It’s been estimated that the average adult makes anywhere from 5,000 to 35,000 semi-conscious decisions on a daily basis. While these numbers may seem absurdly high on the surface, when you consider the amount of responsibility we each take on in a given day, it’s not hard to see how that number can increase fairly quickly.
This process can range from deciding on mundane tasks like what to wear or where to eat, to more consequential concerns like what career choices to pursue or whether you should get married and have children.
The truth of the matter is, each decision you make carries with it certain consequences -- both good and bad. And because you're invested in making the best decision in the moment, you rely on objective reasoning -- thus eliminating any biases or external influences that might alter or compromise that decision.
Easy, right? Well, not exactly. Many of us think that we’re being objective, but as humans, there are limits to our objectivity. We all make decisions that are based on our backgrounds, past experiences, biases, etc. Many times we unknowingly make cognitive errors -- simply put, relying on ‘what we know’ means getting it wrong a lot of the time.
Often we’re too close to a situation to truly be objective about it.
Take for instance, a topic that we discuss quite often -- retirement planning.
There are countless stories of individuals that were so fixated on the ebb and flow of the market that any short-term movement caused a knee-jerk reaction, often to the detriment of their portfolio.
The bad news is, these stories are not uncommon.
But, hey...maybe that’s not you. You’re immune. Or, maybe you’ve yet to realize the glaring signs of lack of objectivity.
Let me just state it plainly, in 20+ years of helping individuals and families manage their financial futures, I have yet to find one person that was truly objective about their money.
It simply doesn’t happen...and that’s okay.
The great news is, the moment you realize that you’re not inherently objective about your finances, is when you will start to view your relationship with money in a different way and with help, begin to take steps toward more prudent money management.
Look for Clues
Are there particular financial topics that are off-limits or ones in which you’re particularly argumentative over? If you find that you are getting emotionally charged about certain money matters, this may be a clue that you are not thinking objectively about the subject.
While it may be tough to do in the moment, try to take note of your triggers and make a conscious effort to do the opposite -- or sometimes nothing at all. For example, if volatility in the market changes your disposition from warm and pleasant to doom and gloom, that might be a sign that a change in perspective is necessary.
Start by recognizing that your emotional investment is eliminating your rational decision-making and find a way to remove yourself from the situation.
Acknowledge Your Biases
As previously mentioned, objectivity is non-existent when our decisions are clouded by emotions and internal biases.
Maybe you have a healthy dose of skepticism with investing in certain market sectors because of past experience. To overcome this, consider the assumptions that you are making and determine why you are making them. If you find that you’re leaning toward (or away from) an option because of these biases, restructure your thinking.
Seek Outside Counsel
Finally (and what we think is the most important aspect of overcoming objectivity issues), is to seek counsel. One of the ways that I’ve found to eliminate confusion when it comes to lack of objectivity is to consider this: whenever you think you know all there is to know about a subject, it’s time to check your views in the interest of objectivity.
Emotions are an investor's biggest enemy because they can cause even the smartest people to make bad decisions. We take pride in the fact that our clients have someone they can talk to keep them grounded and to keep the big picture in mind. Investing properly is simple but one single mistake (often made when emotions are running high) can have permanent consequences.
That’s why seeking outside (truly objective) counsel is so important.
At Fox Financial, we are a safety valve that keeps clients from making decisions they'll regret later. In emergency situations (i.e., 2008), we can "talk clients off the ledge" but more than that, our goal is for clients to have peace of mind and not care at all what the market is doing because they know they're prepared. That peace of mind happens when you understand that we've accounted for short-term fluctuations in our portfolio design, they are expected, and they don't affect our plan.
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