Next Gen Dollars and Sense - CFP J.D. CFF Joel Garris

Next Gen Dollars and Sense (eBook)

CFP J.D. CFF Joel Garris (Autor)

eBook Download: EPUB

2024 | 1. Auflage
244 Seiten
Bookbaby (Verlag)
979-8-3509-6943-6 (ISBN)

This book provides valuable tools and strategies to know and apply to ultimately achieve financial success. Whether you're just starting your financial journey or ready to retire, this book will help you develop a solid plan for achieving your financial goals.

Joel J. Garris is the President and Chief Executive Officer of Nelson Financial Planning, Inc., and enjoys helping people achieve their financial goals. He provides financial planning guidance to families, businesses, and individuals about taxes, retirement, and investments and specializes in bringing perspective to life's financial decisions. His areas of expertise include income planning, wealth management, legacy planning, and minimizing taxes. Joel is a CERTIFIED FINANCIAL PLANNER? Professional, Certified Financial Fiduciary®, and holds various securities licenses, including: •Series 7-General Securities Representative •Series 24-General Securities Principal •Series 27/28-Financial and Operations Principal •Series 51-Municipal Fund Securities Principal A graduate of Boston University School of Law, he is a former member of the Massachusetts and Washington, DC bars. He can be reached at (407) 629-6477 or Joel@NelsonFinancialPlanning.com Joel is the current host of one of Central Florida's longest-running radio shows, which was started in 1984 by his father-in-law, Jack Nelson. Dollars & Sense airs live every Sunday throughout Central Florida: •9:00 a.m. to 10:00 a.m. on WFLA 93.1FM / 540 AM •9:00 a.m. to 10:00 a.m. on The Game 96.9 FM •11:00 a.m. to 12:00 p.m. on WMMB 92.7 FM Recently named one of the Top 25 Financial Planning Podcasts by Feedspot, the show is available on numerous podcast platforms and its YouTube channel. Previously, Joel was the host of 'Moneywise,' a financial call-in talk show on WORL 660 AM, and taught a personal enrichment class entitled Analyzing and Solving Life's Financial Matters through Orange County Public Schools. Joel has been interviewed on a variety of radio programs, including National Public Radio and Good Morning Orlando. His television appearances include national content provider Ivanhoe Broadcasting and 'Best of Central Florida' on CBS affiliate WKMG. Joel served as an Assistant Scoutmaster for Troop 24, chartered by First Presbyterian Church of Orlando, and has been a youth sports coach for Delaney Park Little League, Association of Christian Youth Sports, YMCA, and Upward. He is also a member of various organizations, including Mensa, and has been a volunteer for Literacy Volunteers of America and the Veterans' Administration. Joel and his wife Stephanie will celebrate their 25th anniversary in 2024. Stephanie is President and CEO of Grace Medical Home, a non-profit that provides medical care for the uninsured. She is also a past President of the Junior League of Greater Orlando. Their oldest son, Nelson, is a recent graduate of Auburn University, their middle son, Ethan, is pursuing a master's degree in accounting at the University of Virginia, and their youngest son, Connor, is studying at Northeastern University. All three are graduates of Boone High School and The Christ School in downtown Orlando.

Money is one of the most influential forces in our lives, bringing security, freedom, and happiness but also triggering stress, anxiety, and fear. Managing your finances can be daunting and highly emotional, so learning about and making SENSE of life's decisions involving your DOLLARS is essential. This book provides valuable tools and strategies to know and apply to ultimately achieve financial success. Whether you're just starting your financial journey or ready to retire, this book will help you develop a solid plan for achieving your financial goals.

Chapter 1

Human Behavior

As humans, we are constantly bombarded with news and information. Unfortunately, most of it is negative. Why?

Well, as my good friend and longtime radio and television personality John “Bud” Hedinger once said to me years ago, “Well, you know Joel, negative news sells better than positive news.”

He was right. A commercial news source or media company is not actually in the business of sharing information but in selling advertising opportunities. Focusing on the negative side of things helps retain and enlarge an audience. Increasing viewership allows a media company to charge advertisers more and thereby increase their profits. This reality sheds a very different light on the fundamental nature of the information around us.

The Role of Negativity

Negative news can have a profound impact on a person’s financial decision-making. This is because people tend to react emotionally to any news, especially if it’s negative, which can cloud their judgment when making financial decisions.

One study conducted by the University of Michigan found that people exposed to negative news about the economy were more likely to make conservative financial decisions, such as saving more money and investing less. This happens because negative news can create a sense of fear and uncertainty, which leads people to be more cautious with their money.

Another study conducted by the University of California, Berkeley, found that people exposed to negative news about the stock market were more likely to sell their stocks, even if it meant taking a loss. This is because negative news can create a sense of panic, leading people to make impulsive decisions without fully considering the long-term consequences.

Furthermore, negative news can also impact people’s perception of risk. A study conducted by the University of Chicago found that people exposed to negative news about the economy perceived the risk of investing to be higher than those who were not exposed to negative news. This perception of increased risk can lead people to avoid investing altogether, which can negatively impact long-term financial goals.

Additionally, research shows that humans experience triple the amount of pain from a loss than they do the pleasure from a gain. In other words, if we lose $1,000, we feel an emotional response that is three times greater than our feelings about gaining $1,000. This psychological reaction can dictate our financial decision-making.

