I have made many financial mistakes. These mistakes are usually due to two things: Bad Information and reasoning based on emotion
If I were perfectly rational, I would take the information provided, process it to an accurate conclusion and make smart financial decisions. Sounds pretty simple? This does not work in practice because our brains are not computers. In my personal experience, most bad decisions are not based on bad information, but poor rationalisation because of emotions. My ability to rationalise a bad decision knows no boundaries. I am not perfect and have made many mistakes.
In my brainstorming exercise with friend, he shared an example of what happened when he sold his home far below value because he was not getting any better offers. He had conflicting needs to either move or get out from under an oppressive mortgage payment. The desire to get on with his life is rationalised as the reason to sell below value – sometimes at absurd prices. He accepted a low ball offer out of desperation only to hear someone tell him they would have paid more if they had any idea he was willing to sell that low. There are always alternatives.
Seldom is the discussion about financial considerations. Finance is pushed to the background because the focus is dominated by personal motivations, and therein lies the problem.
How To Minimize Financial Mistakes
There are two ways to minimize financial mistakes:
1. Educate Yourself: That is what the Thornhill Wealth Forum is all about. As you improve your financial intelligence, your reasoning skills will improve. You will develop a good nose for sniffing out financial nonsense. Due diligence skills will help you overcome information problems. This will result in better decisions.
2. Focus on the numbers: Develop self-awareness that notices when conflicting goals are narrowing your field of vision. The goal is to always catch yourself getting sidetracked before making an important financial decision. First step is to focus on the numbers.
Over the years I’ve improved on both fronts and continuously learn from my mistakes. My motivation is strong because I know how much these mistakes have cost me. Train your mind to properly weigh financial considerations and look for alternative possibilities when your field of vision is getting narrowed by conflicting objectives.