Any of these sound familiar?
- I’m an above-average driver.
- I knew that was going to happen.
- I feel safer driving a car than being on a plane.
- My son / daughter is one of the smartest in their class.
- My dog is very well behaved.
If you’ve said (or had a friend say) any of those, it’s possible that you’re 100% correct…or you might be exhibiting some type of biased behavior. You may think your furry friend is the best-behaved creature on your street. But your neighbor might think otherwise.
Are you more likely to believe the opinions of those who typically agree with you? You might be exhibiting confirmation bias. I can personally relate to that one since pretty much all of my political TV news comes from The Daily Show. Do you put more weight on the bad news that comes from the financial media than the good news? You might be exhibiting negativity bias. Have you ever said “I knew it all along,” after a stock (or the market) experienced a big sudden drop? That’s hindsight bias working it’s magic. Have you purchased stock in an industry in which you work (or of the very company where you’re employed)? Yep, there’s a name for that too – overconfidence bias.
Biases are a part of life, but if you can at least learn to recognize and avoid acting on them, it can positively impact your financial future in a big way. Removing emotional reactions from financial decisions could mean the difference between reaching financial freedom at 60, instead of 70, or being able to pay for your child’s college, for example.
What better way to learn about your biases than with a drink in hand? Join Abacus and guest speaker, Dimensional Fund Advisor’s Christian Newton, on September 12th for a happy hour event. Plus, we’ve been looking for a special occasion to show off our newly expanded Santa Monica office, so come check it out. The first guest to find our secret hidden door gets major bragging rights for the evening. We’ll be serving wine, whiskey, and hors d’oeuvres. Bring friends! Your guests are welcome.