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7 Signs You Exhibit Cognitive Dissonance

7 Signs You Exhibit Cognitive Dissonance

| November 10, 2021

 Have you ever been struggling inside your mind? Have you been dealing with conflicting thoughts? Like you know in your heart you should follow one particular path, but then you see some new info that pulls you in another direction and you make a different choice that you didn’t intend on making.

You convince yourself that it was the right choice. You reason, it’s okay- it’s what a reasonable doctor would do. Yet, in your heart of hearts, you question the decision.

This my friends is the soul of cognitive dissonance. It can be really hard to detect and all of us will do it from time to time.

Here’s what I read on Investopedia about the definition of cognitive dissonance. “[It is] the unpleasant emotion that results from believing two contradictory things at the same time. The study of cognitive dissonance is one of the most widely followed fields in social psychology. Cognitive dissonance can lead to irrational decision making as a person tries to reconcile his conflicting beliefs.”

This dictionary definition can be a bit heady. Let’s take a look at another one from Ezonomics.

“Cognitive dissonance is one of social psychology's most influential theories. It relates to the way we tend to correct ourselves when our actions go off track. Studies suggest it holds the answer to the important question: “If I don’t feel comfortable with what I am doing, should I change my belief or change my behavior?”

Cognitive dissonance describes the distressing mental state people often feel when they find themselves behaving in ways which don't fit with their self-image, or having opinions that do not fit with other opinions they hold.

It was first established back in 1957 by American social psychologist Leon 
Festinger. It argues that people desire to be consistent and will go out of their way to make sure their actions fit their beliefs and opinions.

More specifically, it suggests we are sensitive to inconsistencies between our actions and beliefs.”

How does this relate to money, you ask? There are indelible ties to money and cognitive dissonance. Let’s take a look at an example…

You go shopping at the grocery store and you promise internally that you will stick to your list and your budget. Then, you see a yummy and gooey treat. The kids beg and plead with you to buy it. You cave in and reason, “It’s just one little treat. We deserve it.” This first item leads to several others piled in the cart with the items from your list as you go through the store.

After you go through the checkout and pack into the car, you sit there staring at the steering wheel for a moment and you feel a stab of guilt. You feel guilty for buying what wasn’t on the list. You’re briefly struggling with turmoil and indecision. Should you return some of those goodies that weren’t originally on the list? Should you just head home?

This is real life people. The struggle is real!  Let’s explore several signs of cognitive dissonance and several examples of how this can occur in our everyday lives.

My friends, the first step to understanding an issue is to recognize that you are experiencing it.

I’ve identified 7 specific signs that you may be exhibiting cognitive dissonance. Let’s explore each of them in more detail.

I’ve identified 7 specific signs that you may be exhibiting cognitive dissonance. Let’s explore each of them in more detail.

Sign#1: Squeamishness (Feeling Uncomfortable)

Without a doubt, feeling squeamish- the uncomfortable feeling in the pit of your stomach is a sure sign that you may be dealing with cognitive dissonance.

I know I’ve felt this way when upgrading my phone. Do I really need another one? Isn’t my current model enough?

I have felt very uncomfortable with this kind of decision because I know it feels like a waste of money- especially considering the $150/month bill we have now compared to the $30/month bill I used to get for having a landline phone that I needed to upgrade every 10 years. Not only are the monthly bills higher for having a cell, but I am adding on a new cost of a new phone on top of that!

I love this example from

As a personal example, my contract with Verizon recently came up. The phone I had up to that point was perfectly fine. It worked great, there were no major problems and in fact, it was only about a year old, as the first phone I bought on that 2-year contract had broken a year ago and had to be replaced. There wasn’t going to be a penalty for not re-signing my contract; I would pay the same amount and outside of a few pestering phone calls from the Verizon folks, there really wasn’t going to be much of a difference between being on a 2-year contract and not in the short term.

So the rational thing to do would be to keep my old phone while it still worked (and I was happy with it) and when I actually needed to get a new phone, I could. I would have the added benefit of deferring the inevitable cost of a new phone, and by holding out, I might wait long enough for something cool like the Palm Pre or the iPhone to come out on Verizon’s network.

So what did I do? I went ahead and renewed my contract the day it was up, thus allowing me to get a sweet deal on the BlackBerry Tour, of course.

