This week, I’m talking about behavioral finance. An incredibly important topic when it comes to your money and your retirement, yet at the same time it’s something that few people really, truly understand. 

Essentially, behavioral finance looks at how your psychology, your emotions, and your biases impact your decisions and your behavior when it comes to your money. 

Today, let’s talk about why behavioral finance matters big time for your retirement. It’s easy for you and I to overlook how important our money decisions are, and how they can have lasting (and if you’re not careful, damaging) consequences. 

Did you know that the average adult makes about 35,000 remotely conscious decisions each day? That’s a lot of decisions. Some big. Some small. 

One decision that’s been on my mind recently is my cell phone. It’s on its last legs. I’ve been needing a new one for a few months, but I’ve been procrastinating on making a decision on getting a new phone, for a lot of reasons. But I keep getting these messages from my carrier that I’ll get a $200 credit if I upgrade to the new iphone...but only if I buy online.

How do I know where I will get the best deal? I don’t even know which phone I want, and I don’t know what it’s going to cost me. Is it going to impact my plan? And if the past is any indication, I will have to read the fine print and ask a lot of questions to make sure the salesperson isn’t screwing me over. So I think for now, I’ll just wait a little longer. 

Many of the same parallels can be drawn to our decisions about money. We weigh our prior experiences and biases. We might make decisions with blinders on, or make an emotional decision. Back before the smartphone days I absolutely had to have a Razr phone. It was a sleek flip phone that would be laughable today, but I had to have it. So I made a decision driven more by emotion and attraction than rational self-control. Does this sound familiar? 

Because our decisions about money, investing, and retirement can impact us for the rest of our lives, we must be especially on guard to make careful, self-controlled, unemotional decisions as often as possible. 

That’s it for today. I’ll spend the rest of this week covering a few of the most common behavioral finance blunders, starting with the biggest behavioral finance blunder of all tomorrow. 

Thanks for listening. My name is Ashley Micciche and this is the One Minute Retirement Tip. 

----------

>>> Subscribe on iTunes: https://apple.co/2DI2LSP

>>> Subscribe on Amazon Alexa: https://amzn.to/2xRKrCs

>>> Check out our blog: https://truenorthretirementadvisors.com/blog/

----------

Tags: retirement, investing, money, finance, financial planning, retirement planning, saving money, personal finance, wealth management, fee only financial advisor, financial planner, financial podcast, retirement podcast, financial independence podcast, behavioral finance, behavioral finance concepts, behavioral finance examples, behavioral finance biases, why is behavioral finance important, behavioral economics, investor psychology, behavioral biases, herd behavior, herd behavior and investment, herd behavior financial crisis, loss aversion, prospect theory