Whether we want to acknowledge it or not, we all bring biases about money that shape our perspective. How we were raised, the media and other life experiences we’ve gone through all shape our money beliefs.
I try to bring an objective viewpoint to a number of personal financial decisions. Like everyone else I have my own biases but I do try to understand both sides of an issue. The more I learn, the more I realize not everything is black and white. What is most important in achieving financial success is finding what works for you personally. There are a few things that I do feel are black and white. For one, no one should ever carry a balance on their credit card. However, I think SOME people can responsibly use credit cards and so I’m not against credit cards altogether, as long as they're paid off every month.
When evaluating personal finance decisions, acknowledge the biases that you are bringing to the matter. Here are some of the biases that shape how I view money. I was raised in a frugal household and although I didn’t always enjoy not having everything my friends did as a kid , I appreciate the frugal values that were instilled in me. My wife brought a lot of student loan debt into the marriage, and it took a lot of hard work and stress to get the debt paid off. While all of our debt except our mortgage is now paid off, having a huge burden of debt and the stress that goes along with it has made want to avoid debt. Prior to getting married I had the mindset that I would cut out all unnecessary expenses and save all I could until I one day retire. My wife’s mother died at the age of 48, and it was a big wakeup call that life is short and can be taken from us at anytime. I still try to save a lot for retirement, but realizing we never may make it to retirement encourages me to spend money (within reason) on experiences to enjoy life every year.
Go through the following questions with a spouse, partner, close friend or family member. When you answer the questions be sure to include a reason :
What are some of the biases you have about money?
How did your parents handle their money?
Was money a topic of discussion growing up or were your parents secretive about it?
Did your parents spend freely or were they frugal with their money?
At what age did your parents encourage/force you to get a job?
Did your parents encourage financial independence or dependence on them?
Were you encouraged to save money growing up?
Have you struggled with debt?
Have you ever had to put a major emergency on credit card because you didn’t have the cash for it?
Are you more of a spender or a saver?
Would you rather spend money on experiences or material things?
What are your views on giving to charity/ church?
Have you ever been fired or laid off from a job?
Do you think money is evil or a tool for good?
Do you have a stable job?
Why is money important to you?
Do you own or rent? Would you rather own or rent?
Do you have investments?
Have you been “burned” by the stock market? Have you made a lot of money in the stock market?
When, if ever, do you think you’ll be able to retire?
After going through these questions, you should have a good ideas of your own biases. Next time you face a financial decision try to see an opposing viewpoint. Biases aren’t necessarily a bad thing, but we should be aware of them. Don’t just continue to do things because you’ve always done it that way. Make sure your viewpoints are grounded in sound logic. What are some of your biases?