If you set out to go to a friend’s house for dinner and you had never been there before and you never got the address or location, would you just drive around aimlessly until you happened (hopefully) upon their neighborhood, then maybe located their street, and then walked up to each door to knock and ask if they lived there? It sounds crazy, doesn’t it? If someone asked you to come over, but they refused to tell you where they lived or how to get there, you would probably never agree to leave your house. You would want to know where you were going before you started out to get there.
It sounds so obvious – and yet, too many investors make investment decisions with no idea about where they are trying to go and what they want to find once they get there. At United Capital we talk about the “two eternal truths about decision making,” and the first one is that lack of clarity and understanding of yourself and the situation at hand will lead to poor decisions.
Without taking the time to be clear and specific about what you want, and to understand your biases toward money, your experience is most likely one of aimless wandering in the hope that you will get close to the financial end you seek.
While some investors might know they want to save for college, retire comfortably, support a loved one or pursue philanthropic interests, few think about the journey required to get to these end goals. You will need to make a lot of big decisions and trade-offs along the way.
We all have a viewpoint of money that is an accumulation of what we’ve learned and experienced over time. A bias could be that “You can never have enough money saved” or “If I die tomorrow, at least I have lived life to the fullest” and hundreds more like this.
When we combine our biases with our lack of specific direction, we have a potential for making bad decisions that don’t lead us anywhere, much less where we want to go.
Before you make another financial decision, be sure you are clear about what you want to accomplish and why it’s meaningful to you. Have a process and a checklist each time you make a financial decision.
To learn more about your biases and how they affect your financial decisions, visit www.honestconversations.com to discover your Money Mind®.
And don’t ever accept an invitation to go to dinner somewhere without getting an address beforehand!