Have you considered how your instincts influence your decision-making around retirement planning?
Our natural instincts and biases create frameworks that lead our perspectives on how we think the world works.
These frameworks influence our decisions surrounding our financial decisions.
On this episode we discuss how to build prosperity by analyzing and identifying your default financial perspective. Listen in to learn 10 instincts identified by the book Factfulness and what you can do to combat the biases they lead to.
How Is Your Perspective Affecting Your Decisions?
Have you changed your retirement timeline?
Or delayed a big purchase because you weren’t confident that you could swing it
Or adjusted your investment strategy based on a political or economic event?
Like it or not, our biases affect our financial decisions.
Instincts to Watch Out For
We need to combat several instincts to ensure sound financial decision-making actively.
The gap instinct contributes to us vs. them thinking. Rather than considering the economic world in two categories–developed vs developing–we can further separate economic levels into 4 categories. Remembering this can help you shift your financial perspective.
The negativity instinct is a trap we all fall into. We come to expect bad news and think things are getting worse. Gapminder is a helpful tool to help us reframe our perspectives.
Our fear instinct is hard-wired and stems from our brain’s role in keeping us safe from danger. This instinct can lead to an irrational fear of losing it all. Rather than acting rashly, when you fear running out of money try delaying decision making until your panic subsides.
Beware of lonely numbers. It is essential to use numbers alongside others. We need to be able to compare or divide numbers to process them. Having a rules-based process for investing can help you work through your investing decisions.
Our generalizing instinct has us turning to stereotypes to categorize things. Rather than relying on stereotypes, think about other people’s perspectives and assume that they aren’t idiots.
Let Us Help You Create Your Financial Decision-Making Framework
These ingrained instincts can cause us to miss opportunities. It is important to develop a financial decision-making framework that can help you control your emotions as you embark on your retirement journey.
Reach out if you need help creating your framework. As fee-only financial advisors, we keep our clients’ best interests front and center. Check out our over 200 podcast episodes to help you explore financial topics in greater detail.
Outline of This Episode
[0:50] Our article of the week
[1:58] Your instincts influence your decision making
[5:41] Why are we worried about the current situation?
[7:13] Combatting the gap instinct
[10:36] The negativity instinct
[16:10] The fear instinct
[10:18] Size matters
[23:56] The generalizing instinct
[26:10] Destiny instinct
[29:23] Who’s to blame?
[31:05] The urgency instinct
Resources & People Mentioned
