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A police officer once told me that most crimes are solved because the criminal mind, as he put it, was “stuck on stupid.” At Stanford back in the late ’50s, Leon Festinger developed theories and tests to define and measure something called “cognitive dissonance” — academia’s attempt to elevate stupidity to something warranting serious research.

Of course, if you’re reading about it in this column, it has some application to investing money, and we’ll get there shortly. But first, “cognitive dissonance” is the mind’s attempt to rationalize our behavior in the face of what we know is wrong. The simplest example would be smoking (behavior) when we know it causes cancer (cognition). Living with this realization produces a state of cognitive dissonance. Dissonance refers to a sound like fingernails on a blackboard. It’s an unsettled feeling that we might be wrong but that we jump through hoops to dispel.

We can reduce dissonance by one of three ways: We can just change the behavior, which is the hardest in most cases because it means admitting that we were wrong. We can acquire new information (real or imagined to be real) that outweighs the dissonant beliefs. Or finally, we can reduce the importance of the cognitions (the beliefs.)

Back to our example of smoking: It’s tough to quit. So, to outweigh the research, we convince ourselves that smoking has not been proven 100 percent to be a cancer cause. And finally, to reduce the importance of the cognition, we can tell ourselves that it’s better to live a shorter, more enjoyable life experiencing sensual pleasures like smoking than a longer, comparatively joyless life.

Moving on to global warming possibly caused by humans, we start by reminding ourselves that it hasn’t been proven 100 percent. After all, 10 percent of climatologists still claim it could be caused by such things as sun spot activity or be just part of a normal 10,000-year cycle of planet temperature change.

After that, we convince ourselves that a robust economy and higher incomes today are more important than whatever challenges and expense the problem will take to solve — if, in fact, we’re causing it. In any case, we’ll cross that bridge once everyone agrees that our carbon footprint has created the historic droughts, wildfires, hurricanes and other phenomena — all occurring with increasing frequency.

When saving and investing money, we may experience cognitive dissonance with the various behaviors that managing money can bring to the table. Bad habits start with not saving enough money or taking too much risk with what we have. We know we’re creating a problem, but we assume one of several panaceas will come to the rescue. First, the stock market will do really well over the years between now and retirement. Or, we won’t do the simple arithmetic needed to figure out what we may need to have in savings by retirement. Or, our kids will take care of us when the time comes. The list goes on.

We know in our heart of hearts that we should make some sacrifices today and review all the ways we spend money — including at least some expenditures that are frivolous and lead to little marginal satisfaction. Then, we do some calculations that assume a rate of return of just 7 percent per year, which is a more conservative, but predictable, estimate of long-term results from a 50/50 mix of stock and bond investments. At the same time, it is probably a safer percentage to use as an estimate of what a 100 percent allocation of stocks might achieve long term with bad luck. The normal average is closer to 10 percent for an all-stock portfolio, but if you’re counting on this to avoid a touch of cognitive dissonance, stick with 7 percent as you decide how much your annual retirement plan contributions should be — and then consider what indulgences you may be wise to forego. If any of this discussion is unsettling, at least you know why.

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