you’ve probably noticed how authors try to reach both types of personality. Often, a particular lesson begins with a story, illustrating a positive or negative approach. The story is usually light on details, but Intuitive people might be able to relate to the story and understand the point the author is attempting to make. If the author is smart, he or she will continue by supporting the story with details and facts that support the conclusion.

When either approach is missing, either half the audience will be bored or the other half will be mistrusting. It’s possible that Robert Kiyosaki’s “Rich Dad” series falls into this category. The books are strong on story and emotion, perhaps drawing in the Intuitive audience. Yet, the books are short on actionable details, frustrating those, perhaps Sensing individuals, who look for facts and hard data.

Who would be better at managing their own finances, the Sensing or Intuitive individual? I think the Sensing individual should be trusted with managing the family’s finances above the Intuitive individual. The type of analysis required, including net worth, expense reports, and budgets, involve the hard data favorable to Sensing individuals.

Ginger is a fashionista in her late 20s—a wife and graduate student striving to have it all. She wrote this article for Consumerism Commentary, but Ginger also publishes the blog Girls Just Wanna Have Funds, and you can subscribe to the blog’s RSS feed here.

Let me preface this by stating that I am not suggesting that women marry solely for money, I am after all a believer in love and commitment as a solid foundation for marriage. However, I am suggesting that women who marry partners that are financially savvy, motivated by money and have aligned views about their attitudes to money, are indeed smarter than their counterparts who don’t when choosing a life partner. I will detail the benefits of choosing a partner that has a solid financial plan in place and uses money as a tool and not a crutch.

Financially Savvy

Women who choose financially savvy partners fare better than their counterparts who don’t. Why? These women know that in order to have a marriage built to last that finances play a huge role in the viability of the marriage. I know it sounds like we’re discussing a corporate merger but bear with me; after all, marriage in some respects is like a business.

1969 Inc., said it best when asked for her insights to marriage,

It’s like running a corporation. A business venture. You have to go into it knowing that it could fail or it could succeed beyond your wildest dreams and make you rich… If the employees don’t share the vision, believe in the vision and work together, the endeavor will fail. Some businesses will get rich. Some will barely make ends meet. Some will never make a dime. The money does not measure success. The sense of accomplishment will come from the daily struggle… the love of what you do, working together day in and day out.

The reality is that personal finance issues are the leading cause of divorce and in order to live happily ever after, you must be on the same page as far as your finances are concerned. No, if, ands or buts about it. Capisce?

So what makes these women smarter?

Aligned Financial Values

When smart women meet a partner, they aren’t wooed by good looks and the smooth talk, after all those come a dime a dozen. These women are looking at how their potential partners spend money. Does he have an emergency fund? Is he current on their monthly bills such as the car payment and rent/mortgage? Does he spend more than he earns? They’re listening keenly to understand how their potential mates relate to money. Is it a tool? Is it a crutch? They know the difference and conduct business accordingly. Should the potential mate fall into the category of the above mentioned then it’s time to say good-bye. After all, who wants a man who isn’t interested in learning how to manage his money effectively? They are in it for the long haul, not a few cheap dates.

Motivated by Money to Create the Life They Want

Smart women are up to date on the latest issues in personal finance. They understand rate chasing, investing for the long haul and understand that while they may have substantial savings, practice and embrace frugality. They look for similar if not the same qualities in their potential mates. Smart women want to be able to relate not only on a romantic level, but also on issues regarding personal finance.

A Man with a Plan

Who wants a man with no financial plan in place? I certainly don’t. Where does he see himself in 2 years? 5 years? 10 years? Is he thinking long or short term? That answer will determine the course of the relationship. Ideally he should be able to think past next month’s car payment and project how much he will have in his savings account by year’s end. This an expectation for smart women, not a hope or a dream, but something they demand and require in a potential mate.

Take a few minutes to let it all sink in. Gone are the days when gold diggers were secretly envied because they were able to go for the gusto and stifle high pitched screams during musty sex with a shriveled up oil tycoon. Move over and make way for women who are in control of their financial destinies and not afraid to say it. They are armed with a positive net worth and not afraid to flaunt it.

Are you a smart woman?

If you liked this article, read more from Ginger at Girls Just Wanna Have Funds.

One of the most popular personality measurement systems is the “Jung Typology” test, also known as the Myers-Briggs Type Indicator (MTBI) test. These are popular in Psychology 101 college courses and corporate management seminars. The object of this test is to quantify an individual’s personality along four separate dimensions. Each dimension has two options on either end of the spectrum, and most tests provide a measurement of strength in either direction. This results in 16 separate personality types, with additional nuances due to the strength in the pull of either direction.

If you’re interested in determining your personality type, there is a free test at HumanMetrics.com. The test involves a series of questions designed to determine the root of your motivation. The results are best when the questions are answered quickly at face value, without thinking about choosing the “correct” response.

The first of the four personality aspects measures introversion vs. extraversion. Don’t think of this as whether you’re a loner or a social butterfly; the category has more to do with how you draw your energy. This is from the Wikipedia entry:

People with a preference for Extraversion draw energy from action: they tend to act, then reflect, then act further. If they are inactive, their level of energy and motivation tends to decline. Conversely, those whose preference is Introversion become less energized as they act: they prefer to reflect, then act, then reflect again. People with Introversion preferences need time out to reflect in order to rebuild energy. The Introvert’s flow is directed inward toward concepts and ideas and the Extravert’s is directed outward towards people and objects. There are several contrasting characteristics between Extraverts and Introverts: Extraverts desire breadth and are action-oriented, while introverts seek depth and are self-oriented.

Taking a financial viewpoint, which side of this spectrum is better for personal finance? Here are some thoughts.

Introverts may be more inclined to create budgets and analyze progress over time. The “reflect-act-reflect” method can be interpreted as “budget-spend-evaluate.” Introversion can manifest itself in the way an individual sets goals. Do the goals use internal metrics, like a competition with oneself, or do they focus more on parity with the surrounding culture or community? The latter may be the approach taken by an Extravert.

Extraverts thrive on the energy they derive from being around other people, and as a result, may have a more finely honed ability to use “small talk” and network with other people in larger settings. That could lead to better job opportunities and more money in the workplace. However, 40% of CEOs are Introverts or “closet Introverts.” They’ve learned how to act like Extraverts when necessary while retaining their own personality features.

In The Psychology of Money, the author, Adrian Furnham, cites a 1984 study.

[The study] found that extraverts tended to be more extravagant and less stingy than introverts. People with strong feelings of control over their money reported less general anxiety and tended to be more extroverted.

Managing personal money is a skill that is best tended by the introspective nature of an Introvert. While Extraverts can certainly handle the responsibilities just as well, if defined by their personality type, Extraverts will find introspection draining. Does this mean that Introverts tend to be better money managers?

Not all successful CEOs are extroverts [USA Today]