How Biases May Impact Our Financial Decisions

Discovering Financial Biases With Amida Wealth

Our biases are deeply ingrained tendencies and patterns of thinking that can influence our decision-making in many areas of life, including finance. One example of a financial bias is the confirmation bias, which is the tendency to seek out information that confirms our pre-existing beliefs or opinions. In doing so, we ignore information that contradicts our beliefs. In other words, these biases could unconsciously impact the flow of wealth into our lives.

At Amida Wealth, we believe that everyone has the ability to step into their power and make financial decisions with a clear mind and open heart. We often say that “Wealth is a mindset.” Perhaps, especially in honor of Women’s History Month, it is time for all of us to become present to our financial biases. Together, we can embody wealth energy to the fullest. First, we begin with awareness.

Common Biases To Be Aware Of

The first step to discovering financial biases is to become present to the different types of biases that exist.

Confirmation Bias, as mentioned before, refers to the tendency to search for or interpret information in a way that confirms pre-existing beliefs. In finance, this bias can lead to investors seeking out information that supports their investment decisions. Thus, ignoring information that contradicts them.

Overconfidence Bias refers to the tendency to overestimate one’s abilities. This can lead to excessive risk-taking and poor investment decisions.

Loss Aversion Bias refers to the tendency to prefer avoiding losses to acquiring gains. This occurs even when the potential gains outweigh the potential losses.

Anchoring Bias refers to the tendency to rely too heavily on the first piece of information encountered when making decisions. This can lead to investors being overly influenced by the initial price of a stock or investment.

Availability Bias refers to the tendency to rely on readily available information when making decisions. In other words, investors rely too heavily on recent news or headlines and overlook important long-term trends.

Herding bias refers to the tendency to follow the actions of a larger group. This bias can be driven by a desire for safety in numbers or fear of missing out on potential gains.

Above all, these biases can come from a variety of sources. Such as; past experiences, cultural and societal influences, and individual personality traits. In other words, It is important for individuals to recognize their own biases and perhaps seek out advice from an advisor who can steer them in the right direction.

How To Become Aware Of Your Biases

The next step is for individuals to become aware of their financial biases, in order to slowly overcome them. Here are 6 strategies that can be used to identity biases when making financial decisions:

Identify: Take time to reflect on financial decisions and try to identify any patterns or tendencies that may exist.
Educate: Learn about personal finance and investing. Use online resources, books, and courses available to help increase financial literacy.
Seek diverse perspectives: Listen to and learn from people with different backgrounds and experiences.
Take a rational approach: Approach financial decisions objectively and logically, rather than letting emotions drive decisions. Consider the facts, weigh the pros and cons, and seek expert advice if necessary!
Monitor decisions: Regularly review financial decisions. Perhaps, keep a financial journal to track thought processes and to identify any patterns.
Practice mindfulness: Mindfulness brings awareness to thoughts and emotions. Some examples include; meditation, journaling, mindful breathing, and grounding.

Remember, overcoming financial biases is a gradual process that requires self-awareness and effort. In other words, with time and practice, anyone can learn to make more rational and informed financial decisions. Above all, slow down, breathe, and enjoy the wealth journey!

Powerful Women In The Financial Field

In honor of Women’s History Month, we would like to highlight powerful women in the financial industry. First and foremost, we would like to honor our incredible founder, Ana Ramos. Ana’s methods have pioneered a new way of working in the financial industry, and they are revolutionary! Ana truly embodies what it means to “Transform Your Vision of Wealth.” Her clients not only gain this wisdom – her employees do as well.

Second, is Janet Yellen. Janet Yellen became the first woman to lead the US Federal Reserve in 2014, and served as Chair of the Federal Reserve until 2018. She is now the Secretary of the Treasury, making her the first woman to hold that position.

Third, is Abigail Johnson. Abigail Johnson is the CEO of Fidelity Investments, one of the largest mutual fund and financial services companies in the world.

Lastly, is Ana Patricia Botín. Ana Patricia Botín is the Executive Chairman of Banco Santander, one of the largest banks in Europe. She is the first woman to hold this position, and has been credited with turning the bank around after the financial crisis.

Above all, these women have made significant contributions to the finance industry and serve as inspirations for women who aspire to leadership positions in the field.

Amida Wealth Family Conversations

At your next family or friends gathering, bring up the topic of biases! This is an incredible discussion to have at the table because awareness is key. Perhaps, you can open up this blog to share and read out the different biases that exist. Share your wealth energy with the ones that you love. Most importantly, embrace your abundance. Wealth wisdom is everywhere you look.

Final Thoughts

Biases exist no matter where we are, or who we are. These patterns of thinking could be passed down from generations, or past experiences. It is essential that we become aware of, and take the steps necessary to mitigate bias financial decisions. In other words, create more flow to our wealth. Be sure to seek out diverse perspectives, consult with financial professionals, and always take time to carefully weigh out pros and cons. Most importantly, remember that this wealth journey does not need to be done alone– Amida is always one phone call and email away!