The benefits of not signing a new contract right away directly conflicted with my strong desire to buy the coolest new technology. Ultimately, I told myself (and my skeptical wife) that my old phone was probably going to break soon (it wasn’t) and the new BlackBerry had so many cool features that it was worth it (somewhat true). That rationalization was all I needed to resolve the issue between those two thoughts, and two days later I was setting up my new phone.

Sign#2: Avoidance (specifically- Avoiding Conflict)

Some of us don’t like confrontation. We hate it!

When we come to a tough crossroads, we choose the path of least resistance.

Cognitive dissonance comes into play here too.

Let’s consider a very famous story.

In Aesop’s fables, we are told about the story of the fox and the grapes.

The fox is on his merry way and his stomach is growling. Gurgling with hunger and his throat dry with thirst, he spots some ripe, juicy grapes dangling from a lofty branch. His mouth watering… he lusts after those grapes. He smacks his lips and licks them in anticipation.

Taking a few steps back, the fox jumped and leaps higher than he ever has before. His jaws snapping as his legs bounce him many feet until the air. He just missed the hanging grapes. He scowls.

Again, the fox paces back and tried to reach them. He leaps into the air. He still failed.

Finally, giving up, the fox turned up his nose and said, “They’re probably sour anyway” and proceeded to walk away.

My friends, upon not getting these juicy delicious grapes to satiate his hunger and his thirst- he had to change his belief.

His initial belief was that the grapes were amazing, and since he didn’t get them- decided that they were sour and not worth one more iota of thought.

How many of us think that he was still dreaming of grapes the next day or two?

He was simply avoiding the mental conflict and tried to take the easy road by following a belief that probably was NOT true.

Sign#3: Ignoring the Facts (Do As I Say, Not As I Do)

One of the worst things we can do in finance and financial planning is to ignore the facts that are presented.

In the DinksFinance article, he also cites the famous paper published in the Journal of Financial Research called, “Cognitive Dissonance and Mutual Fund Investors.”

You can view the whole famous paper by visiting this link:

In the paper, which was published in the mid 90’s, they said:

"One of the greatest mysteries in the mutual fund industry is why some investors tend to stay with funds that consistently perform poorly. A number of papers have noted that investor dollars flow into winning funds more rapidly than they flow out of losers. This differential has been taken as evidence of irrationality."

They go on to say…

"Samples of both educated and casual mutual fund investors show that investor recollections of past performance are consistently biased above actual past performance. This bias in recollection may be the mechanism by which investors justify remaining in consistently poor performing funds. While investor inertia might be actually switching due to high economic switching costs, our evidence suggests that investors none-the-less adjust their beliefs to support past decisions.

The tendency to adjust beliefs to justify past actions is an example of the psychological phenomenon termed by Festinger as cognitive dissonance".

As we are avoiding making tough decisions, this can cause us to put on blinders and not examine the data because it can be very painful.

Back when I was an intern in 2002 and 2003, my boss stuck with primarily one mutual fund company because she didn’t want to chase hot funds.

Her symbol was the turtles. There were turtles EVERYWHERE in the office. Slow and steady wins the race was her mantra.

Trends come and go in the investment world and we don’t want to get sucked into them. Make sure that you examine the data closely as you take a look at your decisions.

Sign#4: Talking Yourself Off the Ledge (Rationalization)

Another sign that you may be experiencing cognitive dissonance is the rationalization chatter that you are having with yourself.

Basically, it’s the concept of convincing yourself that you made a good decision when you changed your mind about a belief that you had.

Investopedia gave a really good example…

Let's say an investor decides in advance that he is going to purchase shares of a firm when the price drops to $78 a share. The price is currently at $80 a share. All of a sudden, the company's stock price starts going up. The investor's belief that the stock would be a good buy at $78 seems to be contradicted by the stock's current behavior. The investor decides to buy at $85 instead of $78 to reconcile the cognitive dissonance he is experiencing. This may not be as good of an investment decision, but the investor will rationalize himself into thinking it is, mainly to get rid of his feeling of cognitive dissonance.

Sign#5: Deer Eyes (Fear of Missing Out)

Another common sign of cognitive dissonance is what I call ‘deer eyes’. Essentially, your eyes get big and wide. You get really super excited that you follow the herd. Some folks follow others like them and it typically involves money.

