Understand your behaviour – Grow your wealth
Recency/Recentism – is one of the Behavioural biases (a Cognitive bias) that can wreck your wealth, and is especially relevant in these volatile, ‘late-cycle’ times.
Trying to understand a person’s behaviour is hard enough, as soon as you add money into the equation it becomes infinitely more difficult. This is the first in a series of blogs and articles trying to demystify financial behaviour and put some clear action steps in place to make sure they don’t sabotage your wealth. (At the end of the series I will be putting them all together in an eBook). When you look at the long list of biases (like HERE), many of which you’ll probably recognise in the behaviour of those around you (and you – if you’re honest). Marketers and salespeople make good use of these biases to influence (aka manipulate) your buying behaviour. If you want to inoculate yourself against slick salespeople and irritating family arguments, a better understanding of these biases can help. These biases influence our investment behaviour too, and that can have a devastating effect in the long term. We’ve all heard the phrase “it is not that you’re a bad person, it is the behaviour that is making you look bad” – this is certainly true of financial behaviour.
Financial behaviour extends to every aspect of the ‘wealth equation’ (income minus consumption equals wealth – you can read more HERE if you missed that blog). We let our fears and prejudices stop us earning more income, we feed our ego which impacts our consumption, and we allow biases to influence how, when and where we invest our wealth.