These and countless other studies have uncovered many cognitive biases that cause our minds to work against us and prevent our financial success. Cognitive bias occurs when someone interprets a situation based on their subjective opinion and personal experiences, which may not be impartial or correct. The rest of this chapter explores these behaviors and biases and how to prevent them from negatively impacting our finances.

Familiarity

According to the American College of Financial Services, our minds often use what we already know, or familiarity, against us when making financial decisions. This is because our brains are wired to prefer something familiar over something unfamiliar, even if the unfamiliar option is the better choice.

This cognitive bias can lead to poor financial decisions, such as sticking with a familiar investment even if it is underperforming or holding onto a losing stock because we are familiar with the company.

For example, far too many people held onto Sears Roebuck stock way too long just because they grew up with their Christmas catalog. Familiarity can cause us to overlook new opportunities or investments that could potentially benefit us in the long run.

To combat this bias, be aware of our tendency to favor the familiar and actively seek out new information and perspectives by researching new investment opportunities, seeking advice from financial professionals, and challenging your own assumptions and biases.

Anchoring

Anchoring is a cognitive bias that occurs when we rely too heavily on the first piece of information we receive about a topic. In the context of investing, this can cause us to fixate on a particular stock or investment, even if it is no longer the best option, leading to missed opportunities and poor investment decisions. To avoid the anchoring bias, remain open to new information and perspectives, and regularly reassess investment decisions.

In the late 90s, many people invested heavily in technology companies fixing anticipated Y2K concerns—potential catastrophic computing errors in switching from the year 1999 to 2000 (which wasn’t accounted for when software programs were initially developed). When the calendar turned to the year 2000, and the world continued to spin, many of these same companies experienced dramatic declines as their products were no longer needed to prevent a catastrophe that never happened!

Oversimplification

Oversimplification is another cognitive bias that occurs when we try to simplify complex financial information or situations into easy-to-understand concepts or rules of thumb. While this may be helpful in certain circumstances, oversimplification can hinder your comprehension of financial concepts, resulting in poor investment decisions or missed opportunities for growth.

The reality is that every person is unique, with their own set of needs, wants, and desires. To avoid oversimplification, always seek out multiple information sources and perspectives and take time to fully understand the complexities of financial decisions before making them. We often see this oversimplification bias when it comes to retirement planning, as people forget to include their total healthcare costs or the impact of income taxes. At Nelson Financial Planning, we often spend several hours over multiple years mapping out a retirement income plan for clients approaching retirement.

Hindsight

Hindsight bias is the tendency for people to believe they could have predicted an event’s outcome after it has occurred. This bias can lead people to overestimate their ability to anticipate events and underestimate the role of chance or other factors in contributing to the outcome. Hindsight bias is also known as the “I knew it all along” phenomenon. It can negatively affect decision-making when people make overconfident decisions based on their belief in a past event.

This is one bias that I recognize most often when talking to people at the office. They ask, “Why didn’t you see this (name the event over the last 25 years) coming?” Sadly, there are no crystal balls or other ways to predict the future accurately and consistently. This behavioral bias can also manifest itself when people get out of the market during bad times and then try to get back in during good times. This results in selling low and buying high, which undermines investment results.

Endowment Effect

The endowment effect is when people tend to overvalue objects or investments they own because of a personal attachment. In the context of investing, this can cause people to hold onto underperforming investments or assets simply because they feel an emotional connection.

The best example of this is when people continue to own stock because their parents or grandparents once owned it, like General Electric. But the company is not the same as it was thirty years ago! After being part of the Dow Jones Industrial Average for more than a hundred years, General Electric was removed from the index in 2018 due to poor performance. To avoid the endowment effect, remain objective, take a fresh look at all available information, and keep personal feelings about a company out of your financial decision-making.

Status Quo

The status quo effect is the propensity for people to prefer things to stay the same or maintain the current situation. This bias can manifest in a variety of ways, such as resisting change or choosing familiar routines. Status quo bias can be a powerful force, as people often feel more comfortable with what is expected and may avoid taking risks or trying new things. However, this bias can also prevent people from making necessary changes or taking advantage of new opportunities.

To avoid the status quo effect, set specific goals and create a plan for making changes, which provides a sense of direction and purpose. If you are using a financial planner or advisor, make sure to meet face-to-face at least annually to review your account and make adjustments regularly. Many people struggle with change, but life changes every day, so why not use it to your investing advantage?

Bandwagon Effect

The bandwagon effect is when people favor a particular behavior or belief simply because others are doing the same thing. This bias is often observed when people are influenced by the actions or opinions of a large group of people, such as in politics, fashion, or marketing. The bandwagon effect can be a powerful force, as people often desire a sense of belonging and feeling part of a larger group.

However, these biases can also lead to irrational decision-making and prevent people from thinking critically about their choices. To avoid falling prey to the bandwagon effect, take time to consider the facts and make decisions based on objective information rather than simply following the crowd.

The interesting point is that the bandwagon plays a different tune nearly...

Erscheint lt. Verlag	12.8.2024
Sprache	englisch
Themenwelt	Wirtschaft ► Betriebswirtschaft / Management
ISBN-13	979-8-3509-6943-6 / 9798350969436

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