Why Smart People Make Emotional Money Decisions

Be one of a kind with Mike's plan.

This is the One of a Kind Financial Show Daily with your host, Mike Milligan. It's Monday, February 9th. Today we're diving into a topic that might just save your portfolio. Well, uh, from you. Behavioral finance isn't just a buzzword. It's the study of why smart people do not so smart things with their money. From panic selling to jumping on market fads, we'll explore how your brain can trip you up and how to outsmart it on your way to confident retirement planning.

Super Bowl weekend. Gotta ask you, who do you like? Who do you like?

Oh my gosh. You know, I want to root for the Patriots. I want to in this because, you know, did you see Belichick got snubbed by the Hall of Fame?

I saw that. That was ridiculous.

It was ridiculous. Like just somebody holding a grudge, but I kind of want them to win it just so That we all can see that, uh, they're a complete organization. They're just not Belichick and Brady.

I got you. Okay.

But I think, I think Seattle's gonna win it.

Yeah. Yeah. I lived in Seattle for a couple of years, so I'm pulling for Seattle. So we'll see. Should be as long as it's a good game. I want it to be a good game. That's what I want to see.

Well, do you remember last week on the radio show we talked about the Super Bowl commercials?

Yes.

Let's be for real, guys. That's what we're all, that's what we're all watching this thing for. If you're not a Seattle fan, if you're not a New England Patriot fan, we're just watching it for the commercials.

And we're going to talk about Super Bowl snacks today.

That's right, that's right, we are going to talk about that today. That's going to be a good—

Got a lot to get to. All right, let's get to it before we run out of time here. All right, you know the feeling. The market drops, you panic, you think about selling everything, or that hot stock takes off, suddenly you're tempted to chase it with your vacation fund. Been there, you're not alone. It's called behavioral finance. So today We're going to talk about how to recognize it, fix it, and some of these common brain traps that show up, especially as we approach retirement. So the question to you, my friend, is why do smart people make emotional money decisions?

Well, well, your, your mind will just trick you. And behavioral finance shows us that emotions like fear and greed are often louder than logic. Our brain wants to eat donuts because it's a comfort food. It wants you to stay in bed and not go work out because it doesn't want to put stress on the body. The brain, when there's fear, when there's downturns in the market, it tells you to sell, sell, sell, sell, sell to prevent further loss. So case in point, during the 2020 COVID crash, investors pulled $326 billion out of mutual funds and ETFs.

Wow. That's crazy. Wow.

Billion dollars. Just before the market rebounded 60% in the next 6 months. That's according to Morningstar. Ouch. So the instincts often lead us the wrong way because again, our brain is wired for protection. And it's in from loss. It's, it's literally trying to help you there. That's why having a financial plan that helps you, that has logic, that's written down, will help you from making emotional decisions at the wrong time.

So how do you do it? How do retirees stay focused when the market's going bonkers? What do people do?

Well, let's face it, headlines are loud, markets are jumpy, and people check their account balance more often when the market goes down than when it's going up. Behavioral finance calls this availability bias, focusing on what's loudest, not what's most relevant. That can lead to panic selling and freezing altogether. So here's some tips on how to stay grounded in your financial plan. If you don't have a long-term strategy, you're more apt to panic sell. That's why having a long-term strategy makes that just noise, and it's something that you can ignore.

And that's why you need the one-of-a-kind financial plan that Mike's going to talk about in just a couple of minutes. The show is the One of a Kind Financial Show with Mike Milligan. Mike is with One Oak Financial. I want to give you the phone number, get on the calendar, get you all set up with that comprehensive plan. That number is 800-748-1838, 800-748-1838, or text the word ideas to 600-700.

This has been the One of a Kind Financial Show Daily with your host, Mike Milligan. I hope you've enjoyed these segments from the One of a Kind Kind Financial Show with Gary Nolan and I. I need to give you a reminder, and that is that I am an investment advisory representative with Advisory Alpha LLC, member SEC. Ideas by Mike, doing business as One Oak Financial, is an unaffiliated entity of Advisory Alpha LLC. All opinions expressed by me and Gary on the One of a Kind Financial Show are for education purposes only, should not be construed as financial advice, and are solely our opinions. For more information on One Oak Financial, go to the number oneoakfinancial.com. And, uh, if you're interested more in about the book that I authored, The One of a Kind Financial Plan, You can go to amazon.com to, to read the reviews and find out more about that book.

Be one of a kind with Mike's plan. In a face shot growth, take a stand. Visibility, strategy, take the lead. Transformation's yours, fulfill the need. Mike's got the way to help you rise and stay. Leadership impact you'll find in your one of a kind Be one of a kind, take the flight. Mike's the guide. You'll shine bright. Shine bright.