Estimates vary, but it’s generally accepted that the number of discrete behavioural biases we’re all prone to reaches double figures.
As humans we’re naturally inquisitive, curious and analytical and those are exactly the skills we need when we’re setting out our plans for the future. Unfortunately, we’re also hard-wired to view things in ways that may once have meant the difference between life or death, but these days are more likely to lead to poor decisions about money.
We could write a whole other guide on the subject, but it’s important to be aware of things like confirmation bias – the tendency to overweigh evidence that agrees with our current position compared to that which challenges it. We may suffer from loss aversion bias, because as tough as we think we are, research shows we feel the pain of a financial loss more than twice as much as we enjoy making a profit.
We tend towards familiarity, which can mean investing in known names and brands that inspire cosy feelings when they’re actually not helping at all, and ‘sunk cost fallacy’ can see us throwing good money after bad, following a sinking ship all the way to the bottom. Then there’s the doubly unhelpful ‘blind spot bias’, which actually inhibits our ability to see our own biases.
None of this matters when you’re shaping your vision of the future, that’s supposed to look the way you want it to. But it really matters when you’re mapping out how you’ll get there. Your journey and your destination are linked, but they’re not the same thing. To reach the destination you need to be aware of any blind spots along the way.
We can’t get rid of behavioural biases for you, but we can spot them and tell you about them. Forewarned is forearmed and an objective nudge when it’s prudent to think twice is really helpful. We’ll always work in your best interests and that includes pointing out where you need to revisit a decision.
We’ve put together a short guide called ‘A Smarter Approach to Planning Your Retirement’. In this guide we’ll show you how to make a friend of the future and face the next stage of your life with clarity and confidence.
We’ll be back on the blog next week with Step 9: Find a guide you trust (and then trust them).
Get in touch
If you’re thinking about retirement, we’d love to find out how we can help. Whether you’ve been planning it for a while, you’re just starting out or it’s finally time to stop putting it off, the right time is now.
Proper planning early on will help you to understand when you can retire, what that retirement may look like, what you’ll do with your business and how you’ll make sure it’s all done securely.
Along with professionalism, expertise and experience, you can count on respect, transparency and a lifelong commitment. We’ll celebrate your successes with you, but we’ll always have the courage to tell you the truth about your money.