Maybe this involves buying a beautiful new Lexus or Mercedes. Maybe this involves eating at the trendy restaurants. Maybe this involves buying a home in a certain neighborhood.

Then next you thing you know you get caught staring at the headlights in the road, and WHAM- you get knocked off.

Yes, it’s a bit exaggerated and a little silly. However, the struggle is real when it comes to the fear of missing out.

Some of us see what someone else has and then we lust after it.

There’s a great example of debt on

If you have a belief it is wrong to be in debt, for example, yet you find yourself spending increasingly on your credit card, the theory goes that recognition of this inconsistency will cause negative feelings, and this will motivate you to resolve it.
This resolution will happen in one of three basic ways:

  1. You change beliefs (“it’s ok to be in debt”),
  2. you change your actions (by reducing your spending/debt),
  3.  you change the perception of your actions (“everyone has a credit card these days; this isn’t real debt”).

Sign#6: Homer D’oh Syndrome (Shame)

In our previous signs, they are related to what we may be encountering as we are battling cognitive dissonance.

I think the after-effects are actually much more compounding and more felt.

Just imagine when you did something that you said that you weren’t going to do- the shame that you may feel.

After making a poor decision that went against a belief and you rationalized it, you may be struggling with the anguish of your decision. You may feel remorse or even shame.

You may be thinking, “This isn’t me.” You may be encountering that drowning, overwhelming feeling may have you wanting to curl up in the fetal position.

You may want to hide it and stuff it away so that other people don’t know about the choices you made.

In my opinion, one of the areas that many of us struggle in and feel shame about is our finances and our money, our health and our bodies.

Personally, I’ve felt shameful about the fact that from time to time like I was drowning in business debt.

However, it wasn’t always that way. I was completely debt free before 2008. I had no mortgage, no student loans, and no car loan- and then I went out and made a huge $1 million acquisition and got hugely in debt to do so.

I rationalized the decision to lever up and buy a business as “good debt”. This went against my internal thinking that all debt is bad. After all, I was young and this was the time to take risk. This cognitive dissonance has definitely made me go through ocean waves of emotions, bobbing up and down on a sea that I had no control of.

I felt guilty, remorseful, and shameful.

Sign#7: I’ve Messed Up (Guilt)

This of course leads us to a related sign- that nagging feeling of guilt.

The “I messed this up- I should have…” syndrome.

The article addresses this really well…

This cognitive dissonance created while spending money can cause anxiety leading up to the purchase (“I know I shouldn’t but…”) and shame and guilt afterwards (“I probably shouldn’t have spent that much money on that”).

How we resolve those feelings is to justify it. Common justifications I use are: “It was on sale”, “I’ve been thinking about buying one for a while”, “I deserve something new and shiny”, etc… Being able to justify our actions (whether it’s a solid justification or not) alleviates that guilt and we’re free to enjoy what we’ve purchased, even if in the long term that decision is proven to be the wrong one.

How Do You Overcome Cognitive Dissonance?

My friends- perhaps all of these signs are revelations for you. Maybe you’ve identified some with what we’ve been discussing here.

Maybe you’ve felt challenged. Maybe you’ve remembered instances where you have experienced cognitive dissonance.

The question is- how to we overcome and reduce cognitive dissonance?

There are 5 specific ways that you can climb this mountain.

#1: Recognize it and understand the impact

#2: Stayed focused & committed to a course of action

#3: Changing a conflicting belief

#4: Get informed and micro-test the quality of your decision making

#5: Accountability & Mentorship

Of all of these ways to combat cognitive dissonance, I believe that accountability & mentorship is the primary driver to overcoming it.

It’s seeking wisdom among a variety of counselors. There’s a bible verse that cites that iron sharpens iron.

We need to have people around us- mentors, friends, and counselors- who can be our iron. Making decisions on our own without advice is a sure way to lead to doubt.

These people can encourage, inspire, challenge, and argue with us when we need them to.

My friends, any challenge can be overcome with the right team. However, we are susceptible to our own stankin’ thinkin’ if we try and do this on our own.

That’s all we got from now. I would love to hear from you.

Have you experienced cognitive dissonance lately? Let me know what you think. Send me an e-mail at with your thoughts and experiences.


Material discussed is meant to provide general information and it is not to be construed as specific investment, tax, or legal advice. Individual needs vary & require consideration of your unique objectives & financial situation.